Cargo Insurance in Action: Covering Freight Damage On the Road

Cargo owners often think that transporting goods by water as more perilous than shipping freight by land. Ocean travel covers thousands of miles over several weeks versus land distances, which are typically measured in hundreds of miles and days. The assumption, therefore, is that the road comes with fewer hazards due to the shorter transits. But making this assumption can be costly for those that don’t properly insure cargo – whether by water or land.

When Cargo Insurance is Used

Look at a recent insurance claim that involved a 900-mile journey from Rhode Island to a buyer’s warehouse outside Chicago in which a shipment of solar panel kits arrived damaged. The cartons containing the solar panel kits were visibly damaged upon receipt. The buyer notified the shipper of the damage, who in turn immediately notified their insurance company. The insurer appointed an independent third-party surveyor who confirmed during the inspection that four of the five cartons had visible signs of damage, clearly indicating that the merchandise was handled roughly during transit. The surveyor also confirmed that the cargo could neither be repaired nor sold as salvage due to the significant level of damage and sensitive nature of the goods.  

The insured shipper fortunately in this case was properly covered with Cargo insurance, and recovered the value of the damaged cargo less the policy’s deductible. The reported loss amount was $32,250.00, the value of the cargo, less the insured’s deductible of $2,500.00, for a total claim paid of $29,750. Without Cargo insurance in place to respond to the claim, the burden of proof would have been the shipper’s responsibility to try and prove that the loss was the result of carrier negligence.

It’s important to note that carriers typically use contractual agreements to limit their liability for loss to cargo. The contractual limits of liability can usually be found in the Bill of Lading. Even if the shipper were able to prove that the carrier was negligent for the loss, the recovery could have been limited to .50 per pound, which would be significantly less than the value of the cargo.

Does Your Business Need Cargo Insurance?

Cargo insurance provides shippers with coverage to protect their goods from loss, damage, or theft while in transit. Generally, goods are insured while being warehoused or stored and while in transit, until they reach the buyer. Goods may be insured on a spot-shipment basis or under an Open Cargo policy. Coverage on a spot-shipment basis offers coverage for a single, individual shipment whereas an Open Cargo policy is good for clients who insure shipments on a regular basis.

About Roanoke Trade

Roanoke Trade has the experience and expertise to customize a Cargo insurance policy to respond to a shipper’s client’s needs. For a review of your Cargo insurance program to determine if it properly addresses your risk profile, please contact one of our professionals at 1-800-ROANOKE (800-762-6653).