1. What is Forwarder’s Liability Insurance?
This type of insurance product is chosen by owners and managers of forwarding companies who want to run a successful and sustainable business, despite the risks they take in carrying out their activities. “Forwarder’s Liability” insurance covers the contractual liability of the insured company for the transport, forwarding and logistics contracts it concludes with its customers. This is because the freight forwarder is liable not only for damages caused by its employees, but also for those caused by its chosen subcontractor. This condition is valid for any type of contract and transport and is regulated by the applicable transport law or Convention. For example, in the case of a land transport contract, Art. 3 2 of the CMR Convention 3 defines this condition.
Why do we mention contractual liability? Precisely because it is the basis of the type of coverage and the series of insured risks that are mandatory for this policy to be an efficient tool in case of damage. A little below we will pay special attention to this topic.
2. Why is Forwarder’s Liability Insurance necessary for every forwarder on the market?
Like many other insurances, this one is also not mandatory. However, the logistics industry has imposed the requirement that companies have this type of coverage. It confirms that the company is insured with an insurance decision that would indemnify the contracting authority. Even in the event of claims due to non-fulfillment of the terms of the contract.
Due to the different activities and services they perform, freight forwarders conclude different types of contracts, which can be for:
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transport
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forwarding
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storage
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logistics activities
These different types of contracts predetermine the need for “Forwarder’s Liability” insurance to cover the terms and requirements of all of them. As well as the Convention and law under which they fall. For example, when a freight forwarder concludes a contract for land transport, he is a contracted carrier. According to Art. 3 CMR Convention, he is liable as such, even though he has subcontracted the transport. This means that in case of damages, shortages, thefts and delays, the forwarding company bears full responsibility according to the applicable Convention. It cannot be released from responsibility due to subcontracted transport. Here, the freight forwarder is not a commission agent or an operator. In the role of carrier under the concluded contract, he organizes the transport and invoices remuneration for the service rendered.
We pay special attention to this fact, because according to our research, there are over 1000 forwarding companies in Bulgaria. Many of them still believe that the forwarder is not a party in case of damage. This is completely wrong, in the case of a concluded contract according to the example above.
In the case of a land freight forwarding contract, things are different. When such an agreement is in place, the freight forwarder most often acts as a commission agent. This means that he only has to find a carrier for his principal, and the remuneration invoiced by the freight forwarder is only his commission. The carrier provided by the freight forwarder should invoice its freight. From our practice, we can confirm that we have not encountered such a case. You yourself understand that the forwarder does not have many advantages to enter into such a contract. Other than limiting its liability for claims related to non-performance.
Freight forwarders also contract for sea, air and rail transport (using a subcontractor). This means that in order to be adequately covered for all the responsibilities they bear under each of these contracts. Companies must have chosen insurance that covers exactly such risks.
Freight forwarders carrying out warehousing and other logistics activities for their customers should also have the right coverage. They are liable to the owner of the goods for damages that occur while they are in their control.
3. What risks does Forwarder’s Liability Insurance cover?
“Forwarder’s Liability” operating insurance must cover the risks associated with the activities that the insured company carries out. All damages, shortages, thefts, delays in delivery. Wrongly shipped goods to another address. Errors and omissions of the forwarder that have resulted in financial damages must be covered.
For example, in warehousing and logistics activities, damage during loading and unloading operations is the most common: incorrect stacking and arrangement of goods. Cargo loaded into a vehicle for another destination. Damage from natural phenomena.
When the freight forwarder has the correct coverage for the above, as well as for other existing risks, the insurer will cover the claims directed at the company. In the absence of insurance or adequate insurance, the freight forwarder carries a huge financial risk for the entire company.
4. How are Forwarder’s Liability Insurance claims resolved?
With the right insurance partner selected and terms designed to cover all common contracts and activities, resolving claims and damages is a very easy and standard process. When a damage or other insured event occurs, the insurer should be notified in a timely manner. Then it remains for him to take the right steps to successfully adjust and close the case. When the freight forwarder receives a claim, the insurer checks whether it is valid and whether the insured and its subcontractor are liable. After that, it certifies whether the calculation and the value of the damage are correct. And then proceeds to the payment of insurance compensation. The next step the insurer takes is to go back to the responsible subcontractor (whose liability was committed at the outset) and recover the paid value of the damage. So that it does not remain in the damage under the insured forwarder’s policy.
In case of an unfounded claim or an incorrect claim, the insurer rejects the claim on behalf of the insured and defends him if the case goes to court.
5. Why is Cargofort all of the above and more?
It is extremely important for such a solution approach to occur as in the example in point 4. The freight forwarder has chosen a professional partner to provide him with the best and relevant insurance coverage. To have the experience, resources and capacity to deal with any case that arises in an efficient manner. So that the freight forwarder does not have to be personally involved in every step of the process. It is of particular importance that the insured does not suffer damages and losses due to coverage limitations or poor control over the claim.
Cargofort’s specialization and experience naturally led to the creation of a “Forwarder’s Liability” insurance product. A solution made up of all the necessary coverages – limits and professional handling of transport claims. So that shippers can rest easy and confident that their insurance cases are being finalized efficiently!
The freight forwarding and logistics business is tense and dynamic, and decisions sometimes have to be made in seconds.
By choosing Cargofort, you get the security and comfort that you have a reliable and adequate partner. A partner you can rely on for important insurance decisions!
Cargofort – the most correct way for the successful and calm freight forwarder!