Whether you’re a business or a person, there are a constellation of insurance policies you likely carry. Home, auto, health, disability – all of these types of coverage underscore the need to have something because the likely outcome of a loss would be financially catastrophic. The question that people must determine for themselves is how much risk do they want to bear themselves in terms of the premium or deductible and how much do they want the insurer to bear.
For cargo owners, they may ask themselves the same questions about goods in transit and whether or not they could sustain a partial or total shipment loss (or losses if there are multiple shipments on a single conveyance) and if the savings of not carrying cargo insurance for all goods in transit is a savings that would offset one or more of these losses simultaneously or in succession.
The play on words of the use of “Ever present” in the title is not accidental given the two most prominent cargo insurance examples over the past two years have both been Evergreen vessels. The first, which needs no introduction, was the Suez-blocking Ever Given. The second, and perhaps less noticeable because she hasn’t closed a major global waterway, is the Ever Forward, currently having containers offloaded to free it from the mud of Chesapeake Bay in Maryland.
Cargo insurance is designed to protect shippers against loss or damage while goods are in transit from one point to another and is customarily written for the cost of the goods, insurance and international freight charge, plus an additional 10% override. The premium is driven by a number of factors including commodity, trade lane, the insured’s history and their total annual insured value.
At RS Express, applying cargo insurance is as simple as receiving instructions to insure a shipment. We will then generate a certificate using our open cargo policy and the premium for that shipment will be included on our invoice.
The importance of cargo insurance cannot be overstated. There are two overarching reasons why cargo owners should carry insurance.
The first is that in a typical multimodal shipment – one where there are multiple modes of transportation between origin and destination – each type of carrier will have different limitations of liability. Depending on the cargo value, the carrier responsible for the loss – if it can be conclusively determined – will pay far less than the cargo is worth. For a multimodal shipment where the source of damage cannot readily be determined, a fight for subrogation – or assignment of responsibility – will ensue and could take months or years to resolve and likely not to the satisfaction of the cargo owner.
Insurance is usually an all-risk coverage and if a client has a claim for damage or loss, we notify the insurance carrier who advocates for the cargo owner’s interests, pays the claim if it is warranted and subrogates against the carrier for the loss.
The second reason to carry cargo insurance is for when something doesn’t happen specifically to your cargo – but the carrier wants you to pay for their loss instead. When a vessel owner suffers ship damage, loses containers at sea or both, they will declare a condition called “general average.” Ever Forward’s owners have done just that.
All of the cargo owners on the vessel are then required to post a bond to secure the release of their cargo. With cargo insurance, the insurer notifies the ship owner and the cargo can be released as quickly after arriving at the port as possible.
Cargo insurance does have limitations, though. Cargo insurance does not guarantee or warrant the performance of time in transit, and if a vessel owner declares a condition known as force majeure – essentially walking away from a contract’s terms because of extraordinary circumstances – it would not pay for the costs of getting cargo to the named destination on a bill of lading if they choose to end the voyage and offload cargo somewhere between the named origin and destination.
If your company is interested in cargo insurance for the first time or has been overpaying for coverage from your general business insurer, contact RS Express for a quote today.