Marine Cargo Insurance is a staple to the transport of goods both domestic and international, and transportation intermediaries and logistics service providers are in an ideal position to offer quality Cargo Insurance, sometimes referred to as Shippers Interest, to protect their clients’ financial interests.
No matter how robust a shipper’s loss-prevention strategy may be, it is reported that 30% of all freight damage in transit is unavoidable, and most losses occur on the way to or from the ports. Furthermore, the FBI estimates that up to $30 billion in cargo theft occurs every year, and the majority of cargo theft take place when goods are on the truck or in storage. It is easy to envision the very real potential for loss or damage to cargo, since we all know it endures long voyages, extensive moving and shifting, and the potential for theft and bad weather (just to name a few of the many risks).
A Marine Insurance Policy may be written to include not only goods to be shipped via ocean, but also goods to be shipped via air, truck, rail or other conveyance—including international, domestic or inland transit, warehouse coverage and more.
Open Cargo Policies
When provided as an Open Cargo Policy the coverage acts as an umbrella, covering all shipments that the transportation intermediary has been instructed to insure. These instructions must be in writing from the shipper and are generally obtained for each shipment in the Shipper’s Letter of Instructions to the freight forwarder. To streamline the process, you may simply obtain a single letter from the shipper or importer requesting insurance on all of their shipments unless otherwise instructed.
An Open Cargo Policy is considered to be a contract of “utmost good faith,” meaning that the insured must voluntarily reveal to the insurer all information pertinent to the risk being insured. As the intermediary between the assured and the insurer, it is essential to pass along all material information. Failure to do so could void coverage from the time of policy inception.
All Risk vs. Free of Particular Average (FPA)
There are two primary categories of insuring conditions offered to shippers—”All Risk” and Free of Particular Average (FPA). As the name implies, “All Risk” has the broadest insuring conditions and covers the greatest number of perils. FPA is generally only used when “All Risk” coverage cannot be obtained due to the elevated risk associated with the product or shipping conditions. FPA is a named perils coverage meaning that the policy will only cover losses resulting from specifically named causes. “All Risk” on the other hand is held to cover all physical loss or damage from an external cause with the exception of named exclusions.
Some of the most common exclusions include:
- Improper or inadequate packing
- Abandonment of cargo
- Rejection by Customs or other governmental authorities
- Failure to pay or collect
- Inherent vice
It is important to note that Cargo insurance covers physical loss or damage and is not intended to cover financial loss due to delay, loss of market, or other subsequent or liability-related losses. When it comes to physical losses, All Risk/Shippers Interest insurance provides the best means of protecting the shipper’s financial interest.
Some cargo owners expect that any losses incurred will be paid by carriers and/or warehousemen. This is a frequent misconception. Most carriers and warehousemen are not responsible for losses that are unforeseeable and beyond their control. Furthermore, national and international treaty restrictions limit the monetary liability of most carriers. Always refer to a carrier’s Bill of Lading, tariff or other Terms and Conditions for specific limits of liability.
Cover Your Clients, and Yourself, With Cargo Insurance
The bottom-line is that if you don’t offer insurance to your clients on a consistent and routine basis you may be doing a considerable disservice to your customer. Your customer may even construe a failure to offer them Cargo Insurance or to explain the risks of transit as an act of negligence, which could potentially lead to an errors and omissions claim. Offering Cargo insurance to your clients enhances a forwarder’s professionalism and protects the forwarder-shipper relationship.
Roanoke has access to the very best insurers and policies that can serve your Cargo Insurance needs. We invite you to learn more about us, our experienced talent in this highly specialized area, our creative solutions, and the value we will bring to you and your clients. Please contact us at 1-800-ROANOKE (800-762-6653).
