Logistics Insurance

What Makes a Contract Special?

From a risk management perspective, this question is answered by the contractual terms that make the policy holder pay more when they have a claim compared to when standard trading conditions apply.

Standard trading contracts are often taken from other industries that are unsuited to the transportation and logistics sectors. Signing these contracts can lead to significant financial losses, the possibility of no insurance coverage, and even bankruptcy.

The following scenarios found within standard contracts are important to pay attention to, as they can have very high-risk outcomes for the policy holder:

“You are responsible for all claims.”
What it means: Strict liability regardless of any fault or negligence.

“You are responsible for the full value of the cargo.”
What it means: No weight or package limitation, including high value cargoes.

“You are responsible for delays and consequential losses.”
What it means: No limit to freight charges and time crucial delivery.

“You have no defenses to claims.”
What it means: No reference to protection for matters beyond your control.

“You have no recovery against responsible carriers.”
What it means: Certain clauses make you fully responsible for all carriers in the chain.

“You agree to a claimant supportive legal system.”
What it means: Certain legal regimes are less favorable to logistics providers.

For More Information

Please contact our specialists: info@vivaceinsurancepartners.com.

Vivace Insurance Partners, LLC is a member of the +8 Partners ecosystem. This article was authored by Phillip Emmanuel, Chief Operating Officer at +8 Partners.

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.

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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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The Importance of Salvage

If you have a claim under your cargo or liability insurance, salvage can be a major headache for the forwarder.

When an accident occurs, the merchant is understandably upset. Their cargo is damaged, but there also may be other implications to the supply chain. Often, they will prefer to abandon the cargo and re-order a new shipment. Such behaviour can be extremely costly for both merchant and even the forwarder.

The forwarder must ensure they try to get the cargo to destination before arranging any survey or inspection. If an incident happens in the port and the cargo is deemed damaged, the merchant will most likely not want their cargo. And may not want to spend time salvaging with the belief that this is the cargo insurer’s responsibility under subrogation.

However, this is not the case. The duty to mitigate/salvage is on the merchant – not the insurer. Subrogation is only after the insurers have settled the case.

This misunderstanding may result in expensive storage / demurrage / disposal / labour charges that insurers are unlikely to compensate. Therefore, we would always recommend ensuring the cargo arrives at destination before any survey is undertaken.

Any delay may also prejudice the claim, especially if it involves perishables. The insurer’s surveyor may help, but if the merchant refuses to cooperate, then this will be a total loss in a very short time. Whilst insurers will not override a decision by the health department to condemn cargo, often the discretion is on the insurer to decide. Perishables may be condemned for human consumption, but they will have a secondary market under animal feed, and this is where complications occur. There is still salvage, and it is not deemed a total loss.

Ultimately, speedy action on finding salvage buyers results in the claim being paid faster with less costs. It’s also common for the merchant to make a salvage offer for cargo that may fall outside its original market, but they still have a use for. This can make adjusting the claim even quicker and simpler.

Salvage is the number one reason for delay on claims adjusting, so it is imperative to involve the broker as soon as a dispute arises.

For More Information

Please contact our specialists: info@vivaceinsurancepartners.com.

This article was written with +8 Partners member company World Insurance Services, Inc. and authored by Richard Kamppari Baker, Claims Director at World Insurance. Vivace Insurance Partners, LLC is a member of the +8 Partners ecosystem.

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.

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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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Tips for Handling Delayed Goods Due to Panama Canal Backlog

In 2024, the canal might miss a total 1,500 vessels that would pass through in normal conditions, said the Authority’s Deputy Administrator Ilya Espino. Due to the transit restrictions, the Panama Canal Authority has forecast a reduction of up to $700 million in toll revenues for the current fiscal year ending in September. (Source: Reuters, Feb. 7)

The Panama Canal Authority has been restricting traffic since summer 2023, resulting in numerous shipments that have been stuck or delayed. This included a heavy backlog of goods that were sent to meet increased demand of the 2023-24 Holiday season.

The delays were caused by drought in the canals, made worse by on-going restrictions, which resulted in containers of perishables and Holiday-market products arriving after their ETA. This type of scenario typically leads to a mass rejection from the consignee and increased abandonment when shipments do arrive.

If the situation doesn’t improve, vessels might have to consider using other routes, which could lead to an increase in the cost of transportation.

From a Freight Forwarder’s perspective, delay is generally excluded, especially if it falls outside your control. Claims of such nature should be rejected. This may cause friction with customers, but to avoid expensive claims, it is imperative to not agree to specific times or dates of arrival.

Insurers, however, expect to receive many uncleared or abandoned containers that were intended for a particular market and no longer retain the same value. It is important for the Forwarder to carefully monitor all containers that might be traveling via the Panama Canal and notify their liability insurers immediately. If the goods are likely to be abandoned, it is important notify early to avoid incurring unnecessary storage/demurrage costs.

The shipper/consignee must be made aware they cannot simply abandon delayed cargo without settling all charges. Even if the cargo has little value, it will be less expensive for the shipper to accept delivery than to abandon shipments.

For more information, please contact our specialists: info@vivaceinsurancepartners.com.

This article was written in conjunction with +8 Partners member companies.

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.

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