Cargo Liability Insurance: Legal Aspects and Coverage

Cargo Liability Insurance

Cargo Liability Insurance covers cargo or freight that is being transported overland in a truck, van or other delivery vehicle. Cargo liability insurance also covers transportation over water on a boat. This insurance would protect the company responsible for moving the contents in an insured transportation method from being legally responsible if the property was damaged, lost, or stolen while in their control.

As a type of ground and marine insurance, cargo liability is in effect when the goods are in an insured vehicle either in transit or while waiting at a terminal to be loaded. In fact, cargo liability insurance is divided into two varieties, marine and inland. Both forms are paid for by either a transit company or private contractor to guard against any liability that typically occurs from the time the goods are loaded into the truck or boat, until the cargo is unloaded by the company that bought the policy and delivered.

While the cargo is being transferred from one place to another the policy protects the person driving the truck or operating the marine vessel, the company who contracted to move the shipment, and the actual cargo. When the cargo is verified as delivered undamaged and intact, the insurance policy no longer applies. Liability now changes hands, it becomes the concern the person or company who accepted deliver, or falls to the owner as part of a general liability policy.

Inland or Motor Truck Cargo Liability Insurance

In the United States there is a Federal Law covering minimum levels of cargo liability insurance for the transportation and delivery of freight over land. The minimum levels are:

  1. Loss or damage to each vehicle contents – $5,000
  2. Loss or damage due to any one incident – $10,000
  3. If something in the cargo spills into the street and is ruined, the first $5,000 of product would be covered by #1 listed above, with the company or driver held responsible for what is over and above the $5,000. The damage to property due to the spill that is outside the contents of the cargo is covered up to $5,000.

Again, these amounts are federal minimums and often shipping companies or private contractors will choose to increase the minimums depending on the cargo contents and the potential for damage liability. If property is lost or damaged, these issues are typically decided in a courtroom as part of a lawsuit and not by the police. The suit for damages would often include not just the cost of the product, but also any lost income, delay of business, legal fees, and more. The Motor Truck Cargo liability insurance covers these issues.

Marine Cargo Liability Insurance

Marine Cargo Liability Insurance is intended to protect loss of shipments due to theft on open water. It also protects the ship and its operators from any costs that come from the loss or damage of the cargo, as well as against delays and costs associated with delays and the loss of cargo.

Cargo Liability Insurance: Legal Aspects and CoverageMarine Cargo Liability Insurance has to take into account international trade concerns, delays due to bad weather and other incidents that aren’t as critical with delivery of goods over land. Sea-based transport liability must also consider that the cargo could become water damaged.

Often Marine Cargo Liability Insurance carries both a motor cargo element as well as marine. Often goods are transported over land, then over water, and again over land before ultimate delivery of the cargo can be completed. Being able to combine both land and marine liability insurance protects the company against gaps in policies and can reduce the cost of having two separate policies.

Annual or Single Transit Insurance

Transportation companies or private contractors have the option of two types of cargo liability insurance. They can purchase an Annual Transit Policy that covers all liabilities for the cargo they move through a full year or they can purchase Single Transit Insurance that covers liability for a single delivery.

  • Annual Transit Insurance – This type of policy can have mileage limits incorporated in the coverage. This limitation is intended to protect the insurance company from disproportionate use based on the coverage. To manage this type of policy the shipping or trucking company would need to monitor and plan for continuing coverage.
  • Single Transit Insurance – This type of liability coverage is typically used by shipping companies or is someone who either doesn’t ship regularly enough to pay for an annual policy or just needs to cover the risk of loosing or damaging one single shipment.

It’s interesting to note that small delivery package insurance, such you would use through a service like UPS or FedEx, originated as a form of Single Transit Insurance.

Summary

Cargo Liability Insurance comes in two basic types which are land and sea. Companies can get a blanket, annual transit policy or purchase a single transit policy for occasional shipments.

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