Understanding the difference between Freight Insurance and Freight Liability is a crucial part of the cargo and/or logistics industry, especially in an unfortunate event that you need to process a claim. The questions you should be asking yourself is what is the covered by the liability, what is covered by the freight insurance (Full Replacement Value Called All risk that we offer), and what is the difference.
The key point here is to analyze what is the extent of the carrier’s liability for freight loss under the applicable law and/or coverage, and what is the extent of the carrier’s freight insurance protection for that liability.
For example, there are three types of coverage offered by Ramon Inc. One of the coverage is called ALL RISK. This policy covers ANY damages while in transit. This includes damages from physical external cause along with partial or total, theft and catastrophe. This means that if the goods are not covered by All Risk then the insured/shipper is relying solely on the carrier’s contingent liability policy for insurance coverage should there be damage or loss during transit. Since it is a liability policy, the carrier is protected by statue and subsequently limited on their liability to pay claims. This affects the level of individual contract of carriage which was entered by the shipper and carrier. If the shipper imposes any commercial pressure on the carrier, or if the carrier is guilty of gross negligence, or the transit is subject to the Carmack Convention for interstate shipments in the US, then the limited liability of the carrier may be challenged.
Please keep in mind that in case of a claim and relying upon the carrier’s cargo liability insurance, you will be faced with an expensive and timely process that will ultimately involve lawyers and added expenses that accrues. Usually in a claim case, a carrier’s limit of liability is only $1,500. Most of the time customers are lead to believe that the trucking insurance general liability of $100,000 covers their cargo for full replacement value. This is not the case. The $100,000 covers them for all the loads that they haul. Within the fine prints of the contract of carriage, they have a limit of liability of $1,500 per claim. Just like ocean vessels have $500.00 limit of liability per container even if the goods in the container are valued at $500,000. The same with all airlines, they have limit of liability per luggage and/or cargo they carry on-board. Therefore, Ramon Inc. with more than 31 years of experience in the market strongly advises everyone within the industry to check all the details/information prior to booking cargo insurance with any company or relying on the trucking company’s cargo insurance policy. This policy is simply a mandatory requirement by the DOT for any trucking to operate, and it is very limited.
Written by Iris Arden (Ramon Inc.)