Cargo Insurance, why is it so critical!

Most of us have health, home, and life insurance, hopefully never to be called upon, rather a safety net should things go wrong. Cargo insurance is very similar, you should have it in case you need it. Cargo owners often assume the carrier or freight forwarder is automatically liable and do not take cover, and when things go wrong, they find themselves exposed.

The fact is, freight forwarders only cover their liability, and Carriers (airlines/shipping lines) are governed by mostly inadequate limited liability policies under the Montreal Convention (airfreight) and the Hague-Visby rules (ocean freight), and these are often very difficult to pursue.

So what is liability? Imagine your freight forwarder is moving your container on a road journey before or after an ocean leg, the truck is involved in an accident, or even hijacked, and you lose your cargo. Well, that is typically not liability, it’s an accident or a crime, and in such a case if the cargo owner were not alternately insured, there would likely not be cover. (Ziegler South Africa have a global Logistics Liability Policy with AON)

So, given the reality, the best bet for any cargo owner is to obtain All Risk Cargo Insurance (Marine Insurance), and we can assist in negotiating and obtaining same. In this case, provided the warranties are respected, the cargo owner is reimbursed for their loss, and your insurer can then subrogate against liable parties based on merit, not leave you to this massive fight for which you are likely not prepared.

And what about CIF cargoes, where your supplier procures cargo insurance and freight on your behalf, included in the supply price. Well herein lies some of the largest risk. It if often found that cargo owners do not further insure CIF cargoes, so once your cargo crosses the ships rail upon arrival, your cargo is no longer covered! Even if the loss occurs during the ocean journey, have you had sight of the policy terms negotiated by your supplier? Mostly suppliers procure very limited cover (cheapest), and considering that risks pass to the cargo owner at the FOB point, you find yourself pursuing a foreign insurer, with immense difficulty, often with steep excesses and many exclusions.

Again, just like liability, you can get your local Marine Insurer to include your CIF cargoes, and once again, you get settled and your insurer subrogates.

Now what if I have low risk or low value cargo, why insure that? The simple answer, General Average. When ships at sea experience a fire for example and throw containers overboard “jettison” to save the vessel, lives, or other cargoes. Under Maritime Law the vessel operator may declare “general average”. The expenses of repair to the vessel, lost cargo, etc. are then all shared proportionally amongst everyone that has partaken in that journey. Even the cargo owners of those containers jettisoned are liable for their portion.     One great example from March 2021 that many of us may remember, the vessel Ever Given got stuck in the Suez Canal, this resulted in billions of dollars in costs due to various factors including delayed shipments and a fine imposed on the ship owners after the Suez Canal authorities arrested the vessel and held it, a General Average Security at 25% of cargo value was claimed, and unless you had marine insurance, you cargo would not be released unless the cargo owner funded it.

To manage the insurance process is complicated. Freight forwards are well placed to take on this burden. They do this daily and as such know the processes and procedures well. Let us help you negotiate the best terms and make the arrangement on your behalf. Speak to your Ziegler representative for guidance.