Go Back

In the first of the I. T. Journals we briefly discussed the origins of inland transit insurance along with what was generally considered to be I. T. risks all from a direct damage first loss perspective. In this Journal we would like to proceed and move to the liability involved in inland transit insurance and how carrier's liability is related to direct damage insurance.

When property is given over to the care of another party, a legal relationship of 'bailment' arises, that is, the property of one person being held by another (the bailee) with the intent of it being returned or delivered to the new owner. Although the ownership of the property is unchanged, it enters the control of the party to whom it is entrusted.

Common carriers and warehousemen not only have common law obligations but also statutory duties as bailers of the property entrusted to them. Unless otherwise provided by statute or the common carrier's bill of lading, the carrier is responsible for the full value of property transported. However, under a limited bill of lading, a common carrier may limit the risk to a lower specified dollar amount.

The insurance practitioner is aware that an annual direct damage insurance applies to the property of the shipper - the owner of the cargo. The owner of the cargo has an insurable interest and the policy is written to protect the owner of the property for loss or damage while in transit. The carrier that is transporting the cargo from one place to another also has an insurable interest in the property because of the carrier's legal liability to the property owner.

The purpose of a carrier's form of motor truck cargo insurance is to indemnify the insured (the trucker) for loss or damage resulting from their legal liability as a carrier. The policy does not insure against loss of the property unless the insured is legally liable for the loss.

The motor truck cargo carrier's policy is issued to cover the single interest of the trucker. It does not cover the interest of the cargo owners or consignee of the cargo.

In addition to paying only those losses for which the insured is legally liable, carriers' forms also require that loss must result from a covered cause in order for the insurance to respond.

There are exceptions to common carrier liability and they are: Acts of God, Acts of Public Enemy, Exercise of Public Authority, Fault or Neglect on the Part of the Shipper of Public and Inherent Vice or the Nature of the Property.

Concerning covered property, it is customary to insert in the policy a description of the goods hauled. In the case of a common carrier hauling all kinds of goods, the description is often illustrated as "general merchandise". The coverage applies to goods for which the carrier is legally liable. The broad phraseology is used in order to include circumstances in which the trucker would be in the position of a bailee or warehouseman with regard to some particular shipment.

Now that we have had a brief look at the nature and function of the common carrier we will be turning to, in our next Journal, the differences between a Freight Forwarder, Load Broker, Shipping Agent and the various non-carrier operatives.

Resources: Essentials of Risk Management, Volume 1

Insurance Institute of America, Inland Marine Insurance, Volume 1

The Mariner's Smile

Church Newsletter goof-ups. Taken from an actual church Newsletter.

"Ladies, don't forget the rummage sale. It's a chance to get rid of those things not worth keeping around the house. Don't forget your husbands."

Go Back

Peter J. Taylor, President. Underwriters and Intermediaries in Ocean and Air Cargo, Inland Transit, Transit Liabilities, Marine Liabilities, Commercial Hull, Yachts and Hovercraft.

Contact History Mission Statement Privacy Policy Mariner's Journal Application Forms Products Bulletin/News Links Home