When you are negotiating a business deal, getting insurance is probably one of the last things on your mind. We know that it can often be complex and technical, but insurance’s role in your business is paramount.
Think about the business deals you negotiated – how do you keep your operation and business protected in case of an unforeseen event? Even the authorities will not allow you to operate your vehicles on a public roadway without the minimum required automobile liability insurance. Your financial provider may not approve a loan or financial backing without insurance on your property. And your business partners may require you to have insurance to protect their interest as part of the business relationship.
Insurance exists to protect you and those you do business with. When things go wrong or when an accident happens, insurance is there to help your business get back up on its feet. A good working relationship with your insurance broker (and insurer) will help you understand what coverage you require, and how you can take the proper precautions to prevent claims.
One specific area that your broker and insurance company can assist you with is shipping contracts. In addition to your legal counsel, your insurance broker and
insurance company can provide you with valuable information, such as the risk assumed in the contract and coverage under the insurance policy.
insurance company can provide you with valuable information, such as the risk assumed in the contract and coverage under the insurance policy.
For the most part, a standard cargo insurance policy offers coverage that aligns with the terms and conditions of a bill of lading. It is important that you review your insurance policy and are aware of its limits in coverage and applicable exclusions.
Shipping contracts are usually more complex and often supersede other agreements or documents that have been issued for the goods transported. Expectations are highlighted as to the cargo transported, availability and type of equipment to be used, and who is responsible for any loss or damage to the goods.
As an insurer, we are interested in the terms and conditions agreed to between the shipper, carrier and consignee. It is common for the contract to amend the conditions of carriage and contain clauses that shift liability and impact claims handling. Insurers need to be aware of clauses where the carrier has agreed to waive their defenses for liability for loss or damage to the goods. The contract may also contain terms stating higher amounts of liability assumed for the overall value of goods, and how the value of any damaged goods may be determined.
Also included could be broader terms for reporting of damaged or lost goods, the handling of claims and if, and how, any recovered goods can be salvaged. Some agreements may also include terms demanding compensation by the shipper or consignee for consequential or indirect loss due to the damaged goods or for failure to deliver.
Your lawyer, insurance broker and insurance company can assist in pointing out clauses in the contract that may be increasing the risk you are taking on.They can advise when liability for the goods transported exceeds the policy limits. They can highlight any conditions or exclusions in the insurance policy where claims for certain damages may not be covered that would otherwise leave the carrier to pay those amounts themselves. Your insurer needs to be aware of any terms agreed to where settlement of claims may increase the costs of managing the claim or restrict any recovery of amounts through salvage or subrogation against another party.
Paying claims is what insurance companies are in business for. But the #1 priority is to protect customers and to ensure that there is adequate coverage under a given policy. That’s why it’s so important that your broker and insurance company is informed of any agreements or contracts made so they can make informed
recommendations for your business. Not doing this can lead to the unfortunate and difficult conversations about how your policy does not cover the damages claimed, support the terms of the contract, or the policy coverage is inadequate.
recommendations for your business. Not doing this can lead to the unfortunate and difficult conversations about how your policy does not cover the damages claimed, support the terms of the contract, or the policy coverage is inadequate.
Dealing with a claim is already a stressful event. The last thing anyone wants is additional time and money spent on collecting information, explaining policy wordings, and settling costs.
Always be proactive in your contract negotiations and use the resources available to support your business. The financial and reputational risks associated with inadequate coverage for your business are real and can be avoided with the right help. Your insurance broker is there to provide advice and recommendations to help protect your business. Reach out to your legal and insurance business partners so you are aware of the terms of your agreement and are properly covered.
