An Insurance Policy That Actually Protects You – Part 2 of 2

In the previous article, “An Insurance Policy That Actually Protects You – Part 1 of 2” I outlined some general principles relating to insurance contracts. The aim was to make the subject easier to understand and to explain why the level of cover can vary so significantly – even between policies issued by the same insurer. 

A copy of the policy is not enough

Having been involved in hundreds of cargo claims on behalf of companies operating in the TSL industry, I have seen that carrier insurance verification is very often limited to:

• obtaining a copy of the insurance policy, 
• obtaining proof that all due premium instalments have been paid, 
• checking the policy for information confirming that: 
  • the territorial scope is appropriate, for example that international transport is covered, 
  • the policy period is valid and covers the entire expected duration of the transport, 
  • the sum insured is sufficient – which can be particularly difficult when the customer describes the cargo simply as “general cargo”, “neutral goods” or “nothing special”. 

As a result, once a loss actually occurs, it may turn out that the insurance:

• does not apply at all, for example because particular types of goods are excluded from cover or because theft during stops outside guarded parking areas is not insured, 
• or applies only to a limited extent, for example because losses caused by gross negligence are subject to a specific sublimit. 

When checking a subcontractor’s insurance, it is therefore worth spending a few extra minutes on a more detailed review in order to establish the actual scope of cover.

What should you really look for in a carrier’s liability policy?

Based on my experience, the following points are particularly important.

Based on my experience, the following points are particularly important.

1. Type of cover – First, establish exactly what type of carrier’s liability insurance is provided – domestic, international or cabotage – and make sure it matches the transport operation you intend to entrust to the carrier.
2. Territorial scope – In international transport, it is not enough for the policy simply to state that international carriage is covered. You should check exactly which countries fall within the territorial scope. Some policies, for example, limit cover to EU Member States, while the carrier also performs transport to and from Switzerland, Norway or the United Kingdom.
3. Sum insured – The sum insured should be sufficient to cover at least the carrier’s standard potential liability. For domestic transport in Poland, this may mean cover corresponding to the value of the cargo. For international transport, it should at least reflect the liability limit provided for under Article 23(3) of the CMR Convention.
4. Deductibles – Check the amount of any deductible, i.e. the part of the loss that the insurer may deduct from the compensation and that must ultimately be borne by the carrier itself. Fixed deductibles, such as EUR 200 or EUR 1,000, are generally preferable to percentage-based deductibles such as 5% or 10% of the loss.
5. Types of cargo covered – The goods being transported must not fall within an exclusion under the policy. In practice, this usually means reviewing the exclusions section carefully and checking whether the relevant category of cargo appears there.
6. Cover for theft and robbery – It is not enough simply to establish that theft and robbery are insured. You also need to check on what terms that cover applies. This usually requires reviewing the so-called parking clause, in which insurers specify where stops are permitted and under what circumstances the vehicle may be parked outside guarded parking facilities, for example where the stop results from statutory driving or rest-time requirements. Important: some insurers apply different requirements depending on the country. Less stringent conditions may apply in countries regarded as relatively safe, while stricter requirements may apply in countries with a higher risk of theft or robbery.
7. Cover for losses caused by gross negligence – When using a subcontractor, you can never be certain that the subcontractor itself – or one of it’s employees – will not cause a loss through gross negligence.Gross negligence may include subcontracting the transport further, parking in a location that does not meet the requirements of the transport contract, causing a road accident through a serious failure to exercise due care. Ideally, the policy should also provide cover in such situations.The sublimit under this clause should be as high as possible because, under Article 29 of the CMR Convention, a finding of gross negligence may prevent the carrier from relying on the standard limitation of liability, including the weight-based limit set out in Article 23(3) of the CMR Convention.
8. Cover for temperature-controlled transport – Check whether the insurance covers losses involving goods transported in refrigerated vehicles or under controlled-temperature conditions.
9. Cover for liability under Article 23(4) of the CMR Convention – This is particularly important when transporting goods subject to customs duties and/or excise duties. Such costs can sometimes be several times higher than the value of the goods themselves.

Other provisions worth checking

Depending on the details of the transport service, it may also be advisable to confirm whether the policy covers:

• transport performed by subcontractors, 
• losses resulting from delivery of the goods to an unauthorised person, 
• losses resulting from fraud or misappropriation of the shipment, 
• losses caused by unauthorised third parties entering the cargo area, for example migrants, 
• losses occurring while the vehicle is being driven by a driver under the influence of alcohol or drugs, 
• losses resulting from late arrival for loading, 
• losses resulting from delayed delivery, 
• damage to containers or packaging, including pallets and gitterboxes, 
• losses occurring during loading or unloading performed by the carrier, 
• losses resulting from the way the cargo was secured on the vehicle, 
• transport performed with a declared value of the goods under Article 24 of the CMR Convention, 
• transport performed with a declaration of special interest in delivery under Article 26 of the CMR Convention, 
• losses resulting from confiscation of the goods. 

A detailed review pays off

Properly verifying an insurance policy is neither simple nor quick, but experience shows that it is worth the effort. When low-value goods are involved, even if the carrier does not have adequate insurance cover, it is often still possible to recover the loss directly from the carrier’s own assets. The situation becomes much more difficult when high-value cargo is involved. In those cases, recovering the full amount directly from the carrier may simply be impossible. And high-value losses are becoming increasingly common. It is no longer unusual to see goods worth more than 500,000 EUR destroyed in transit or stolen from a parking area. A single load of clothing, footwear, perfumes, cosmetics or electronics can easily reach – or exceed – that value.

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