Chinese FF Seminar presented at the 11th WCA Worldwide Conference February 2019

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CHINESE FORWARDER LIABILITY INSURANCE SEMINAR
Presented by: MonicaLee,WIS&QueencyChau,Chubb
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WHATISGOING ON INTHEMARKET?
Itisnowcommon, inmanycountriesaroundtheworld,forinternationalfreightforwarders/logistics
operators tohave ForwarderLiabilityinsurancein placetoprotecttheirbusinessagainstthirdparty
claimants.
Inaddition,theirmajorcustomersexpectanddemand thattheyhavesuch insuranceandthatit
meetstherequirements/standardsexpectedwhentradingin theinternational logisticsmarket.
Itisalsocommon nowforinternational& localfreightforwardingassociationstostipulatethattheir
memberscarrysuchinsurance.

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RISK MANAGEMENT/LOSSPREVENTION
Riskmanagementbythe forwarderhasan importantpart to playin this classof insurance.
Thecarefulselectionof agentsand/orsubcontractors, making suresuch agentsorsubcontractorshave sufficientandadequateinsuranceconditionsinplaceare very importantin order to deflectclaimsandrecover anylossesfromnegligentagentsor
subcontractors.Insurershouldhaveproperprocedureandinstructionsfor theirstaffandappointedagentsto follow.
All businessshouldbesubjectto Insured’sstandardtradingconditionssettingout obligationsandexclusionsand limit theircontractualliability.

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FORWARDER LIABILITYINSURANCE
Why dofreightforwardersneeds ForwarderLiability insurance?
Theextentofthefreightforwarder’sliabilitycan bedeterminedbyone ormoreofthefollowing:
• Local legislation
• Internationallaworconvention
• Local tradeassociationconditions
• ForwardersownStandardTradingConditions(STC’s)
• InhouseBillsofLadingand/orAirWaybill
• Specialcontractsseparatelyagreedwiththecustomer

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FORWARDER LIABILITYINSURANCE
Below aresome of therisksfaced by freightforwardersintoday’s marketplace:
• Lossordamagetocargo
• Inappropriatestowagearrangements
• Lossofimportantdocuments
• Accidentalinterruptionofbusiness
• Delay,misdirection,mislabelling
• Failuretofollowinstructions
• Non-deliveryorimproperreleaseofgoods
• Negligentselectionofsub-contractor(s)
• Inappropriatepreparationofcustomsentry

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LEGAL LIABILITYINSURANCE
Coverstheinsuredforwarder’slegalliabilityundercontract(suchastheirown tradingconditions,domesticorinternationaltradingconditionsorinternational
convention)forlossand/ordamagetotheircustomers’goods.

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ERRORS& OMISSIONS(E&O)
• Delayoffreightdue tonegligence
• Negligentselectionofanairline,oceancarrier,packer,subcontractor,etc.
• Misdirection/mis-delivery
• Improperlycompleteddocumentation
Coverstheinsuredforwarder’sconsequentialorfinancial loss suffered by theInsured’s
customers resultingfromtheInsured’s negligence,errorsormistakesdueto:

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DEFENCE
FFs may not be at fault but a law suitcanstill
happen!
• Defence is necessary
• Costof defending –expensive
• Coverprotects the insured forwarderagainst
unexpected costs andprovides legal expertise
• “Ground Up”or“First dollardefence” provides
coverage irrespective ofdeductible

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STANDARDTRADINGCONDITIONS
• Evidences thetermsandconditionsofcontractbetweenthe
parties
• Setsouttherightsandobligationsofbothparties
• Mustbevisibleon transactiondocuments(invoices etc.)
• Clearlyreferencedonletterheads,emailsandwebsitesetc.
• Providesdetailsofyourcompany’sexclusionsandlimitationsof
liability
• AllSTCsmustbeapprovedby insurers
• STCsarebindinginlawinmostcountries

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STANDARDTRADINGCONDITIONS
Clearly defined,STCs can assist theforwarderto:
• Exclude liability,ifandwhenapplicable
• Reduceorlimitliability,ifandwhenapplicable
• Minimiseclaimsandimprovethelossratiounderthepolicy
• Maximise boththeFreightForwarderandtheInsurer’sprofitability

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CLAIMSPROCEDURE
Intheevent ofa claimbeingmade, intimatedornotified:
• Insuredtogivethe Insurerspropernoticeimmediately
• Insuredmust take allreasonablestepstoavoid,mitigate,orminimize liability
• Insuredmust NOTadmitliability(expresslyorimpliedly)oragreeto
compromiseorsettleanyclaimagainstthe Insuredunlessexpresslypermitted
by theInsurers
• Insuredmust promptlytake actionsasinstructed/requiredby theInsurersfor
the purposeofinvestigatingand/ordefending anyclaimorlegalprocessagainst
the Insured.

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REAL TIMECASE 1
Truckdamagedareeferunitandforwarderreceivedabillofover$15,000torepair. Thetruckwouldnotpay
becauseitwasan individualandknewitwasunlikelyforthecarriertopursuethem,sothecarrierinvoicedthe
forwarder. Clearly,theforwarderwasnotatfaultbuttheywerestillbeingheldliable. Theamountwas
eventuallynegotiateddownandsettledwiththehelpoftheInsurer. Thefairamountoftheworkfromthe
Insurer’slegalteamwasdefense.
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REAL TIMECASE 2
Cargoshippedby bargeandarrivedtothedestinationseveraldayslateandmissedtheirmarket.Customer
wasunhappyanddecidedtosuetheforwarderfordelayandlossofbusinessrevenue. Althoughthereare
strictlimitsforfreightdelay,butthisclaim’smajorcostwastodefendtheforwarder. AstheInsurer’slegal
teamreactedquicklyupon receipttheclaimnotification(theInsuredforwarderalsonotifiedtheInsurer
verypromptly),thedefensewassuccessfulandclaimwasdroppedshortlyafter.
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REAL TIMECASE 3
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Theforwardertransportedtemperaturecontrolledcargo(fruit)whicharriveddamaged. Itwasatotal
loss. TheclaimwasoverUSD40,000withtheallegationthattheforwarderincorrectlysetthesettingsofthe
reefer. Aftermuch investigationbytheInsurer’legalteam,itwasdeterminedthecargowas"hotstuffed"in
thecontainerandtheforwarderdidnotdoanywrong. Casewasdeclineandforwarderprotected.

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