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The differences between liability and cargo insurance


We know from the many enquiries we receive at BIFA that insurance can be a subject put to one side inadvertently. The following article has been submitted by BIFA Associate Member The Insurance Broker, for which we are grateful


Understanding the issues and the nature of the cover required by a BIFA Member is key to providing a policy that aides freight forwarders should the worst occur. Insurance should be a product that allows


freight forwarders to sleep easy, knowing that should a situation arise where their insurance is called upon, no inadequacies of cover exist and no aspect of their business has not been taken into account. Getting to this stage can be a difficult task.


What are the difficulties? One such area where confusion can arise is the difference between a freight forwarder’s liability insurance and the marine cargo insurance that goods owners can obtain, either direct from insurance brokers or being sold by the freight forwarder, on a marine open cover policy. Firstly, freight transport liability (FTL) insurance


is a policy designed to indemnify the freight forwarder for its liability (if proven) to its customers for damage, loss and theft of the goods under its trading conditions. Any liability policies which aim to be compliant with BIFA membership will also have a minimum £100,000 limit of indemnity for a modicum of errors and omissions cover. It should be stressed at this point that FTL


insurance is a policy to cover the freight forwarder’s liability and at no time will the goods be insured under this policy (See BIFA Clause 11). In the event of a claim for damage or loss, the freight forwarder’s liability will be limited in accordance to BIFA Clause 26 (if proven); this is approximately £2 a kilo. Given the potential significant shortfall between the value of the


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goods and the liability of the forwarder in the event of a claim, the goods owner should obtain marine cargo insurance.


What is marine cargo insurance? Marine cargo insurance is a separate and unconnected policy to FTL. Whilst FTL looks to cover the freight forwarder’s liability for goods under its conditions, marine cargo insurance will cover the full value of the goods. Coverage can be obtained on a different basis ranging from ‘all risks’ coverage under the International Cargo Clauses (ICC) A to ICC C.


Should a goods owner take out marine cargo


insurance, it does not remove the freight forwarder’s liability for a claim that might arise. The goods owner can choose not to use its insurance, or if the insurance is used, then the marine cargo insurers will likely look for a recovery under the freight forwarder’s liability, having taken the rights of recovery from the goods owner.


A list of insurance brokers that are BIFA Associate Members can be found at bifa.org > contacts > insurance brokers


December 2017


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