Lost cargo, insurance claims and unexpected delays

12 December 2015

By implementing effective deterrents companies can receive quicker settlements if making a claim for cargo misappropriation.

Cargo misappropriation is on the rise due to large-scale socio-economic turbulences in Europe and beyond. Claiming on insurance can be complicated if cargo owners fail to optimise their storage practices and handling procedures.

For example, one cargo owner with a long-term storage agreement with a Bailee (an individual who temporarily gains possession, but not ownership, of a good under a bailment) requested that their cargo was released under the terms of the storage agreement. 

But the owner was unaware that, due to an economic downturn in that region and consequent withdrawal of credit insurance from local retailers, the Bailee was over-stretched by its financial commitments and overwhelmed by debts.

Excuses, excuses

The Bailee gave the cargo owner several excuses why its cargo could not be released, including ongoing maintenance and transport logistical issues. The Bailee was simply stalling, however, as it had used the cargo to honour other release obligations – to other cargo owners. By this point the Bailee was effectively bankrupt, so the cargo owner had no recourse against it despite being deprived of access to its cargo.

The claim the cargo owners presented to its cargo underwriters was complex, as the owner had not relied on regular physical and independent inspection of its cargo. To complicate matters further the cargo had been commingled with other cargoes. 

Although insurers paid the claim it took longer than normal to settle as the owner was challenged on their storage practices and handling procedures. 

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For further information, please contact Jay Payne, Senior Partner, Cargo on +44 (0)20 7466 6236