Author: Sarah Corry

Understanding Your Policy: The Difference Between Cargo Insurance and Freight Forwarders Liability Insurance

By Rebekah Khew, Director

We come across clients who perceive that a Freight Forwarders Liability policy acts the same as a blanket Cargo Insurance policy. However, this is not the case, and this misinterpretation can land the freight forwarder in hot water.

Both insurance policies can cover lost or damaged cargo, but how they respond is significantly different.

The key difference between the two types of insurance relates to who they protect.

Cargo Insurance: protects the cargo owner – depending on the Incoterms – meaning the shipper (seller, manufacturers, wholesalers, sourcing agent) or the consignee (buyer, importer).

Freight Forwarders Liability Insurance: protects the freight forwarder who has legal liability for the goods they are transporting. This cover combines Legal Liability and Errors & Omissions and serves primarily as a defence policy.

WHAT DO THESE POLICIES COVER?

Cargo Insurance

The policy cover compensates the cargo owner for the financial loss up to the value of the affected cargo – related to the specific shipment declared – as long as the nature of the loss is not excluded or otherwise not coverable under the terms of the cargo insurance policy.

A policy is intended to provide an indemnity (reimbursement) based on the value of the lost or damaged cargo. The value is limited to the Sum Insured declared when issuing the cover.

The cargo owner should be aware that a cargo claims event may not be triggered by errors or negligence by the freight forwarder. But, cargo insurance can provide financial protection for damage or loss in various events, including faulty loading/unloading, accidents, bad weather, fire or theft.

Freight Forwarders Liability Insurance (FFL)

The freight forwarder is accountable for the cargo from collection to delivery. It has a liability exposure for any loss or damage to the goods or consignment.

For an FFL cargo liability claim to be payable, the loss or damage of the goods must be proven to be caused by the freight forwarder’s negligence or error.

Meaning for an FFL claims event, the freight forwarder or carrier’s contractual liability has to be established, e.g., if the goods were in the custody of the forwarder at the time of loss and/or if the forwarder issued the Air Waybill or Ocean Bill of Lading and/or FIATA Bill of Lading.

It’s not uncommon to see an FFL policy trigger when it’s required to provide a defence to a forwarder against subrogation claims from cargo insurers.

HOW THE POLICIES ARE SET UP, AND WHO PAYS FOR THEM

Cargo Insurance: Policies are purchased by the party obligated/interested in arranging the insurance, either the shipper or consignee, as per the Incoterms. This also presents an opportunity for the Freight Forwarder to provide an add-value service in helping to arrange the cargo insurance for their client.

Freight Forwarders Liability Insurance: FFL is payable by the freight forwarder as an annual cost based on the scope of activities and the Gross Freight Receipts. FFL is a policy that protects a company as the freight forwarder, not the forwarder’s client, i.e., the cargo owner.

WHAT DOES IT ALL MEAN?

Both insurance policies are essential in their own right and should not be considered a replacement for each other.

It’s also important to note that cargo insurance is designed to indemnify the cargo owner. As long as the claim incident is not excluded and within the scope of cover, it should pay out based on the value of the cargo and the Sum Insured.

By contrast, FFL is primarily a defence policy designed to protect the Freight Forwarder by pushing back and limiting liability as much as possible. It also covers cargo liability; the claimant (which could be your client) will need to fight and establish liability before any payout is considered. After which, the settlement would be limited for various reasons, including your Standard Trading Terms and Conditions and International Conventions such as the Hague-Visby Rules.

From a business perspective, Cargo Insurance protects the cargo owner, keeping them happy. FFL protects the Freight Forwarder against unhappy clients.

Both insurance policies cover goods transported domestically, internationally, and by all transport modes (land, air, ocean, or a combination).

CONTACT US

As an international Managing General Agent in the marine and logistics space, Vivace Insurance Partners can help you provide Cargo and FFL Insurance to protect your clients’ commercial operations and discuss the options available for tailored and affordable cover.

  • Cargo Insurance: All risk cover, place to place by any mode.
  • Freight Forwarders Liability Insurance: Customized solutions for freight and logistics.

For questions or more information, please contact:

Asia Pacific: Rebekah Khew – Director, rebekah.khew@vivacehk.com

Americas: Cordell Fenig – Senior Underwriter, cordell.fenig@vivaceinsurancepartners.com

Disclaimer: The descriptions of coverage described above are generalized and are subject to the specific insurance policy’s terms, conditions and exclusions. For full coverage details, please refer to the actual policy forms. This content is not an offer of insurance nor does it provide insurance coverage to the reader.

Vivace Insurance Partners, LLC is a member of the +8 Partners ecosystem.

© 2024 Vivace Insurance Partners, LLC. All rights reserved.

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Riding waves of growth, China and India take steps to expand marine insurance capacity

Rebekah Khew, Vivace’s APAC Director, shares her views with (Re)in Asia.

At a time when the spotlight is on rising marine rates due to the conflicts in Ukraine and Israel, China and India are looking inward at how they can reduce their vulnerability to global events like the COVID-19 pandemic and geopolitical developments.

“During the COVID-19 pandemic, China’s implementation of stringent control measures, including travel bans, quarantine, vaccinations, and testing led to — or accelerated — the closure (or) withdrawal of many foreign companies from the Mainland,” said Rebekah Khew, APAC Director at Vivace Asia Pacific.

“Post-pandemic, it’s unsurprising to see China re-engaging on the international stage to entice foreign companies to enter or re-enter the market,” she added.

However, an apparently perfect storm of appetite, market, and regulatory opportunity does not mean instant success.

Click here to read more. 

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Vivace Insurance Partners Launches in the Americas, Rebrands in Asia Pacific

+8 Partners ecosystem MGA company focused on marine and logistics expands international operations.

Vivace Insurance Partners (Vivace) today announces the launch of Vivace Americas and the rebranding of ADVA Specialty (HK) Limited as Vivace Asia Pacific.

Deriving its name from the musical expression denoting freshness, energy and movement, Vivace is focused on fusing bespoke coverage solutions with intelligence and data gained from a years-long focus on a global logistics industry client base.

Vivace Americas, based in Los Angeles, will be writing business in partnership with A-rated international insurers across North America’s logistics sector and will be led by Cordell Fenig, late of Roanoke Insurance Group. Fenig brings market knowledge, accounts, portfolios, exposures and an extensive network of key industry players.

Vivace Asia Pacific will provide coverage solutions from Hong Kong for marine cargo, logistics and hull and cargo war risks, the latter a key focus in today’s current geopolitical climate.

Leading the company will be Rebekah Khew, director – Asia Pacific. Khew brings three decades of experience to Vivace and is widely recognized for her solid technical knowledge, strategic analysis and management experience. Prior to being named to the position, Khew held senior roles at MS Amlin, Beazley, Chubb and AXA Corporate Solutions.

Vivace’s MGA software platform “Vivacity©” provides seamless interactivity across all underwriting functions, accounting, online engagement with clients and principals, and granular, AI-enabled intelligent reporting. Developed over many years of incremental learning from a logistics industry client base, it gives brokers a quick and easy route to quotes and policy management.

“Vivace is a focused, specialized MGA with in-depth knowledge and understanding of key players, risk exposures and the cultural nuances of our markets. Under the leadership of Cordell and Rebekah, the company offers a fresh approach with experienced players writing insurance online on behalf of the best security in the business,” said Philip Bilney, executive chairman at +8 Partners.

“Vivace is the perfect combination of technological innovation backed by a relationship-driven approach to business. I’m excited to be a part of the team of seasoned industry professionals with a forward-thinking mindset,” said Fenig.

“Brokers and clients need to be confident that their underwriting partner is committed to supporting their business over the long term. And it’s clear that Vivace delivers,” said Khew.

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