09 August 2017

All in Supply Chain from Shippers and Freight Forwarding Agents to Hauliers Must Consider Insurance  

Be Aware of the Risks, Costs and Limits to Avoid Legal Problems

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Shipping News Feature UK – WORLDWIDE – We return again to the thorny question of insurance, a subject which should always be uppermost in the minds of both shippers and forwarding agents when dealing with any consignment, but particularly when high values and/or delicate commodities are involved. Many shippers still live with the belief that, when they hand over their precious goods, the agents or shipping companies involved automatically will reimburse them in full for any losses or damage. The truth of course is that most operators in the supply chain who UK shippers come across are bound by such terms and conditions as CMR, The British International Freight Association (BIFA) or the Road Haulage Association (RHA).

These terms of course limit the liability of the carriers and agents and keep pay-outs for claims at a maximum set level, often to the consternation and expense of the owner of the goods. The answer of course is to insure separately for full value which, in light of the volumes carried, means in fact turning to a broker, usually one which specialises in goods in transit insurance. Failure to do this can often end in lengthy, and expensive administration and all too frequently, litigation.

The world into which one enters however when confronted with the structure of shipping insurance is one which often confounds the most experienced industry operator. One only has to look at the conflicting clauses within the Hague-Visby Rules, which quite properly hold a carrier liable to ‘properly and carefully load, handle, stow, carry, keep, care for, and discharge the goods carried’ when other rules such as Hamburg, or perhaps at some future point, Rotterdam Rules with different provisions, may be relevant.

These complications however are as nothing when one drills down into how the insurance system works when we look at the major disasters which are an inherent risk when vessels, both large and small, traverse the high seas in all weathers. To their credit the P&I Clubs, which carry much of the risks to the global fleet, regularly update members on topics which otherwise only become the subject for discussion when the worst happens.

Acts of war, and those of God, fire, ‘perils of the sea’ (whatever these are) can all excuse an insurer from liability, and when claims have the potential to reach billions of dollars, one can be sure that some loss adjusters will be keen to quote every precedent and find every excuse not to pay.

This month the Shipowners’ Club, with an inception date of 1855 one of the oldest P&I Clubs, and one with over 32,000 vessels covered by its 600 plus brokers, has issued a downloadable statement to explain ‘overspill’, the excess which occurs when a claim exceeds the liability of the insurers under their cover, which is the General Excess of Loss Reinsurance Programme which protects Mutual Members of the International Group of P&I Clubs.

Although such statements make informative and indeed somewhat fascinating reading for professionals the majority of shippers simply need to ensure the value of their goods are protected whilst in transit. For most this means taking out an all ‘risks policy’ either via their forwarding agent, who should beware ramping up the amount charged for fear of becoming an unwitting underwriter and therefore shouldering a percentage of the risk, or directly with a broker.

One such broker, Peter Lole based near High Wycombe, specialises in cover of all forms particularly with regard to the supply chain. Boss Simon Lole commented that shippers should ensure they discuss their requirements fully with their insurers to cover all eventualities, saying:

”Every case is different, whilst hauliers need to protect themselves against claims of one type so forwarding agents face a different set of risks. Most importantly in these days of multimodal transport a shipper must make certain that their cargo is covered from the loading point until satisfactorily delivered and signed for where ever in the world it is consigned to.

”So many shippers come to us after they have unsuccessfully claimed for goods lost or destroyed in transit, finding that, while they might have a completely legitimate case, the carrier’s terms and conditions explicitly state a ceiling beyond which they will not reimburse.

”It is up to the carrier or agent to inform their clients of their terms of trade, but it is the shipper which suffers if they do not make themselves aware of the limits of protection and mitigate against this.”

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