A freight forwarder is one who arranges shipment of a consignment or transport services on behalf of importers, exporters or other companies under a single contract which involves inland transit or more than one different modes of transport.
The freight forwarder is accountable for the cargo from the time of collection from the consignor until the time of delivery, he is liable for any loss or damage occurring to goods or consignment. It might be the physical damage to the goods, theft, fire or any other mishap which leads to a delay in delivery or any financial loss arising from such mishaps. If a freight forwarder is at fault or acts negligently, he has to bear the repercussions.
Following are some types of liabilities which a freight forwarder possess during a transit:
1. Cargo and Legal Liabilities: Any physical loss or physical damage to cargo during a transit caused by the reason of a negligent act, error or omission makes the transporter liable for his actions and he might get sued by the client against loss or damage to cargo. Nowadays, clients are aware of their right and probability of the lawsuit is very high. The risk of a lawsuit is alarming and inducing freight forwarders to have their services insured in order to get the license from The Director General of Shipping.
2. Fines and Duty Liabilities: Claims arising due to an unintentional breach of any regulations or any statutory requirement resulting in fines or any other fiscal charges or other penalties imposed by an authority will be borne by the freight forwarder. A freight forwarder should abide by the rules in contract, otherwise, he may suffer the legal lawsuits which leads to fines and duties. It is very crucial to know the legal structures under the multimodal transport operator (international freight forwarders) as well i.e. comply with all the regulations or requirement of customs, ports and shall bear all the duties and fines incurred or suffered by the reason to any failure to comply with such statutory requirement.
3. Third Party Legal Liability: Any physical loss or damage to third party’s property, bodily injury and legally recoverable consequential loss arising out of the operations of the freight forwarder invites claims as he may be held responsible for such losses. It is crucial to assume this liability risk as it might bring financial and reputational crisis for the freight forwarders.
4. Errors and Omissions Liability: Any legal liability arising out of the operations of the freight forwarder following a negligent act, error or omission by the freight forwarder, his agent or subcontractor makes him liable to compensate for the loss incurred by the client. In such cases, the freight forwarder will bear the legal expenses if he is not able to prove that he or his agents or sub-contractors took all the measures to avoid the occurrences and its consequences. If he is at fault, he is liable to pay the loss amount to its client.
In order to mitigate the risk of these liabilities, it is crucial to buy the freight forwarders insurance policy which triggers the claims arising due to these liabilities to ensure complete protection against such liabilities:
1.Cargo Liability insurance
2.Third party liability insurance
3.Liabilities of fines and duty cover
4.Error and Omission Cover
Being a freight forwarder, you are bound to answer for all the loss or damage to cargo so you should buy the freight forwarders liability insurance policy and include extensions such as third party liability cover in it. You would not be accountable if the loss occurred due to the act of God, inherent vice of goods or consignor’s own fault. Any breach of contract, negligent act or fault from the freight forwarder’s side will be triggered by the freight forwarders liability insurance policy.
For instance, A freight forwarder has been sued by its clients due to delay in delivery of goods which resulted in a huge financial loss to the client. He luckily had a freight forwarders liability insurance policy and when he became aware of the claim being raised against him, he informed the insurer about it. The insurance company provided the required assistance in order to deal with the claim.
In this case, the freight forwarder is not liable to pay the compensation amount because he has not signed any agreed-time limit contract with the consignor so such claims will not be triggered by freight forwarders Liability policy and freight forwarder is not legally liable to pay compensation since he has not signed any contract. The insurance company not only helps to mitigate the risk of liabilities but also assist you at the time of contingencies where your clients try to manipulate you in order to gain monetary benefit.