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SPOTCHECKINSURANCE


The changing face of


Freight transport specialist insurer TT Club outlines the additional liabilities that project cargo forwarders are undertaking as a result of the growing volume and variety of value-added services they are now offering shippers – and of the more challenging parts of the world to which such cargo is consigned.


roject cargo forwarders, like many others providing freight transport services, are increasingly being called upon to expand, both to accommodate additional volumes in their sector and also to supply additional services to cargo owners. These demands can include not only traditional tasks, such as Customs clearance and documentation (not always straightforward in some regions) and on-carriage from the port of entry, but also secure staging, warehousing, sub-assembly and coordination of multimodal traffic. Project forwarders are finding themselves open to increasing liabilities consequent upon these various activities and to pressure from their multinational clients to bear responsibility for often extremely valuable cargoes. It is vital that forwarders recognise how their role is changing and the consequences of these changes. Importantly, from a risk management perspective, companies must understand how this can result in newly acquired exposure to loss and liability. In addition, they should understand what steps they can take to mitigate the exposure by a disciplined and organised approach to the contractual terms agreed with their customers, and well-advised insurance cover.


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Individuals negotiating such project www.heavyliftpfi.com


contracts have many things to consider. It is therefore wise for them to consult their insurer about the liability implications of the contract before it is agreed. In all probability, contractual obligations in relation to risk exposure – and whether or not insurance cover can be reasonably obtained – are scarcely of concern at the outset of negotiations. The TT Club, however, advises project bidders and contract negotiators to apply their minds to such issues without delay.


Project forwarder liabilities


Some involved in the supply chain, such as terminal operators, may have little additional exposure contractually or in relation to insurance, provided they have declared the nature of cargoes handled; the project forwarder is far less secure. It is this sector that requires particular attention in relation to liabilities for cargo loss or damage, errors and omissions, delay, Customs and similar fiscal returns, and third-party liabilities. One of the most notable challenges is that contracts drawn up by the project owners are usually faits accomplis, offering little if any leeway to the unsuspecting freight forwarder. These non-negotiable contracts, which tend to be non-specific and very confusing, require special


consideration. Many are generic service terms, covering all types of supplier, and sometimes considerable imagination is needed to relate them to road or sea carriage. Our greatest concern is that the contracts that forwarders and transport operators are asked to sign may be based on no-fault liability and lack typical carriage liability limitations or defences. This may be inconsistent with, or may derogate from, international conventions or locally applied law. Consequently, while international law, such as the Hague-Visby rules, may cut in for the ocean carriage, this may only benefit the sub-contractor. The forwarder or transport operator may be exposed to vast liability risk from what is a seemingly open-ended contract. The combination of such onerous conditions and the high value of many project loads means that, if they are not delivered on site, on time, a huge claim may result.


Speed also is usually of the essence in such contract negotiating situations. So it is crucial that the forwarder’s insurer is able to examine the contractual terms at the earliest opportunity and preferably before it is signed. This is not always possible in reality of course, in which case a contract review before transport activity starts is advisable. The priority is to transform the contract’s theoretical conditions into practical


July/August 2013 107


liability risk


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