Risk of Significant Financial Loss
To put it plainly, marine cargo insurance protects you from losing your shirt if the cargo you’re shipping is lost, damaged, or destroyed. At this point, you might be wondering:
Wouldn’t the ocean freight carrier be responsible for reimbursing me if my container slid off their ship (for example)?
It’s not quite that simple. Before the 1893 Harter Act, ocean freight carriers weren’t responsible for damages to or loss of cargo. Before the act was passed, carriers simply wrote clauses that released them from any liability.
However, the Harter Act changed that to:
- Define the responsibilities of ocean freight carriers, including operating a seaworthy ship, proper loading, handling, and caring for cargo.
- Prevent carriers from including clauses that relieved them of specific types of liability. In other words, it made carriers responsible for fulfilling the duties named in the act, and in the case of negligence, offered shippers recourse.
However, the Harter Act also made a concession to the ocean freight carriers. The act recognized that carriers could not be held liable in circumstances beyond their control. What circumstances would that entail, exactly? We’ve included the actual language below so you can see exactly what the law covered:
But then came the 1936 Carriage of Goods by Sea Act (COGSA), which governs ocean freight shipments entering or leaving the U.S.
Under COGSA, ocean carriers were allowed to limit their liability to $500 per package. Although the meaning of the word “package” has been debated by many legal teams, it can ultimately mean only a $500 reimbursement for the entire container.
For example: what happens when your 1,000lb solar panel worth $1,200,000 is only covered for $500? That’s where marine cargo insurance comes in.
Purchasing additional freight coverage can mean the difference between full replacement value vs only $500. Protecting your investment with marine cargo insurance will protect you from significant financial loss.