Cargo Insurance: Protecting Against Loss
By NNR USA In Insight On 25th October 2021
Carrier Liability Limits
As the shipper or owner of the cargo, you may expect that a carrier who has care, custody and control of your shipment would be responsible for reimbursing you for all losses to the goods.
However, carriers, including steamship lines, airlines and freight forwarders, limit their liability through international treaties and by the terms and conditions of service.
Most importantly, carriers are not responsible for losses that are unforeseeable and beyond their control.
For example, carriers are not commonly responsible for the following causes of loss because they are beyond their control:
- Fire, unless caused by the actual fault or knowledge of the carrier or warehouseman
- Stranding, sinking, vessel collision, or striking a submerged object
- “Aِِِct of God” – such as a lightning strike or a hurricane
- Any loss or damage inherent to the goods, such as rust or rot on unprotected metal or fruit
- And many others
CASE STUDY: Comparison between Carrier Liability Coverage and Cargo Insurance
The Loss
An air shipment of 8 pallets of electronics valued at $1M suffered a total loss due to an unforeseen loss from humidity that was a result of a delay due to a major storm.
Reimbursement by the Carrier
The cargo owner sued the air carrier and won, but they were only awarded $60,000. This was the legal liability of the air carrier based on the contract of carriage terms. The terms were the standard recovery amount of 22 SDRs* or $29.00 per kg based on the Montreal Convention air carrier limitation valuation.
Solution
If the cargo owner had obtained Shipper’s Interest cargo insurance on the shipment, it would have paid at the full value of the goods.
*SDR = Standard Drawing Rights. It is an international method of calculating the rate for the local area.
Have confidence your goods are covered. Purchasing additional insurance is easy and relatively inexpensive.
NNR Global Logistics offers cargo insurance on all modes of transport.