20 December 2021
I recently met a client who operates a small water taxi service. I noticed several crates in the bed of his truck and learned that he was transporting them to one of our local islands.
While this appeared to be an innocent risk to the insured, there was one glaring problem: His policy excluded coverage for freight.
Although marine policies have limited coverage for passenger personal effects, there is often an exclusion for freight. This can be added by a rider with a coverage sub-limit, with the premium being based on the amount of coverage. Make sure you understand the value of the cargo you are carrying, as your insurance policy will only provide the limits you paid for. You will also have a separate deductible for freight claims. It is good practice to have a freight contract with a customer that determines the value of the items to be shipped. This makes it possible to avoid unpleasant surprises in the event of a disaster.
Take a look at how the cargo was packed. We all know things can get hectic and wet on the water. You must have established a set of packaging guidelines and you must reserve the right to refuse the right to ship an improperly packaged item. You can’t control the weather and you don’t want to have to pay for someone else’s bad work.
As with all insurance, the cargo rider will come with exclusions. Be sure to review the exclusions with your agent to make sure everyone is on the same page. Negotiations with an underwriter can often result in more advantageous coverage.
Here in Maine, the small freighters that serve local island communities are a lifeline to these islands. Often the families that exploit them have been doing so for many generations. The same is true for many coastal and river freight operations across the United States.
As the nature of your business changes and grows, so should your approach to managing risk. Talk to your agent and see if your policy needs to be updated.