Three tips to consider when evaluating cargo insurance

Brent Wm. Primus, J.D. -- Logistics Management, 4/1/2008

In a business as obtuse as cargo insurance, there are lots of grey areas. But experts agree that a few truths prevail. Here, one of Logistics Management’s most valued legal contributors offers three key points to consider. 

1. Review the policy: Virtually every insurance policy has exclusions from coverage and deductible amounts from full coverage. This means that one must review a policy in detail in order to know for sure the extent of coverage for the products one ships under the particular circumstances of the transportation.
2. Know the different policies: It is critical to know and understand the difference between a shipper’s interest cargo insurance policy purchased by a shipper and a cargo liability insurance held by a carrier. The cargo liability insurance will only pay out to the shipper if the carrier is liable for the loss or damage to the cargo. This means that if the carrier is not liable due to a common law defense such as an “act of God” or a valid limit of liability in the carrier’s tariff, there is no coverage that will pay the shipper. Conversely, a shipper’s interest cargo insurance policy, while subject to the exclusions and deductibles of the policy itself, will pay regardless of the carrier’s liability.
3. Be cautious of purchasing from carriers: One must be especially cautious when purchasing cargo insurance from a carrier or an affiliate of a carrier. This is because such policies will often contain exclusions or deductibles that parallel the limits of liability and the terms and conditions in the carrier’s tariff. This means that such a policy may not provide protection in a given circumstance over and above what the carrier would be liable to the shipper for even if the shipper had not purchased cargo insurance from the carrier or its affiliate.
   —Brent Wm. Primus, J.D. can be reached at brent@primuslawoffice.com. Brent will be hosting LM’s “Logistics and the Law,” an online educational series coming late spring.