The Difference between Freight Liability and Freight Insurance

  • July 25, 2017
  • Blog

If your business hires the services of 3PL logistics professionals frequently or if you are involved with a related field, there are certain concepts that you must be knowledgeable about. This is especially important if the involvement of logistics is an important part of your business. One such aspect of 3PL service cost that you must have a deep understanding of is freight claims and freight insurance.

The possibility of damaged or lost goods is one of the major concerns that any shipper has. However, accidents are sometimes inevitable and if a similarly negative situation has to be faced, it is crucial that you are armed with all the information you need. This can help you get reimbursed with a significant amount of the losses caused.

Liability Claims

Many shippers confuse freight liability with freight insurance. However, there are some basic points of difference between the two. To get liability compensation for your damaged freight, there are some things that you have to prove. Some of them are:

  • When the goods left the shipper’s location, it was completely undamaged
  • The damage was not caused by the receiver at the time or after delivery
  • Impeccable proof (photographic evidence etc.) that the product was delivered to the receiver in a damaged or shorted state. If the product was delivered unreasonably late, this too can form the basis for seeking liability claim.

For the liability claim to be considered credible, the carrier of freight by sea, land, or air must be at fault for the damaged or lost shipment. If it is found that the damage was caused due to inadequate packaging by the shipper, external weather-related causes or errors while loading, the carrier cannot be held liable and hence the claims will be dismissed.

Freight Insurance

This is generally set up by a third party freight import-export broker and the details of the insurance are often overlooked by the shipper. However, shippers must have a clear understanding of the insurance they have as this will help them understand how protected and secure their shipment is during transit.
Unlike liability claims, the responsibility of the carrier does not have to be proved in order to get insurance compensation. However, like carrier liability, you will be asked to show proof of damage or loss of goods during transit or handling. Some important things to remember about freight insurance:

  • Make sure that the insurance coverage is acceptable; don’t believe what the brokers say without seeing the documents yourself.
  • Compete or 100% coverage doesn’t exist and is often a ruse to attract unsuspecting shippers who are worried about the safety of their goods.
  • Just like any other policy, make sure that you read the documents related to the freight insurance carefully.

Although every shipper hopes that the time will never come when they have to file a claim for damaged or lost goods, being prepared is of key importance. Such incidents can cause a strain in your relationship with the customer as the client will be dissatisfied with the goods and you will be out of money. Understanding the boundaries and details of freight insurance and liability will help in seeking compensation and get past the roadblocks on the way to getting a claim finalized.