Q: I’ve read your article in the Nov. 14 issue on the spoiled load of imported shrimp.
(Editor’s Note: The original question left it unclear whether the load was spoiled during the ocean voyage, at the transit warehouse where the load was interchanged, or while in the custody of the motor carrier against whom my correspondent filed claim. I responded that, accordingly, the shipper would be hard-pressed to support its claim.)
I found your comments to be on point, and I’m sure this situation unfortunately arises with many importers and exporters.
I’ve specialized in marine cargo insurance for more than 35 years, and it seems that many importers/exporters and distributors are under the false impression that as long as their carrier or storage facility carries “insurance,” if a problem arises, the claim will be paid. As depicted in your article, this causes large financial losses and frustration to the importer/exporter.
The company discussed in your article easily could have been avoided the problem by having its own insurance program to insure its merchandise against direct loss or damage. A properly structured program would have allowed the company to claim against its insurance carrier, be paid for the damaged merchandise and, in turn, its insurer would have the problem of going after the trucker.
One of the keys to protecting your assets is being in control of the insurance covering that asset. For a company that requires its assets to be transported, processed, warehoused and once more transported to the end-user, a stock throughput policy is the best insurance program for them.
This policy form will insure the merchandise from the time a “financial interest” exists for the insured, even though title of the merchandise may have not passed, until the merchandise is safely delivered to the end-user. If at any time prior to delivery to the insured’s customer the merchandise suffers damage resulting in an economic loss, the claim will be paid in accordance with the policy terms and conditions.
Stock throughput policies can include concealed damage that is discovered after the insured’s customer takes delivery of the consignment. This is particularly important when no exceptions are noted on the delivery receipts. It also can include reimbursement of extra expenses beyond the normal cost of delivering sound merchandise or replacing merchandise damaged during storage or transit.
By design, this form was created so it could be tailored to meet the unique exposures of the individual importer/export/manufacturer and distributor. Companies A and B may be in the same industry, but their methods of operation may not be identical and therefore their exposures to losses may have differences.
In addition to controlling the terms and conditions of the insurance protecting your assets, why not make it the responsibility of one insurance company under one insurance contract to insure your merchandise “from cradle to grave?”
As for relying on another’s insurance, it isn’t to your advantage to have multiple insurance companies or multiple insurance policies. The more prudent action is to have seamless insurance, not a patch-quilt program. The stock throughput policy is exactly that. One insurance company has taken the responsibility to insure your merchandise until it’s delivered to your customer. There will be no argument concerning at what point during transit did the damage occur; there is one insurance contract and one insurance carrier there to protect you.
A: Although I invited it after a much more abbreviated response by this correspondent to my original column, I almost decided not to publish this because it reads like nothing more or less than a sales pitch by an insurance executive, which in fact it is.
But I chose to go ahead because somewhere in that marketing verbiage is a serious point — which is, on an intermodal shipment, a shipper can’t count on carrier liability for in-transit loss or damage as protection.
Especially when it’s an ocean-land linkup, either the shipment will be subject to multiple liability regimes where it may not be clear where the loss or damage occurred (as in the original question) or the land link will be subject throughout to the very weak (from the shipper’s standpoint) maritime liability standard under a “Himalaya clause” in the through bill of lading. Either way, the shipper suffers.
So the sales pitch isn’t without merit. Either the shipper has to accept the very real possibility of monetary loss or, as my correspondent says, buy insurance.
It’s a sad, but unavoidable, choice.
Consultant, author and educator Colin Barrett is president of Barrett Transportation Consultants. Send your questions to him at 5201 Whippoorwill Lane, Johns Island, S.C. 29455; phone, 843-559-1277; e-mail, BarrettTrn@aol.com. Contact him to order the most recent 351-page compiled edition of past Q&A columns, published in 2010.