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Cargo Insurance - Customer Advisory

RTL Client Advisory Service (CAS)

Cargo Insurance – for the times that you do need it!

Importance of Purchasing Cargo Insurance – We, try to fully describe to you, why it is important to purchase cargo insurance in advance. Your goods are being trucked or thrown on an international vessel, which exposes them to a variety of risks. All of these, can cause for direct negative impacts on your company’s bottom line. Throughout the years, in logistics business, we found that the number one complaint of shippers was cargo damage. It’s often unavoidable and after it happens, it can be difficult to place the blame on any one party. What’s even worse, is the fact that some people, are not eligible to file a claim, for damaged cargo, especially if they, have received from the service provider driver delivering to port or to the Railhead a document (POD – Proof of Delivery), signed as returned without incidents/accidents, advising that their cargo is in apparent good order and good condition. Here is RTL perspective on the importance of purchasing cargo insurance, for those who are not ecstatic to pay hundreds or thousands of dollars in cargo damages, although it is not something anyone expects. We. In RTL, pride ourselves on very minimal past examples, as we are always making sure, the client, is well advised and fully aware of probable complications, either via on vessel or intermodal or port event or over the road occurrence. Please kindly also refer to RTL’s Legal Terms and Conditions.

Cargo Insurance – Cargo insurance, just like homeowner, car, or life insurance is a form of insurance that mitigates, the financial risk of any international or domestic shipments, that are damaged while being in transit. Canadian and American law, requires that all carriers have a minimum amount of cargo insurance, known as carrier liability. However, as one would expect, carrier liability insurance, has a very low degree of overage and thus carriers and shippers are often encouraged to purchase cargo insurance to protect their goods from theft, mishaps, damage, and natural disasters, while in transit under carriers custody or jurisdiction only, as the carrier that has the control on the same cargo. Once the container or the cargo, was dropped at the Rail or at the Port or any other intermediate Terminal, the current carrier, has no further formal responsibility on the cargo condition, as the cargo can be damaged in transit from the last terminal and now it is under different custody with additional new handling.

Here is why: The loaded container without accidents is being delivered to the next terminal, the crane picks up the container, from the truck’s chassis and drops it on the ground. This is the first impact. After, the same container is picked up again and loaded onto the train, second impact (while in the terminal, can be also several transfers from one spot to another before it is train loaded). The cargo is being dropped by the crane and yes, it is not a move in a pharmacy, where everything is careful and smooth, it is a hard ground impact. Now, on route to the port and the same happens again, a few more impacts, before it is loaded onto the vessel. On the vessel, possible few shifts in various ports, either it is on the vessel or maybe off the vessel. The same happens at the Port of the destination, on route to the ultimate consignee. Same container is picked up and dropped about min 12 times to 15 times or more, before it is arriving to the final address. Yes, indeed, many chances for the cargo not to be in the same condition as when it started its journey. Who is responsible for the fact that the crane operator (and every time it is a different person) handles the same container which is numerous times dropped and suffers strong ground/surface impacts, hence the cargo owner must always have in his mind and in place, his own rail and ocean cargo insurance arranged in advance or suffer the consequences of the opposite!

Cargo Insurance Limitations – Unfortunately, there is no one type of cargo insurance that covers everything. Cargo insurance does have its limitations. If you are shipping on a truck via Canada or U.S., your cargo insurance, will not protect you against all losses that a trucker or the motor carrier, might be liable for under various Legal Amendments, also, a certificate of insurance, that states a motor carrier has a degree of insurance while the cargo in his jurisdiction and under his liability, but not after it is not, and does not mean that the shipper/broker’s valid claim, will be covered by the said insurance. There are a ton of different types of cargo insurance, made available to shippers and brokers. All Risk Coverage in a Broad Form, Legal Liability, Motor Truck Freight and so many others, all provide different types and degrees of coverage to shippers, so understanding what your company and cargo truly needs are, is always very important. Cargo insurance has options, for both domestic and international freight, as well options for different modes of transportation and can be always fitted to your specific needs.

Limited Carrier Liability – Carriers, by law, are not responsible for many common causes of losses, that occur in transit (for example, acts of God, General Average, etc.). Even when, the carriers are liable, carriers’ liability in the event of a loss is limited – either by contract in the Bill of Lading or by law. In most cases, shippers will only recover cents on the dollar from the carrier. Shippers should never count on the carrier, that is shipping their goods, to cover losses or damages that may occur, over the course of a container ship voyage. By law, carriers aren’t required to cover the common causes of cargo loss while in transit. These could include events such as an “Act of God” or General Average. Even when a carrier is liable for the damage or loss, their liability is often limited (by law od the Bill of Lading ACT) to recover cents on a dollar. Shippers should never rely on their carrier for financial security, when it comes to shipping. Limited liability, keeps your security low. Very low. So, what would be the best way, not to deal with this possible occurrence? You know the proper answer!

Land, Marine Cargo Insurance – Land Cargo Insurance coverage, includes theft, collision damages, and a variety of different risks. The insurance is intended for cargo that is transported, within the Canada or United States, over the road and generally covers trucks and other small utility vehicles. This additional Ocean cargo insurance covers transportation carried out, either in sea or by air. Here, means of transportation and goods are covered from damage due to cargo loading/unloading, weather contingencies, piracies and other relevant issues. Mostly, this insurance covers international transportation. Under these insurances, there are some policies, which can help you in understanding the concept of cargo insurance in a profound manner. These policies are unlike land cargo insurance which is intended for domestic shipments. Marine cargo insurance is intended to be applied to international shipments. Primarily those being shipped by ocean or air. Due to the differences in potential risks of international transport over domestic, marine cargo insurance covers damage due to cargo loading and unloading, weather conditions, piracies, and a few other potential risks. Within marine cargo insurance, there are different policies which, can, will help you, understand the overarching concept more conclusively.

Open Cover and Specific Cargo Policies – When insurance holder opts for coverage against various consignments, then open cover cargo policies get activated. These policies are segmented in two categories, namely renewable policy and permanent policy. Renewable policy is required for a particular value, requiring renewal after policy expiration. Most of the single trip or voyages fall under this category. Permanent policy can be drawn up for a decided time period permitting countless shipments in that period. When a company approaches an insurance company or broker for insuring a particular consignment, then it can fall under the category of specific cargo policies. These policies are also termed as voyage policies, because only shipments are covered under them.

Containers Lost or Damaged at Sea – The statistics, show that before 2010 there were about 350 containers lost per year and the amount doubled after 2010 on average. That is counting the containers that were legitimately lost/damaged not those that were subject to catastrophic events. This is a large increase and still growing. Cargo gets damaged frequently. We can’t emphasize that enough. As stated before, our info on market research studies indicate that damaged goods were the number one complaint of shippers. There are certainly steps, you should or can take as a shipper to help avoid complications, there is never any guarantee that proper preparation on the shipper’s part will prevent, from experiencing cargo damage. Cranes drop containers, trucks get in accidents, hurricanes and tornados happen, gensets fail – it’s all part of the logistics reality, and the usual daily events that take place from time to time.

Related RTL T&C some of the paragraphs for your perusal:

Valuation – Subject to Part A – Article 10 (Declared Value), the amount of any loss or damage for which the carrier is liable, whether or not the loss or damage results from negligence, shall be the lesser of, (i) the value of the goods at the place and time of shipment, including the freight and other charges if quoted, priced and paid, and (ii) $2.00 per kilogram computed on the total weight of the shipment.

Declared Value – If the consignor, has declared a value of the goods on the face of the RTL or its agents, bill of lading, the amount of any loss or damage, for which the carrier is liable shall be or shall not exceed the declared value on the instructions to RTL, for the specific delivery! If the consignor has declared a value of the goods in advance, there will be a surcharge, on the face of the Bill of Lading, for the amount of any loss or damage for which, the carrier is liable, as it shall not exceed the declared value. In any case, if the required additional coverage, was not requested from RTL in advance, ahead of the service /delivery date and accepted by both sides, there is no additional coverage.

Maximum Liability: The amount of any damage calculated, per occurrence shall not exceed $2.00 per (1) one KG, unless a higher value was declared in advance on the face of the bill of lading by Shipper/Agent/Consignee to RTL, while asking through email communications in advance, and at the same time having RTL, agree, arrange and respond for specific additional insurance coverage from RTL or otherwise arrange via own insurance additional coverage, according to your own cargo needs.