In the past few years, transportation and logistics insurance and liability issues used to be very simple to understand. Under the traditional Canada Transportation Act, carriers were basically responsible for the freight till it was delivered. Today, however, because many contracts are negotiated between the carriers and 3PL Links, it is not very clear who should be liable for transportation incidences such as cargo damages, theft, or injuries. Consequently, plaintiff attorneys continue to move up the supply chain—from the carrier company to broker and sometimes to the shipping company—for compensation. It pays therefore, to understand a few basics when it comes to freight insurance and liability.
Freight Insurance versus Freight Liability
Generally, freight insurance provides protection against physical loss or damage to freight as a result of external causes during shipping. However, it doesn’t provide coverage for all losses that a carrier may be liable for under common law. In other words, there is no form of freight insurance that can fully protect a carrier. On the same vein, a certificate of insurance specifying the amount of freight insurance that a carrier has doesn’t necessary cover all broker’s or a shipper’s valid claims.
Should you opt for Freight Insurance or Liability?
By and large, all booked freight shipments are accompanied by limited liability coverage. However, the amount of coverage depends on the type of commodity in transit and is often determined by the carrier company. To file for a liability claim, therefore, the carrier company must be liable or at fault for the lost or damaged freight. However, if the loss or damage is as a result of loading errors, inadequate packaging, or weather-related causes, the carrier company may not be held liable. What’s more, when the damage isn’t reflected in the delivery receipt, most carrier companies will not accept any liability.
In certain situations, value of the shipped goods may be more than the liability coverage included. In such cases, additional freight insurance is necessary. Extra freight insurance usually covers the freight and the shipment cost of the freight. It comes with a number of benefits. To begin with, it is redeemable under all forms of losses and doesn’t need proof of fault. Additionally, unlike limited liability, it doesn’t exclude weather-related factors or packaging errors.
Conclusion
Tendering shipments is part and parcel of the logistics business, but every shipment has the potential to attract negative surprises: theft, accidents, and poor business processes among others. While logistics companies rarely prioritize liability, the potential for huge financial ramifications as result of theft, accidents and other unfortunate events is on the rise. It is, therefore, pertinent for shipping and logistic companies to keep up with the dynamic legalities of freight liabilities. For more information and resources, visit 3PL Links.
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