carrier liability

With respect to the insurance of goods in transit, during transportation, the goods are exposed to various risks. To secure repayment of the sums involved in the event of damage or loss, the charger has a legal obligation to ensure the goods.

In practice, the charger representing the importer or exporter at the Incoterms has the choice to either purchase directly from a company’s insurance policy (mostly its freight forwarder), or enter into an agreement with the carrier that will provide its own insurance for goods entrusted.

Even if the carrier claims to be responsible for the goods entrusted, it is very important to consider the extent of that responsibility. Because, in practice, carrier liabilities in case of disaster are regulated and limited by international conventions.

The basis of the carrier’s liability

The carrier has a limited liability in case of damage. Everything is based on the method of pricing of international transport (Ratio weight / volume).

  • For ground transportation: 1T / 3m3.
  • For air transport: 1T / 6m3.
  • For shipping: 1T / 1m3.

Transport costs and therefore the pricing of freight being based on the weight and volume of goods transported, various conventions predicted that the carrier’s liability is expressed as the weight of goods transported. In other words, if the carrier is found liable, the refund will be based on the weight of damaged goods and not on the actual value of the goods.

In addition, the charger will be compensated by the carrier according to the limit set by the Conventions. The consequences for the latter can be very significant as the amount of compensation may be in some cases, well below the real value of damaged goods.

Liabilities of the carrier are in SDR (Special Drawing Rights). The rules for calculating the reimbursement penalties are:

  • For Land Transportation under CMR convention: 8.33 SDR per kilogram, or $12.36 per kilo. (10/2014)
  • For Air transportation
    • Under Warsaw Convention: 16.5837 SDR per kilogram, or $24.62 per kilo. (10/2014)
    • Under Montreal Convention: 17 SDR per kilogram, $25.23 per kilo. (10/2014)
  • For Maritime Transportation
    • Under the Hague-Visby rules: 2 SDR per kilo (about $2.97) or 666.66 SDR per package (about $989.55) as of octobrer 2014. The strongest of the two limits apply.
    • In most African countries, apply instead the Hamburg Rule: 835 DTS / package is $1,239.44 or 2.5 DTS / kg or $3.71/ kg (10/2014). The strongest of the two limits apply.

The specific cases of liability exemption of the carrier

Charger, representative of the importer or exporter can claim compensation for damage to the carrier only if his liability was actually incurred. Generally, there is a presumption of liability of the carrier when the goods are delivered in a different state than it had when loading (case of breakages, loss …). If the carrier proves that he tooks all necessary during transport and that its responsibility is not engaged, it will not pay any compensation to the charger.

Under certain circumstances, therefore, the carrier may be exempted from liability. This is the case when the damage to the goods are the result of a case of “force majeure”. The concept of force majeure refers to any event the three characteristics of being “Unpredictable, Irresistible, exterior to the transport company. »

Cases of force majeure (irresistible, unpredictable and outside)

  • Shipwreck, collision, caused by a storm;
  • Earthquake or other natural disaster;
  • Armed robbery, pirates ..

Unrecognized cases of force majeure

However, if one of the events listed below has been planned and reported well in advance, the carrier may have enough time to take all necessary and protect the goods loaded:

  • Warning given by the meteorological services;
  • Warning given by the coastguard services …

Cancelation of the liability limit of the carrier

In case of a major fault of the carrier (as a proven negligence, misuse and sale of goods…), he may see his liability limit cancelled . He no longer compensate the charger based on the limits of liability, but rather on all the damage suffered (total value of goods, plus the expected profit and other penalties). The suspension of limit of the carrier’s liability is determined by a competent court.

« Ad Valorem » Insurance solution

The limit of the liability of the carrier or the exemption of liability for damage to the goods is a major issue. The charger will be partially compensated or at worst will not receive any compensation at all.

To avoid any inconvenience this may cause, the charger has the opportunity to subscribe directly from an insurance company his own insurance policy. This kind of policy has no direct relationship with the price of transportation, is made on the actual value of the goods.

This is called insurance Ad Valorem.

With Ad Valorem insurance coverage, the charger is compensated, not on the basis of the principle of responsibility, but on the basis of the actual value of the damaged or lost goods. To ensure both the expected profit if the goods arrive in good condition and were sold, it can be applied at the conclusion of the insurance contract, a rate increase of up to 20% of the actual value.

Following a claim from the charger for damages during the transportation, the insurer will pay him an allowance to cover the total value of losses. Then the insurer will return to the carrier to recover damages in turn according to his limit of liability.