Many a slip

How often have we heard the request from cargo interests for insurance that “covers all risks” on a “warehouse to warehouse” basis? ANDREW ROBINSON warns that it’s quite easy to slip up when it comes to this cover…

It sounds simple enough – but most freight operators know that the transport of goods often includes elements that go beyond the actual movement of goods on a conveyance. Goods sometimes need to be broken down from their original packaging for storage prior to distribution – or combined with other goods in some form of consolidation, or even for processing.

The types of standard insurance cover available are many and various. Some standard forms are distinguishable by the type of goods (frozen meat or bulk oil, for example), the risks covered (many clauses exclude loss caused by delay, others will allow such cover in limited circumstances) and the conveyance, especially carriage by air.

Most policies will not cover storage of goods, unless that storage was in the ordinary course of transit. Where the purpose of the storage is for the collateral benefit of the goods owner, the cover may cease or be interrupted until the goods are again in the ordinary course of transit.

Logistics implies that goods will be subject to various forms of transport during their journey from the warehouse or place of origin to their final destination. Very often storage for lengthy periods may take place before the goods begin the next logistical leg of their journey. Where freight operators are able to lawfully arrange insurance for their customers, care should be taken to establish three things:
• The conveyances to be used in the movement of the goods – and to be sure that appropriate cover is in place;
• The place of final destination: does the insurance cover any extended periods of storage that might not be regarded as being in “the ordinary course of transit”?; and
• The risks that should be covered given the nature of the goods and the proposed “insured transit”. Where the standard clauses will not suffice, what alternative “extension clauses” are available and at what premium?

We do find that, on occasion, the general cover provided does not adequately match the needs of the cargo owner, the nature of the goods or the transit that the freight operator has carefully planned. Care should also be taken to ensure that where a policy offers options or alternative types of cover, these are explained to the cargo interest before they make their election, so that there is no doubt as to what cover they requested and what was provided by the insurer. Properly drafted questionnaires and suitably worded policies go a long way to avoid disputes at a later stage. Having a lawyer suitably experienced with both the logistics business and marine insurance look over them would not be a bad idea either!