what you need to know about transport insurance
If transported goods are damaged or stolen en route, the question arises as to who is liable for the damage. Naturally, the focus is on the forwarder, simply because he usually has the contractual relationship with his customer (forwarding contract). However, the forwarder is not liable for every transport damage, and even if he is liable, the contractual liability limits must be taken into account. In many cases, the owner of the goods does not receive compensation from the forwarder – or at least not the full amount of the damage! It is clear that this is bound to cause trouble in the relationship between the customer and the forwarder, but what can be done?
The solution is good transport insurance. The majority of forwarding customers have their own transport insurance, which usually compensates efficiently and accommodatingly for the damage suffered in the event of a claim. However, if the forwarder’s customer does not have such general transport insurance, he can also apply for such insurance via the forwarder. It is important to know that transport insurance is only taken out on special order. The GC Spedlogswiss, as the basis of all FEAG International Freight Forwarders Ltd. forwarding contracts, subtly take this circumstance into account in Article 13:
Art. 13 Transport insurance
The forwarder shall arrange transport insucrance only at the express written request of the customer. The function of the forwardeer is limited to the procurement fo suitable transport insurance.
If the instructions of the customer are simply to arrange for transport insurance, the forwarder shall take out transport insurance “against all risks”. If this is not possible, or if the desired extent of cover is not clear, the forwarder shall clarify the matter with the customer.
What does transport insurance cover? Transport insurance can be described in the broadest sense as comprehensive insurance for transported goods and compensates the owner of the goods if his goods are damaged or stolen during the insured transport or during transport-related interim storage.
From this alone it is easy to see that there are no (unnecessary!) discussions between the customer and the forwarder regarding basic liability or limited liability. In the case of transport insurance, this dispute shifts to the area of recourse, i.e. the transport insurer who has settled the claim subsequently recourses to the alleged party responsible for the damage – in other words, two insurers discuss the matter with each other, and the relationship between the forwarder and his customer remains unaffected.
As a rule, a so-called “all-risks” insurance policy is taken out. This type of cover includes all risks that are not expressly excluded in the insurance conditions. In addition, we also know the so-called “limited insurance”, which is used, for example, for unpackaged goods or second-hand machines. With this limited cover, the insured risks are defined in the insurance conditions.
In addition to the actual damage to goods, the premiums due following general average are also reimbursed under the transport insurance. The amount of these premiums should not be underestimated. Depending on the circumstances, it can easily reach a five-figure sum!
Special arrangements must be made with the insurer for various types of goods, such as aircraft, antiques, cement, temperature-sensitive and perishable goods, exhibition goods, money, etc.
The most important exclusions: By far the most important exclusion of cover concerns defective packaging: Every third transport packaging (!) is defective. It goes without saying that the insurer assumes adequate packaging in its premium calculation and is not prepared to reward savings in packaging by compensating the loss. Packaging is considered adequate if it protects the transported goods from the risks that can normally occur during the transport in question. This includes, for example, emergency braking in truck transport, air holes in air transport, shunting impacts in rail transport etc.
There are also a number of other exclusions (some of which can be included again for an additional premium):
- Delay damage
- Temperature influences
- Improper stowage in the means of transport or container by the policyholder
- Demurrage charges
- Use of officially blocked transport routes
- War, civil war, rebellion, revolution, strike, terrorism, etc.
This list is not exhaustive.
What else is important: In practice, the terms of delivery (Incoterms) are agreed in the sales contracts of freight forwarding customers in addition to various other aspects. In many cases, clauses are used in which the risk is transferred during transport. In other words, the seller bears the risk of the goods up to a certain point, and the buyer bears this risk for the rest of the transport. Following the logic, one would think that each party covers its risk in the transport insurance NO! Never take out such so-called broken cover. The transport insurance must always be taken out for the entire journey (the premium can still be divided up). Why is this so important? Basically, the policyholder has to prove legally that the damage occurred on the insured route. If, for example, in the case of a multimodal container transport, the consignee discovers that the goods are damaged, it is very often impossible to define where exactly the damage occurred. This means that it is not possible to prove that the damage occurred on the insured route, and discussions with both insurers are inevitable!
Good arguments for taking out transport insurance:
- No discussions with (possible) liable parties
- No proof of liability
- No limited liabilities
- Also indemnity if there is no liability of the parties involved in the transport (e.g. in case of force majeure)
- Compensation for general average contributions
- Planning security (no financial holes).
Your contact at FEAG International Freight Forwarders Ltd. will be happy to provide you with further information on transport insurance.
