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. Understanding the liabilities of Freight Forwarders Insurance is essential for protecting your business.
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. This happens if he fails to prove that he or his agents took preventive measures. If he is at fault, he is liable to pay the loss amount to its client.
To mitigate the risk of these liabilities, it is crucial to buy the freight forwarders insurance policy :
1.Cargo Liability insurance
2.Third party liability insurance
3.Liabilities of fines and duty cover
4.Error and Omission Cover
As a freight forwarder, you are responsible for all cargo loss or damage. Therefore, you should purchase a freight forwarders liability insurance policy. Make sure to include extensions like third party liability cover. You won’t be liable for loss due to acts of God, inherent vice, or consignor’s fault. The freight forwarders liability insurance policy triggers claims for breach of contract, negligence, or fault. Therefore, it is important to take due cognizance of the liabilities of Freight Forwarders Insurance for protecting your businesses’ financial interested.
The clients sued the freight forwarder. The delay in delivery of goods caused a huge financial loss. Luckily, he had a freight forwarders liability insurance policy and informed the insurer about the raised claim. 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. He has not signed any agreed-time limit contract with the consignor. Therefore, freight forwarders Liability policy will not trigger such claims. The freight forwarder is not legally liable to pay compensation. The insurance company not only helps mitigate the risk of liabilities. They also assist you during contingencies when clients try to manipulate you for monetary benefit.