Due to the risks involved, shippers should ensure that their freight forwarder carries liability insurance before entering into an agreement for the carriage of cargo. As increasing amounts of freight traffic travels on ships registered in countries where safety goes unregulated, contingent cargo insurance becomes more important. Freight forwarders know this to be the case and cargo insurance allows them to offer their customers added protection in the event that there is a mishap.
When cargo goes lost or damaged, it often isn’t clear who is responsible for that loss. The carrier will not always take responsibility, especially without proof the lost was a direct result of their actions and may decline to pay damages. Shippers will attempt to hold freight brokers, who negotiate the transportation contracts, liable in the event that cargo becomes lost or damaged in transit. Freight brokers often carry contingent cargo insurance to guard against claims, as well as pay those claims they assume responsibility for.
Contingent cargo legal liability
This coverage responds to defense and damage payments associated with a freight broker that has been named a party to a lawsuit, including a third party motor carrier found at fault for incidents resulting in a covered loss. This may represent the greatest financial risk to freight brokerage operations.
There are instances where freight is lost because of extenuating circumstances; perhaps it resulted from saving a vessel from sinking due to weight distribution concerns. Unfortunately, a loss has occurred and the party suffering the loss will demand compensation. No one wants to work with a company that doesn’t carry insurance for situations where a loss occurs. The economic pressure on freight brokers and freight forwarders to obtain and carry this insurance makes it a priority.
The client suffering the loss will often look to the freight forwarder to make good on their claim when the carrier refuses to pay. While not legally or strictly liable, the forwarder realizes that their reputation could greatly suffer if he or she refuses to pay.
Contingent cargo insurance coverage covers all common causes of loss, including damage of goods, theft in transit, loss of cargo on common carriers (specifically truck, rail or ship), and covers losses specific to rail or ocean shipping, such as a sinking ship or if a train wreck occurs.