Product orders from giant online retailers like Amazon are now being filled and shipped from Canada – proof the logistics chain is evolving. But this also means Canadian companies storing and shipping goods under contract for these retailers need protection, such as legal liability for damage to goods.
Marine insurance is multi-faceted and evolving, and there’s potential for confusion with other types of insurance, a managing general agent said.
“There are dimensions of marine coverage in a property policy, for example, or dimensions of recall insurance in a general liability policy,” said Jeff Somerville, managing director at Strategic Underwriting Managers Inc. (SUM Insurance).
“Specific product lines also cater to those exposures, those issues, those perils, very specifically and very thoroughly. It creates a lot of confusion in the marketplace.”
A general retail broker may have difficulty understanding the triggers, potential for gaps in coverage, and how a logistics claim is treated or adjudicated. Even the terms ‘load broker’ and ‘freight forwarder’ are not in an average broker’s vocabulary.
“A freight forwarder arranges shipments internationally by ocean, by air, and will also do it domestically. A load broker…only arranges domestic shipments,” explained David St. Martin, vice president and marine and logistics practice leader with SUM Insurance.
“The best way to say it is they are travel agents for cargo. They never touch it.”
What load brokers do “can be the start of the confusion,” Somerville said, referencing legal liability or errors and omissions (E&O) coverage for these cargo brokers. Sometimes, it can be difficult to differentiate between the two coverages. “It sounds like you’re insuring a physical thing, but you’re really insuring their conduct or behaviours.”
There’s also coverage for the product itself, such as direct damage cargo insurance. By contrast, E&O relates to loss or damage to cargo through the load brokers’ actions.
It’s critically important for load brokers to do their own due diligence on a carrier, or risk compromising their coverage.
For example, existing websites match transportation carriers with freight forwarders, but sometimes nefarious actors will assume the identity of a transportation carrier. For example, a criminal may call a trucking company pretending to own goods, such as a weekly shipment of plastics, and arrange a shipping schedule.
The fraudster then gets the trucking company to send details like insurance documents and trading conditions, before doctoring them and then assuming the identity of the trucking company.
“What we say to our insureds is, ‘Do not take [potentially fake transportation carriers’] document packages,’” St. Martin said. “Get on the internet, get their [phone] number [and] call them. This is how we foil them.”
Nowadays, cargo theft is done electronically. “Our load brokers are in the middle of this,” he added. “These are the people that are getting the wool pulled over their eyes. And we’ve paid…for those claims.”
When it comes to cargo, brokers need to speak the lingo of the transportation carriers, said St. Martin. This could involve details such as knowing if the cargo must be carried at a certain temperature, or if tarps are required to cover the shipment.
“If [the load broker] were not to give the proper instructions to the [transportation] carrier, we’re paying an errors or omissions or a legal liability claim for that,” St. Martin said. “Those are claims we pay when they don’t do what they’re supposed to do.”
This article is excerpted from one that appeared in the August-September edition of Canadian Underwriter. Feature image by iStock.com/Natalia Lagutkina
