Goods are subject to the risk of damage, whether shipped by sea, inland waterways, or multimodal transport. It is not uncommon for shippers, receivers, or freight forwarders to experience disputes regarding goods damage. At the same time, in any transport chain, there may be several companies involved, and each of them can be potentially liable for the damage. Marine liabilities insurance covers expenses related to legal defence and damages in case of an insured being found at fault.
Understanding Marine Liabilities Insurance
Marine liabilities insurance covers business owners involved in maritime-related activities from legal liabilities that may emerge due to the negligence of their workers resulting in damage to others’ property. Marine liabilities insurance usually covers shipping companies, lines, and terminals, as well as other transportation service providers, who may be found legally responsible for cargo damage and/or loss. Furthermore, marine liabilities insurance differs from cargo insurance, covering the interests of cargo owners, not transportation service providers.
Marine liabilities insurance policies enable policyholders to settle claims arising from cargo damage disputes to avoid lengthy legal proceedings. Additionally, marine liabilities insurance helps mitigate financial risks for businesses involved in international shipping, which often have limited liability coverage for potential claims. Marine liabilities insurance usually has a claims investigation procedure, during which the insurer analyses the chain of custody and determines whether any negligence occurred on the insurer’s part, the policyholder’s part, or none of the above.
Investigation Procedures
During the investigation procedure, an insurer assesses the claims through the following procedures:
- Review bills of lading and other shipping documents
- Examine inspection reports
- Retrieve photographs of damaged goods
- Interview captains, crews, and other shipping or cargo handling personnel
- Consider the weather during transit
- Evaluate loading/unloading procedures
- Consult marine surveyors, who can offer third-party expertise and assistance during the claims settlement process
The responsibilities for damage to goods are determined on a case-by-case basis and depend on numerous factors, such as transport contracts and agreements, marine conventions, and local legislation.
For example, if goods were improperly packed, the responsibility for the damage may lie with the shipper or another entity in the shipping chain, not the transportation service provider. Marine liabilities insurance enables insurance professionals to determine an insured’s legal responsibility for cargo damage.
Legal Defence and Representation
Sometimes, disputes over damage to goods involve legal battles between shippers and receivers or between an insured and another shipping company. It is especially common for international shipping disputes to involve legal proceedings due to differences in national legislation. When multiple shipping companies are involved in a transport chain, legal disputes can become especially costly for business owners, who may experience substantial financial losses due to court expenses.
Marine liabilities insurance can cover a significant percentage of legal defence and representation costs, which can be especially crucial for international shipping disputes. Some legal expenses that may be covered by marine liabilities insurance include:
- Payment for maritime lawyers, representing the insurer, the insured, or settling claims
- Court expenses during legal proceedings
- Arbitration procedures
- Payment for expert witnesses
- Investigation costs
Settlement Procedures
Settlement procedures can be crucial for cargo damage disputes, especially when no party is found at fault for the damage to goods. Insurance professionals discuss the dispute with the receiver and/or shipper and attempt to determine the most reasonable settlement option. In some situations, the insurance company is legally liable for the damages to goods and settles the claims in accordance with the policy limits and terms. Settling claims can offer numerous benefits for business owners, including:
- Quick resolution of a dispute
- Lower financial costs compared to legal proceedings
- Reduced business disruption
- Preservation of a good relationship between multiple business entities in the shipping chain.
- Higher level of trust from trade partners, as well as regulatory accreditation and compliance.
Marine liabilities insurance policies can offer policyholders financial protection from cargo damage disputes, which can help mitigate expenses and reduce potential disruptions to business operations. At the same time, marine liabilities insurance can be particularly valuable for business owners and shippers involved in international transport, as legal issues in international shipping can become particularly costly and time-consuming.
Minimising Risks and Claim Settlement Costs
Marine transport often involves high operational costs, and an average claim for compensation may cost thousands or even millions of USD depending on the value of the damaged goods. Businesses involved in shipping operations may find themselves in a difficult position in the event of a claim, as they would have to consider substantial losses.
However, marine liabilities insurance can offer policyholders financial protection from potentially crippling expenses related to claims for damages to goods. Additionally, marine liabilities insurance can help ensure that business owners and shippers are not held accountable for damages to goods that exceed the insurance coverage limits.
Preventing Future Claims
Marine liabilities insurance policyholders can minimise the expenses related to cargo damage disputes by reducing the likelihood of an incident that would result in a claim. In many cases, insurance companies offer policyholders loss control services, helping them improve their current safety measures. For example, experienced insurance professionals advise policyholders on how to minimise the risk of damage to goods during transit.
In this regard, marine liabilities insurance policies can play a crucial role in minimising expenses related to claims for cargo damage, as well as legal expenses. Some of the measures that can help prevent claims for cargo damage include:
- Staff training
- Compliance with loading instructions
- Equipment maintenance
- Improvement of packaging
- Documentation
- Safety audits
- Close monitoring of specialised cargo
Conclusion
Claims for compensation regarding goods damage and dispute resolution are inevitable for the majority of businesses involved in international shipping. Marine liabilities insurance covers legal expenses and claim settlements for business owners found legally liable for cargo damage.
Additionally, marine liabilities insurance enables insurance companies to investigate claims for goods damage to determine whether the claim is legitimate and identify potential sources of negligence.
Therefore, marine liabilities insurance can be an essential asset for businesses involved in international shipping, as it helps them minimise financial losses in the event of a claim. Given the growing complexity of the international trading environment, companies involved in maritime shipping activities may benefit significantly from minimising potential liabilities from claims for cargo damage.