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Amulet of freight forwarder- Freight Forwarder Liability Insurance

22 Nov 2021

By Eric Huang     

Many cargo owners often compare this Freight Forwarder’s Liability Insurance with the cargo transportation insurance. In fact, these are two completely different insurances, and there is no substitute between them.

Last week we talked about the importance of cargo maritime transportation insurance from the case of general average. This is a loss caused by force majeure. So, if today’s cargo is delayed or damaged due to the human negligence of the freight forwarder, how should the freight forwarder insure itself? Generally, formal freight forwarders should have " Freight Forwarder’s Liability Insurance ". This insurance is responsible for the loss of the cargo owner caused by the negligence of the freight forwards’ personnel!

What is the scope of this "Freight Forwarder’s Liability Insurance"? First of all, let’s find the definition of this insurance - During the insurance period, the insured and its agent as an international freight forwarding agent accept the entrustment of the principal to provide international freight forwarding agency business services, resulting in losses to the principal, and the insured shall bear the financial compensation in accordance with the law Liability. The insurer is responsible for the insurance within the agreed liability limit in accordance with the provisions of this insurance contract.

Generally speaking, the scope of liability covered by Freight Forwarder Liability Insurance is as follows:

(1) Loss of additional transportation costs due to non-delivery, mis-delivery, mis-shipment, or mis-delivery of goods when arranging cargo transportation agency business but does not include the resulting loss of goods.

(2) Loss of related expenses caused to the client due to omissions, errors in the preparation and issuance of relevant documents (excluding the NVOCC bill of lading) and files.

(3) If the delivery date or time of the goods is agreed in writing in advance, the loss of transportation costs caused by the delayed delivery of the goods due to the insured's omission.

(4) In the port or warehouse (including warehouses owned by the insured or leased or entrusted to temporarily store other's warehouses, venues) supervision of loading, unloading, and storage and custody work, causing loss of goods to the client (including due to theft, Loss caused by robbery);

(5) Loss of goods to the consignor due to errors in unpacking, packing, and consolidation operations in the use of container transportation business.

(6) Loss of goods caused to the consignor due to improper or inadequate packaging and reinforcement of the entrusted goods.

(7) In the process of customs declaration, additional duties imposed by the authorities due to the insured’s negligence in violation of relevant national import and export regulations or customs declaration requirements.

However, if it is due to the intentional actions or gross negligence of the policyholder or the insured and their representatives and employees, it does not fall into the scope of compensation.

Many cargo owners often compare this Freight Forwarder’s Liability Insurance with the cargo transportation insurance. In fact, these are two completely different insurances, and there is no substitute between them. In other words, if today is not due to the additional costs or cargo damage caused by the negligence of the freight forwarder and its agent, the Freight Forwarder’s Liability Insurance will not be compensated. Therefore, if the cargo owner wants to reduce the delay or loss of the cargo due to force or force majeure during the transportation process, he must insure the "Cargo Transportation Insurance" instead of relying on the "Freight Forwarder’s Liability Insurance" to protect it!

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