VI. LIABILITIES AND LIABILITY INSURANCE
A freight forwarder as an agent is usually liable for some errors and omissions.
a) Surrendering / releasing cargo without taking in exchange a properly endorsed
bill of lading;
b) Delivering cargo before collecting payment resulting in losses;
c) Incorrect instructions given to a carrier;
d) Mis-routing resulting in delay and additional charges for storage / rerouting /
e) Issuing and signing transport document by mistake resulting in losses;
f) Errors in cargo storage resulting in losses;
g) Forgetting or failing to obtain clear evidence indicating the cargo status, thus
the shippers cannot claim from the responsible carriers or third party;
h) Errors in packing and de-consolidation leading to the losses;
i) Errors in customs brokerage and failing to follow import and export
procedures resulting in losses; and
j) Errors in arranging insurance for the shippers resulting in the losses.
A NVOCC or MTO has all the liabilities of a freight forwarder as an agent. In
addition, they also have responsibilities in arranging cargo transport and storage, thus they
have more liabilities. In the case of MTOs, their liabilities depend on whether MTOs have
their own transport means or not. When a MTO has its own transport means, relevant
international regulations and rules such as Visby Rules, the Hague-Visby Rules and Hamburg
Rules may apply if they are included as appropriate in a contract between the MTO and the
When a MTO does not have its own transport means, its role is similar to NVOCC. In
such a case, the UNCTAD/ICC Rules for Multimodal Transport Documents may apply if it is
clearly included in the contract. The MTO (NVOCC) usually is liable for loss of or damage
to the goods, as well as for delay in delivery, if the occurrence which caused the loss, damage
or delay in delivery took place while the goods are in his or her charge, unless the MTO
(NVOCC) proves that no fault or neglect of his or her own, his or her servants or agents or
any other person has caused or contributed to the loss, damage or delay in delivery.
In the ASEAN subregion, if a country is a Contracting Party to the ASEAN
Framework Agreement on Multimodal Transport, 2005, a MTO should have the liabilities
detailed in the Agreement, if the relevant clauses in the Agreement, are included in the
B. Liability insurance
In the existing national regulations on freight forwarders (as agents), issues on
liability insurance have rarely been addressed. For NVOCCs and MTOs, the ASEAN
Framework Agreement on Multimodal Transport, 2005, indicates that a multimodal transport
operator “shall have an insurance policy, a coverage from a protection and indemnity club, or
an alternative of a financial character to cover payment of obligations for loss, damage or
delay in delivery of goods under multimodal transport contracts, as well as contractual risks”
The industry associations often play an active role in promoting liability insurance. A
noticeable example can be found in SLA which indicates that the applicant for the
membership should have “in force a liability insurance policy which is appropriate to the
nature of the logistics and/or ancillary services provided by it and has a minimum coverage of
S$100,000 for any one claim”.
In Sri Lanka, the Sri Lanka Freight Forwarders Association makes it imperative that
their members need to obtain valid and recognized liability insurance covering at least Rupee
10,000,000 for legal liabilities and Rupee 5,000,000 for errors and omissions.
The Canada International Freight Forwarders Association (CIFFA) requires its
members to “abide by CIFFA’s requirement to secure, at member’s cost, a freight forwarders
liability insurance coverage, with a minimum liability of Canadian Dollar 250,000 per
occurrence. Annual submission of proof of coverage required.”
In Switzerland, the Association of Swiss Freight Forwarding and Logistics
Companies (SWEDLOGSWISS) require its member to “prove existence of liability insurance
– contractual and non-contractual exposure coverage is Swiss Franc 1,000,000”.
C. Comments and recommendations
(1) The freight forwarders, NVOCCs and MTOs should be fully aware of their liabilities.
(2) There is a need for freight forwarders, NVOCCs and MTOs to have the liability
insurance coverage. A freight forwarder as an agent should have at least insurance to
cover errors and omissions.
(3) It is desirable that the NVOCCs and MTOs have full scope of insurance coverage,
such as third party insurance, customs duties insurance, transport liability insurance
and liability insurance for errors and omissions.
(4) If an ASEAN member country is a Contracting Party to ASEAN Framework
Agreement on Multimodal Transport, 2005, the liabilities of a MTO are defined in the
Agreement, as included in the contract.
(5) Liability insurance specified in relevant international rules and/or subregional
agreements could be set as a minimum requirement.