What Makes a Contract Special?

From a risk management perspective, this question is answered by the contractual terms that make the policy holder pay more when they have a claim compared to when standard trading conditions apply.

Standard trading contracts are often taken from other industries that are unsuited to the transportation and logistics sectors. Signing these contracts can lead to significant financial losses, the possibility of no insurance coverage, and even bankruptcy.

The following scenarios found within standard contracts are important to pay attention to, as they can have very high-risk outcomes for the policy holder:

“You are responsible for all claims.”
What it means: Strict liability regardless of any fault or negligence.

“You are responsible for the full value of the cargo.”
What it means: No weight or package limitation, including high value cargoes.

“You are responsible for delays and consequential losses.”
What it means: No limit to freight charges and time crucial delivery.

“You have no defenses to claims.”
What it means: No reference to protection for matters beyond your control.

“You have no recovery against responsible carriers.”
What it means: Certain clauses make you fully responsible for all carriers in the chain.

“You agree to a claimant supportive legal system.”
What it means: Certain legal regimes are less favorable to logistics providers.

For More Information

Please contact our specialists: info@areteadjusting.com.

Arete Adjusting, LLC is a member of the +8 Partners ecosystem. This article was authored by Phillip Emmanuel, Chief Operating Officer at +8 Partners.

Disclaimer: All claims are subject to the terms, conditions and exclusions of the relevant product disclosure statement and/or policy.

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The Importance of Salvage

If you have a claim under your cargo or liability insurance, salvage can be a major headache for the forwarder.

When an accident occurs, the merchant is understandably upset. Their cargo is damaged, but there also may be other implications to the supply chain. Often, they will prefer to abandon the cargo and re-order a new shipment. Such behaviour can be extremely costly for both merchant and even the forwarder.

The forwarder must ensure they try to get the cargo to destination before arranging any survey or inspection. If an incident happens in the port and the cargo is deemed damaged, the merchant will most likely not want their cargo. And may not want to spend time salvaging with the belief that this is the cargo insurer’s responsibility under subrogation.

However, this is not the case. The duty to mitigate/salvage is on the merchant – not the insurer. Subrogation is only after the insurers have settled the case.

This misunderstanding may result in expensive storage / demurrage / disposal / labour charges that insurers are unlikely to compensate. Therefore, we would always recommend ensuring the cargo arrives at destination before any survey is undertaken.

Any delay may also prejudice the claim, especially if it involves perishables. The insurer’s surveyor may help, but if the merchant refuses to cooperate, then this will be a total loss in a very short time. Whilst insurers will not override a decision by the health department to condemn cargo, often the discretion is on the insurer to decide. Perishables may be condemned for human consumption, but they will have a secondary market under animal feed, and this is where complications occur. There is still salvage, and it is not deemed a total loss.

Ultimately, speedy action on finding salvage buyers results in the claim being paid faster with less costs. It’s also common for the merchant to make a salvage offer for cargo that may fall outside its original market, but they still have a use for. This can make adjusting the claim even quicker and simpler.

Salvage is the number one reason for delay on claims adjusting, so it is imperative to involve the broker as soon as a dispute arises.

For questions or more information regarding salvage, please contact our specialists: info@areteadjusting.com.

This article was written with +8 Partners member company World Insurance Services, Inc. and authored by Richard Kamppari Baker, Claims Director at World Insurance. Arete Adjusting, LLC is a member of the +8 Partners ecosystem.

Disclaimer: All claims are subject to the terms, conditions and exclusions of the relevant product disclosure statement and/or policy.

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Tips for Handling Delayed Goods Due to Panama Canal Backlog

In 2024, the canal might miss a total 1,500 vessels that would pass through in normal conditions, said the Authority’s Deputy Administrator Ilya Espino. Due to the transit restrictions, the Panama Canal Authority has forecast a reduction of up to $700 million in toll revenues for the current fiscal year ending in September. (Source: Reuters, Feb. 7)

The Panama Canal Authority has been restricting traffic since summer 2023, resulting in numerous shipments that have been stuck or delayed. This included a heavy backlog of goods that were sent to meet increased demand of the 2023-24 Holiday season.

The delays were caused by drought in the canals, made worse by on-going restrictions, which resulted in containers of perishables and Holiday-market products arriving after their ETA. This type of scenario typically leads to a mass rejection from the consignee and increased abandonment when shipments do arrive.

If the situation doesn’t improve, vessels might have to consider using other routes, which could lead to an increase in the cost of transportation.

From a Freight Forwarder’s perspective, delay is generally excluded, especially if it falls outside your control. Claims of such nature should be rejected. This may cause friction with customers, but to avoid expensive claims, it is imperative to not agree to specific times or dates of arrival.

Insurers, however, expect to receive many uncleared or abandoned containers that were intended for a particular market and no longer retain the same value. It is important for the Forwarder to carefully monitor all containers that might be traveling via the Panama Canal and notify their liability insurers immediately. If the goods are likely to be abandoned, it is important notify early to avoid incurring unnecessary storage/demurrage costs.

The shipper/consignee must be made aware they cannot simply abandon delayed cargo without settling all charges. Even if the cargo has little value, it will be less expensive for the shipper to accept delivery than to abandon shipments.

For More Information

Please contact our specialists: info@areteadjusting.com.

This article was written in conjunction with +8 Partners member companies.

Disclaimer: All claims are subject to the terms, conditions and exclusions of the relevant product disclosure statement and/or policy.

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