The terms used within the insurance industry in relation to products and services provided to the logistics sector can be confusing.
In some cases, these are simply product names, but in others they are important terms that need to be clearly understood.
To help you get to grips with this terminology and become more confident about what your insurance policy covers, we have put together a summary of common terms, complete with plain English explanations.
Cargo/Freight/Marine Cargo/Freight Liability and Goods in Transit
These terms are commonly used in the product names of policies. The key thing to note is that the focus for all of these is on the actual goods being moved, rather than the method of carriage.
Goods are accompanied by a ‘Proof Of Delivery’ document, known as a POD. This document can be in paper form but is increasingly being digitally managed on handheld devices.
If goods arrive damaged or there are shortages, this should be noted on the POD, which is then ‘claused’ with a note of the damage or amount of goods missing. This is an important part of the evidential process and helps to ensure swift and appropriate claims settlement.
It is also recommended that photos of any apparent damage are provided as issues such as improper packaging may mean that you can defend against any damages claimed.
The CMR was a United Nations convention signed in 1956. It was created to standardise conditions for international goods movements and refers to a number of legal issues involved in transporting cargo by road. It will apply when the carriage of goods starts and ends in two different countries, and when at least one of the contracting parties is signed up to the CMR Convention. It can also apply automatically by statute.
In addition to setting out carrier liability for goods (as standard 8.33 SDR [Special Drawing Rights per kilo]), it also stipulates the documentation that must be used.
There are circumstances in which goods are ‘transhipped’ (off-loaded to a different vessel or vehicle) during their journey that can ‘break’ statutory CMR. In this situation, the remaining part of the journey can still use the terms by contract.
Most goods movement insurance policies automatically provide CMR cover as standard.
Incorporation of Terms
This term is used in many policy wordings. It basically means that you should engage in the movement of goods for third parties under pre-agreed carrying conditions. These are usually standard conditions, such as RHA, Logistics UK (previously FTA), CMR, BIFA or UKWA, but they can potentially be adjusted to cover higher amounts per tonne or vehicle/vessels above the standard limits.
It is a very broad descriptor and is used to cover the general commercial activity of transporting goods.
RHA & Logistics UK terms
Unlike CMR, these terms are specifically contractual conditions that set out carrier liability for goods and the responsibility of all contracted parties for the movement of goods, including defence of certain types of losses. To use RHA terms, the carrier must be a member.
An operator should stipulate its standard contract form to customers, who should in turn confirm if their requirements differ from standard compensation (e.g. RHA £1,300 a tonne). The operator can then arrange suitable cover with their insurer for specific customers.
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