In the event of a claim, you have the responsibility to mitigate the extent of damage, taking all reasonable measures to minimise and prevent further loss or damage where possible.
This responsibility exists in your policy and in law. It is also important to remember that the regulations governing various modes of transportation carry strict limitations on the time in which you must notify the carrier of loss or damage. Failure to provide notification within those time limitations can allow the carrier to avoid liability and may prejudice your ability to recover the claim from your insurer.
Here is a quick Step Guide as to what you need to know and what action to take upon discovering any loss or damage to your cargo:
STEP 1
Immediately call for and arrange a joint survey with the carrier, haulier or other parties that had physically handled the cargo.
- For local shipments, to notify your broker your insurer.
- For overseas shipments, to notify the survey or settling agent (as stated in the Certificate of Insurance).
STEP 2
For full container load (FCL) shipments, inspect the container for any holes, dents, corrosion and any other physical condition that may evidence of the cause of the loss or damage during the voyage.
STEP 3
Clause the delivery order (write the exceptions on the delivery order and cancel the clause “Received in Good Order & Condition”, if any) if the container is delivered:
- damaged
- with seals broken/missing or
- with seals other than the ones stated in the shipping documents.
If the cargo is found to be damaged upon unstuffing of a container, the operations must be suspended immediately and notification must be given to the surveyor or your broker or insurer.
STEP 4
Do not give clean receipts where goods are in doubtful condition except for cases where the letter of protest has been written.
STEP 5
Write to the relevant parties immediately holding them liable for the loss or damage sustained. Relevant parties include and not limited to: Carriers, Port Authorities and/or other Bailees.
STEP 6
Give notice in writing to the carriers or other bailees within 3 days of the delivery of the cargo if the loss or damage was not apparent at the time of taking delivery.
Your Responsibilities under a Marine Cargo Policy
It is also important to remember that the regulations governing various modes of transportation carry strict limitations on the time in which you must notify the carrier of loss or damage. Failure to provide notification within those time limitations can allow the carrier to avoid liability, and may prejudice your ability to recover the claim from your insurer.
It is your duty in all cases, to take such measures as may be reasonable for the purpose of averting or minimising a loss and to ensure that all rights against Carriers, Bailees or other third parties are properly preserved and exercised. Your Insurer will reimburse you for any expenses that are properly and reasonably incurred in your pursuit of these duties resulting from an insured peril. In particular, you or your agents are required:
- To claim immediately on the Carriers, Port Authorities or other Bailees for any missing packages
- In no circumstances, except under written protest, to give clean receipts where goods are in doubtful condition
- When delivery is made by Container, to ensure that the Container and its seals are examined immediately by their responsible official. If the Container is delivered damaged or with seals broken or missing or with seals other than as stated in the shipping documents, to clause the delivery receipt accordingly and retain all defective or irregular seals for subsequent identification
- To apply immediately for survey by Carriers’ or other Bailees’ Representatives if any loss or damage be apparent and claim on the Carriers or other Bailees for any actual loss or damage found at such survey
- To give notice in writing to the Carriers or other Bailees within 3 days of delivery if the loss or damage was not apparent at the time of taking delivery
Compile and forward all documentation for the shipment to your broker or the insurer’s representative. Documents required usually are:
- Original Policy or Certificate of Insurance
- Original Bill of Lading or Airway Bill
- Colour Photos of packaging and damaged cargo
- Letter of claim or protest against the carrier and/or their agents
- Copy of correspondence exchanged with the carrier or other bailees
- Copy of supplier’s Invoice
- Copy of Packing List
- Delivery Order and, where applicable, duly claused
- Survey Report
- Landing Certificates or Weight Notes
- Repair / Replacement Quotations and original receipts
- Statement of claim
- Other documentary evidence of loss or damage if and when required
Note that you have an obligation mitigate loss i.e. to prevent further damage by taking protecting measures. Damaged goods should be handled with care. Separate damaged goods from sound goods. Do not destroy damaged goods without insurance company’s acceptance. See under Check list on receipt of goods for printing out the checklists.
General Average Claims
The carriage of goods by sea is deemed to be a joint venture between ship-owners and cargo-owners, and the maritime convention places a responsibility on the ship-owner to safeguard the common interest and incur necessary additional or extraordinary costs in so doing. There is no governing international statute and consequently the “Comite Maritime International” C.M.I. sponsored conditions (York-Antwerp Rules 1974 – and subsequent amendments) are incorporated in most marine contracts of carriage (bills of lading).
Situations may arise whereby the carrying vessel suffers a fortuitous event during the course of the voyage resulting in additional or extraordinary expenses being incurred by the ship-owners. Typical examples of a fortuitous event is an engine or machinery breakdown, fire, or collision with another vessel or fixed or floating object, such incidents resulting in additional expenditure in saving the venture and cargo.
In the event of additional or extraordinary costs being incurred in successfully (or partially) saving the venture, ship-owners will look to cargo owners to contribute towards such costs. In such circumstances, ship-owners may declare General Average, and in doing so will automatically exercise a Maritime Lien on the cargo for its pro-rata share of the total additional and extraordinary costs.
Before any cargo is released ship-owners will require from each Bill of Lading holder a signed General Average Bond plus either a cash deposit or a General Average Guarantee signed by cargo insurers, based on the percentage of the invoice value of the of the cargo deemed to reflect the proportion due from cargo interests.
Since the insurance policy covers General Average expenses, your insurer will issue their own General Average Guarantee to ship-owners instead of the cash deposit. For your guidance this procedure is universally accepted. It should be pointed out that whilst insurers will deal with the Guarantee aspect, shipowners will still require you to complete the ‘General Average Bond’ (the Average Bond is your guarantee to provide full information and to pay the contribution when due).
To facilitate prompt release of the cargo, it is essential that your broker or your insurer is immediately notified of the incident, and that the following information is provided:
- Copy of the completed General Average Bond, together with copies of all correspondence received from the ship-owners and/or their appointed General Average Adjusters
- Copy of commercial invoice
- Copy of ocean Bill of Lading
- Copy of Certificate of Insurance or declaration details as applicable
Upon receipt of the above, immediate steps can be taken to issue the General Average Guarantee, which will facilitates release and delivery of the cargo.
Salvage
In certain situations the vessel may require the services of a salvage company. In such an event salvors will require salvage security from cargo owners and will retain a Maritime Lien on the cargo until acceptable security is provided. Since the insurance policy covers salvage expenses, your insurers will issue their own salvage security.
Upon receipt of a demand for salvage security, immediate notice should be given to your brokers and the following information provided
- Copy of the salvage demand, together with copies of all correspondence received from the ship-owners and/or salvors
- Copy of commercial invoice
- Copy of ocean Bill of Lading
- Copy of Certificate of Insurance or declaration details as applicable
Upon receipt of the above, immediate steps can be taken to issue the Salvage Security, which will facilitate release and delivery of the cargo
Time Bars and Suit Time Extensions
Until such time as your insurer settles a claim, the onus of protecting the right to claim against the party or parties responsible for loss or damage rests with you. Your insurer does not have any title or interest in the cargo until after it has settled your claim, and until then it cannot act on your behalf. Your insurer does not have any rights or obligations to preserve the right to claim prior to settlement.
Once the time bar or time limitation for filing an intent to claim or final claim against a carrier or your freight forwarder has passed, the matter becomes “Time Barred,” that is, the carrier and/or your freight forwarder will be protected from any action which might find it responsible for the damage or loss of the shipment. Please note that different carriers have different time limitation periods, as do freight forwarders. This is especially important to consider in multimodal shipments.
Failure to protect against your claim from becoming time barred may prejudice your rights, as well as your insurer’s rights, to recover from the responsible party or parties. This may affect your claim settlement from your insurer.
Understanding Subrogation
Once your claim has been settled, your insurer will have the right of subrogation to recover his claim against any errant third party. This means that the Insurer may choose to take action against carriers or other parties involved with the transit to recover the amount of a claim paid.
You will be provided with a subrogation form which generally must be signed and returned before settlement of the claim. This form evidences the transfer of your rights of claim against responsible third parties to the insurers who have paid your claim. After insurers have paid your claim, they may pursue subrogation against those third parties responsible for the loss or damage to your cargo in an attempt to recover their losses.
Sample Notice of Claim against Carrier or other Bailee
Date:
Reference No.
Address of Carrier/Bailee
VESSEL’S NAME:
BILL OF LADING NO. & DATE:
VOYAGE:
DESCRIPTION OF LOSS:
ESTIMATE OF LOSS: REFERENCE NO:
We regret to advise that upon arrival of the above shipment certain shortage and/or damages were noted.
We are currently establishing the full extent of our loss, details of which will follow at a later date, however in the meantime we hold you fully responsible for this claim and all associated costs which may arise therefrom.
Your written acknowledgement of this notice in good time is appreciated.
Yours faithfully
Name of officer
Designation
Company Name