Most of the information in this section has been taken from "The International Freight Guide" with the kind permission of the British International Freight Association.

Why does a shipper need Insurance?
Insurance Terms and the Insured Person's Duties
Insurance in relation to trade terms
Insurance for the freight forwarder/carrier

Insurance for the freight forwarder/carrier

Introduction

Most of the preceding subsections have primarily been relevant to the owner of the goods. The freight forwarder will sometimes wish to take out insurance on the goods as an agent for a customer who asks him to do so. He does, therefore, need to have an understanding of how cargo insurance operates so that he does not give a misleading impression to the customer of what the latter will obtain for his money. However, uppermost in the forwarder's mind will be protection against his liabilities as expressed in his trading conditions or as they are imposed by common law or international law. Again, it is important not to give the customer the impression that the goods are "covered" simply because the forwarder has taken out the proper liability insurance. In order to recover for loss or damage, the customer will first have to show that the forwarder is liable. If the customer seeks complete security (or as near to it as he can get), he should be advised to take out separate cargo insurance or to let the forwarder arrange it on his behalf.

The key to liability insurance - the forwarder's trading conditions

Strictly speaking, the forwarder does not need to operate under any trading conditions at all, as his activities will be regulated to some extent by international Conventions, by the law of contract and negligence. However, it is most imprudent to take this course. Many aspects, such as the all-important question of lien and interest on overdue accounts, can only satisfactorily be dealt with by means of conditions, and conditions which have been properly incorporated into the rest of the agreement with the customer on the rate for the job, collection point, time for delivery, etc. In an ideal world, a written quotation would be submitted accompanied by the conditions and the customer would be asked to agree to both in writing. In the real world, with telephone communication, things are not so easy. Office staff should, however, be instructed always to mention that work is undertaken on the basis of the Forwarders' Standard Trading Conditions. Reference to the conditions should be printed on all stationery, quotations and invoices and if a change is made to the conditions at any time, all existing customers should be notified. In the case of new business, forwarders should ensure that such clients receive a copy of their conditions at the very earliest opportunity, preferably by recorded delivery.

Where the forwarder trades under well-drawn conditions, which he takes care to incorporate into his business deals, they will offer substantial protection against the kind of claim which could put him out of business. They will also provide a secure framework upon which his insurance broker can construct appropriate liability insurance. It should be noted that the highly regarded 2000 BIFA Conditions are for use only by trading members of the British International Freight Association.

Forwarders' insurance

Special packages are available from Lloyd's brokers, the ILU market and others, embracing the different elements of cover required to give complete protection. The forwarder acts in a variety of roles and therefore requires:

1. error and omission insurance in respect of breach of professional duty and document completion;
2. cover in respect of the traditional role as an agent;
3. cover to embrace any specialist physical services, such as packing or warehousing;
4. goods in transit cover to take in situations where the forwarder moves goods on his own vehicles or trailers. The need for CMR cover and extension to marine journeys should not be forgotten where the forwarder is operating as contracting or actual carrier;
5. cover to cater for the forwarders' activities as a principal, i.e., where he undertakes to deliver goods to a foreign destination issuing his own documentation (house bill or FIATA FBL) even though some or all of the actual carriage may be subcontracted to one or more modal carriers. The exact cover required will depend on the split of business. Thus, an air-consolidator will require different cover from that required by a forwarder providing road groupage services;
6. cover for any containers for which the forwarder is responsible. When these are leased or even hired on a short-term basis, there are usually fairly onerous conditions attached, with indemnities in the case of loss or damage to the container. The same is true of trailer hire. Besides the actual physical damage it is necessary to insure against loss of use while the equipment is undergoing repair;
7. finally, the insurance should include cover against all reasonable costs and expenses incurred in avoiding, mitigating and dealing with claims.

When asking his broker to arrange cover, the forwarder should establish clearly whether there are any restrictions or conditions in the cover offered. If there are restrictions, for example a limit per load, the forwarder should be sure that he can live with the restriction. It is often possible to modify limits or restrictions on type of goods covered, by paying additional premium. Having agreed policy terms, the forwarder should be aware that some care may have to be exercised over the work he accepts if the policy conditions are not to be breached. Typically restrictions may be expected in areas including the ones set out below:

1. limit per load/vehicle/container;
2. aggregate limit per warehouse;
3. exclusion of specific goods, e.g., wines, spirits, tobacco, precious metals;
4. exclusions where security measures are not taken. There is often a requirement that vehicles should not be left unattended at night.

Despite being an integral part of any movement of goods, insurance is arguably poorly understood by shippers and forwarders and is all too often ignored. A good freight forwarder will bring to the attention of his customer the fact that goods in transit should be insured and to offer this service as part of his portfolio.

Percy Pallet™ is a Trademark of the PSL Group. All Trademarks and Registered Trademarks are the property of their respective owners.