Cargo insurance, covers any possible risk from physical external cause to the goods while in transit. Should your claim for the loss or damage be denied by the shipping carrier, the all-risk cargo insurance for full replacement value will always protect your goods for the full declared value. To protect against these claims, freight brokers carry contingent cargo insurance to pay the claims that the carrier will not.
When It’s Used
Shippers may hold freight brokers — who negotiate transportation contracts on behalf of shippers — liable should cargo be lost or damaged in transit. To guard against this potential, freight brokers carry contingent cargo insurance to insure them against claims made by the shippers for damage to cargo. Contingent cargo insurance only comes into play when the carrier refuses to honor a claim.
Requirement to Insure
Freight brokers or freight forwarders aren’t legally required to carry contingent cargo insurance; however, carriers are often reluctant to work with those who do not carry this insurance. This places economic pressure on freight brokers and freight forwarders to obtain and carry this insurance. Further, should a shipper’s cargo suffer damage and the carrier refuse the claim, the shipper will look to the freight forwarder to make good on the claims. Although not strictly liable, the forwarder’s reputation will suffer if he does not pay.
What It Covers
Contingent cargo insurance coverage includes common causes of loss, such as damage and theft in transit. It covers the loss of the cargo on any type of common carrier, including truck, rail or ship. It even covers some of the losses peculiar to rail or ocean shipping, such as the ship sinking with the cargo aboard or a train wreck. One type of loss in ocean shipping where contingent cargo insurance is essential is called “general average.” When the crew jettisons cargo to save the ship, the insurance company charges the loss of all or part of any one shipper’s cargo back to all the shippers. Contingent cargo insurance pays this claim.
Written by Iris Arden (Ramon Inc.)