Port Disruption – A one off incident or a precursor to Brexit?

Authored by NMU

The recent closures of UK ports will hopefully be short lived, but with the uncertainty around what the Brexit deal may mean, the disruption seen may become a more regular issue impacting both cargo owners and freight logistics providers alike

So what does this mean for your Cargo & Freight Liability policyholders?

Those who have goods delayed during the import or export leg of the journey may have arranged insurance cover for the cargo, and logistics providers who are involved in the movement of goods internationally may have protected against their legal liabilities for goods in their possession on behalf of cargo owners.

We obviously can’t issue comprehensive guidance on every variation of individual policy or contract, however as the majority of policies in question for Cargo will be written on the terms of the Institute Cargo Clauses (A) or Institute Frozen Food Clauses (A), and potential liability for hauliers and forwarders likely determined by conventions or industry standard conditions of carriage, we have compiled some guidance based on these in the form of FAQs below to assist.

The Guidance focuses on the disruption caused by the port closures and assumes there is no physical loss of or damage to the cargo itself.

If your client has a Cargo or Freight Liability policy with NMU and there is any physical loss or damage to Cargo, please notify our claims department as soon as possible.

Cargo FAQs

My Cargo has been delayed at the port due to closure, does cover remain in force?

Yes. Under the terms of the Institute Cargo Clauses (A) goods would be deemed to be within the ordinary course of transit during the period of delay.  If the Cargo owner themselves decide to divert the shipment to a point of storage other than where it was originally intended for, cover may cease on arrival at the place of storage.  In these circumstances please contact your NMU underwriter and we will look to ensure cover continues but may be subject to additional premium and/or terms.  If the goods are directed to a place of storage by the shipper/forwarder without the Cargo owner’s knowledge, cover remains in force as the temporary storage situation is deemed to be within the ordinary course of transit.

If goods were shipped by vessel or aircraft, cover may terminate prior to delivery if goods are not delivered to the intended destination within a specified period of time after discharge from the vessel or aircraft (60 days for sea freight, 30 days for Airfreight).

My client ships perishable goods. If the goods spoil as a result of the delay are they covered?

Most policies for goods of this nature will have been written using the Institute Frozen Food Clauses (A) as the insuring clause. Under these clauses, cover for deterioration of the subject-matter insured would require one of the specified triggers (eg breakdown of refrigerating machinery) for a claim to be recoverable. Closure of or disruption at the port in itself would not trigger cover for deterioration. There are also specific exclusions within these clauses for Delay and Inherent Vice that may come into play.

My client has lost an order as they have been unable to get supply to their customer in time due to the delay. Are they covered?

As with most property covers, under the terms of the ICC (A) the subject matter insured must have suffered some physical loss or damage for a claim to be recoverable. Where the cargo owner suffers an inability to fulfil orders or loses trade due to a breakdown in the supply chain, there is no such loss or damage and therefore unlikely that there would be a recoverable claim.

My client has incurred additional freight and storage charges as a result of the port closures. Are these costs recoverable under their cargo policy?

Under the terms of the ICC (A), it’s unlikely these costs would be recoverable as there has been no physical loss of or damage to the subject-matter insured. However there may be extensions of cover within a particular policy that could pick up an element of such costs.

If your client holds a Cargo policy with NMU, please contact our claims department as soon as possible.

Freight Liability FAQs

My client is a haulier moving goods to/from the EU by road. Will they have a liability arising from delays caused by the disruption at the ports?

In these circumstances the CMR convention would determine the liability or otherwise of the haulier.  Whilst CMR does extend to include liability arising from delay, as this has arisen due to circumstances beyond the haulier’s control, it is likely they would have a defence to liability under article 17.2 of CMR.

If the haulier is insured with NMU and the cargo owner makes a claim against them please contact our claims department.

The policyholder should not comment on liability without first contacting us, as doing so may prejudice any claim

My client is a Freight Forwarder operating under BIFA conditions. Will they have a liability arising from delays caused by the disruption at the ports?

Under BIFA conditions there are defences available to the forwarder for circumstances they are unable to avoid by exercising due diligence and also a specific exclusion for consequential loss and delay. If the haulier is insured with NMU and the cargo owner makes a claim against them please contact our claims department.

The policyholder should not comment on liability without first contacting us, as doing so may prejudice any claim.