Cargo loss has been in the news again recently, following the dramatic accident involving the container ship Dali and the collapse of the Francis Scott Key Bridge in Baltimore. The 9,971 TEU containership Dali suffered a power loss and collided with the bridge, causing significant damage to the vessel and cargo, as well as the tragic loss of lives. This event serves as a stark reminder of the ever-present risks involved in shipping goods across the ocean.
With cargo loss and damage risks on the rise, now is a good time to examine your marine cargo insurance coverage. Many shippers mistakenly believe they are covered for cargo loss by their company's general liability insurance or that the ocean carrier is solely responsible. However, maritime law can be complex, and a false sense of security can be devastating in the face of a cargo loss.
What is General Average?
One of the key maritime legal principles that comes into play around marine cargo losses is general average. Under the law of general average, all parties in a sea venture proportionally share in any losses resulting from a voluntary sacrifice of part of the ship or cargo taken to save the whole in an emergency. In the event of such an occurrence, the ship owner will declare general average.
The law states, “There is a general average act when, and only when, any extraordinary sacrifice or expenditure is intentionally or reasonably made or incurred for the common safety for the purpose of preserving from peril the property involved in a common maritime adventure.”
When general average is declared, the ocean carrier is not liable for cargo loss or damage. In fact, all cargo owners are made partly responsible for each other’s cargo, as well as the vessel itself. Once the total cost of the incident is known, the general average adjuster appointed by the ship owner will calculate the costs owed by each party involved in the voyage. In extreme cases, these costs can be onerous and put a small company’s bottom line at significant risk.
The Dali Incident and General Average
Though the full scope of damages from the Dali incident is still emerging, it is likely that general average will be declared. This means cargo owners without proper marine cargo insurance could face significant financial responsibility for the salvage operation and repairs, even if their specific containers were not directly damaged.
Should I get maritime cargo insurance?
The worst time to realize you need insurance is after a loss event. If you typically do not insure your cargo, now is a good time to reevaluate that option to make sure you are adequately covered in the event of a loss.
Marine cargo insurance is comparatively affordable and protects you from catastrophic damages, so it offers a great deal of protection and peace of mind for a relatively minimal cost. It can also mean the difference between a quick claim settlement or months of waiting and back-and-forth to recover any value from your goods.
Contact Laufer Group to download our cargo insurance white paper and sign up for a free, personalized evaluation of your cargo insurance policy. For specific questions regarding marine cargo insurance please contact your local Laufer Sales or Customer Service representative.