How carrier liability and freight insurance affects your freight claims

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February 21, 2018

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The terms carrier liability and freight insurance might sound foreign to many. However, if you are involved in the field of logistics or any other related field, educating yourself regarding these two terms can make all the difference when making freight claims. In case your shipping items should get lost in transit or are damaged in one way or another, freight claims are what you would typically use to recover some of the value you may have lost.

When people first learn about damage to their items or incidences of loss, one of the very first things that spring to mind is ‘will I be compensated, and if so, how will I be compensated? To answer such a question, you must first understand the difference between freight insurance and carrier liability, so that you can determine what is covered by liability and what is covered by your insurance.

Carrier liability and freight insurance

Carrier Liability coverage defined

Carrier liability is a term used commonly in the world of shipping to illustrate that a carrier is answerable for any losses, delays, and damages that may occur to customer’s shipments. All booked freight shipment, regardless of what it is, generally comes with limited liability coverage.

The liability coverage for your shipment is usually determined by the carrier based on the type of commodity and the freight class of the items being shipped. If you are shipping used goods the liability value of your items will be less than the liability value of new goods. Conversely, if you are shipping directly from the manufacturer, your liability coverage will be higher.

For a carrier to be held responsible for losses or damages, the shipper or freight forwarder must prove that the freight was in good condition when it was received by the carrier or when it was given to the carrier. Carrier liability is useless when damage to your goods occurs due to acts of God (weather issues or natural disasters) or faults of the shipper (when you pack or load goods improperly).

In such instances, the carrier cannot be held responsible. Furthermore, if the damage is not indicated on the delivery receipt, the carrier will deny any liability. So always ensure to check that you work with a reliable freight forwarder that understands such important intricacies of the shipping business.

Freight insurance defined

Sometimes freight insurance is known as goods in transit insurance or cargo insurance. Freight insurance only requires you to prove that damage occurred. Unlike carrier liability, you do not have to prove that the carrier was at fault for any loss or damage that takes place.

Freight insurance is the best tool that freight forwarders use to protect their customer’s goods while it is in transit. The freight forwarder that you are dealing with will usually charge you extra if you ask for freight insurance. When you book a shipment, you will simply be asked by your reliable freight forwarding service whether you would like to add insurance.

The amount is determined by the declared value of the goods that you are shipping. Therefore, if you are shipping high-value items such as medical equipment, your freight insurance will be higher compared to someone who is transporting say, furniture or sporting goods.

The majority of freight insurance plans are usually provided by third-party insurers.  Often people opt to pay for freight insurance when the liability coverage provided is not sufficient to cover the entire value of your high priority goods.

Differences in the claims process between carrier liability and freight insurance

  • When your shipment is only covered by carrier liability:
  • The freight claim must be filed within 9 months of delivery
  • If your delivery receipt is not marked as damage, your carrier must be notified immediately
  • You must prove the value of your goods
  • You must also prove that loss occurred in transit that is, that the freight was packaged properly before departure at the point of origin but it was delivered in a damaged state.

When your items are covered by cargo insurance:

  • You are not required to prove carrier negligence
  • However, you must provide proof of the value of items and proof of loss or damage.

What to do when damage occurs to your shipment

When filing a damage claim, you must be able to prove that damage occurred between shipment and pick up. After the shipment has been delivered and the freight has been inspected always:

  • Double check the description of the Bill of Lading.
  • Take pictures in case of damage.
  • Note down any damage on the delivery receipt even if the damage may be concealed or negligible. If you discover damage after unpacking, stop the unpacking process immediately, keep the packaging and contact your carrier to request for someone to come and inspect the damage.

If you are sending a shipment to someone:

  • Take pictures before packaging the shipment
  • Ensure that you note down the description of the freight on the BOL clearly. The devil is in the details after all.
  • Ensure that you package your goods and label them properly.

Let Sidoman help

Sidoman can help you determine the carrier’s limited liability amount as well as help you decide which coverage is best for your shipments. Reach out to us today to learn more.


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