What Every Shipper Needs to Know About Declared Value vs. All Risk Cargo Insurance
In the transportation industry, the words declaring and insuring are often interchanged, resulting in great misunderstanding and confusion among shippers and customers. Here’s an explanation of what to expect when declaring value with your forwarder/carrier versus purchasing All Risk cargo insurance.
Understanding Freight Claim Coverage
To start off, the difference between the two ultimately falls with the payment of a freight claim. Declared value is primarily used in domestic airfreight shipments. According to the Carmack; amendment in order for the bill of lading and or airway bill to, in effect, limit a carrier's liability a carrier must offer the customer/shipper at least two choices of limits:
Declared value coverage
One of the most significant distinctions of being paid on a claim under declared value is that the shipper must prove that the carrier’s negligence directly resulted in the loss or damage to cargo. Declaring value simply raises the financial legal liability of the carrier beyond the limitations stated on the carrier’s or forwarder’s freight bill, tariff or other contract of carriage. For example, many domestic forwarders and carriers limit their liability to 50 cents per pound. Declaring value takes that amount up to the amount declared. So in other words, just because a customer has declared a value and paid a premium for it does not necessarily mean that in the event of a claim it will be paid out automatically. Claims that arise from shipments that move under a declared value (DV) can be denied just like any other claim. The burden of proof still rests on the claimant to prove negligence from the carrier. An example of some basic claim denials might be clear delivery receipts, Acts of God, dishonesty on the part of the carrier’s employees, theft occurring while a vehicle is left unattended, and theft of certain commodities. Or any other incidences that would be legally considered outside the carrier's control.
All Risk Cargo Insurance
When purchased, cargo insurance attaches to the cargo while in transit, with coverage being extended door to door. Cargo insurance pays regardless if the loss or damage was due to the carrier’s negligence. Furthermore, cargo insurance provides protection for the full commercial invoice value plus freight and other costs associated with the cargo.
Account representatives can provide quotes for added all risk cargo insurance along with your rates.