Goods in Transit – Are you getting the right coverage?

If your business is to move property and goods from A to B, a Freight Liability policy is a critical part of your risk management and insurance protection strategy. At RHA Insurance Services, we are here to help and want to share our expertise with you, that is why we are providing an overview of the common covers, terms and exclusions found within these policies.

One of the key points we want to touch on is ensuring that all hauliers are using the right conditions of carriage, rather than using Common Law Liability – which could land you with serious problems, should the worse happen!

Common Law Liability is often misunderstood or simply unknown to some operators, this can be due to the somewhat complex nature. To understand and demonstrate the true liability at risk without any conditions of carriage, we can use a simple example:

A new customer calls the carrier for an urgent delivery of construction plant valued at £100,000 to a nearby site – the carriage charge is agreed, and the item collected for onward transit. Without any conditions limiting liability, the carrier is liable for the full cost of any damage to the item of plant – to say, the liability for damage at risk is £100,000.

If during the same call, the new customer advises that the safe delivery of the plant to site is time critical and without it, the construction project will incur delays costing £1,000,000, the impartation of this information has the potential to increase the carrier’s liability from £100,000, to £1,100,000. Now that the carrier has this information, the risk for consequential losses becomes foreseeable, and at common law can be held liable for such losses.

It is worthwhile noting that without the disclosure of the potential financial consequences, the losses would not be foreseeable, and the carrier would only be liable for damage to the item being moved, subject of course to negligence.

From this example, it is clear just how important it is to operate under specified conditions (i.e. RHA Conditions of Carriage 2020). Without limiting your liability you could be left with substantial amounts to pay in the event of damage to the goods being carried.

How do I protect myself from this?

That is where Freight Liability comes in. It provides protection for the loss or damage to goods carried or stored in accordance with standard conditions of carriage, international conventions or statutes and common law liability. 

Covers are typically offered for:

  • Limited/Specified Contract, i.e. RHA Conditions 2009,BIFA, FTA, UKWKA
  • Statutory Liability, i.e. CMR Convention, Hague-Visby Rules, IATA
  • Full Value / All Risks / Full Responsibility Cover
  • Common Law Liability, when contracts are disputed, or no conditions of carriage used

How do I choose my cover level?

Freight Liability policies should mirror your conditions of carriage. If all your business is traded using RHA 2009 at £1,300 per tonne, then your policy should insure for these conditions, irrespective of the value of the goods carried. If however you have contracts which require you to insure on an uplifted value, or a full value basis, then your insurance policy will need to be amended to include these.

Typical Terms and Conditions

Policies vary in cover levels as standard, with most insurers either offering sub-limits, or cover subject to conditions on the following:

  • Theft-attractive goods
  • Loading and unloading
  • Overnight parking and security arrangements
  • Refrigerated / Temperature controlled goods
  • Attached and detached trailers

What are Common Pitfalls when arranging cover?

The most common mistake made on Freight Liability policies are businesses agreeing to extend their liability by uplifting values or agreeing to full value cover but forgetting to increase their levels of cover accordingly. Unfortunately, this can lead to claims for losses being only partially met by insurers, with the business having to meet the remaining cost – with increasingly thin industry margins, this can lead to a significant dent in profitability.

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