- April 26, 2011 1:39 pm
- Rick McCord
- No Comments
Cargo Update
Cargo Thefts Increasing:
Various sources continue to cite the increase in cargo thefts, both in the U.S. and internationally. Many tie this to the old adage that theft and insurance fraud tend to increase in tough economic times. One report, from FreightWatch, indicates that the leading states for cargo theft continue to be California, New Jersey, Florida, and Texas, with thefts in New Jersey having increased 144% between 2009 and 2010. The leading categories of stolen loads are food and drink products (21%), electronics (19%), clothing and shoes (11%), and building materials (10%).
Our own experience in handling cargo losses for a number of U.S. and London insurers tends to confirm these findings. One always troubling aspect that we seem to see increasingly is the frequent lack of interest in aggressively investigating cargo thefts by many law enforcement agencies, particularly those in large metropolitan areas.
Cargo Valuation Issues:
One of the consistently troublesome issues in handling cargo claims involves the basis for valuation of lost or damaged cargo. Exactly what is its value? The shipper naturally wants to be paid the full invoice price for which it had intended to sell the product, and this would include its mark up and prospective profit. However, many cargo insurers, as well as the wording of many cargo policies, incline toward the idea that the claim should be limited to the actual value of the cargo – meaning the shipper’s actual production or acquisition cost, which arguably reimburses the claimant for its actual loss. Courts have been inconsistent in their interpretations and rulings on the subject.
We are finding that it is becoming more common to find situations where a contract exists between the shipper, or the logistics provider/cargo broker, and the motor carrier, and in many of these cases the terms of the contract specifically address the valuation issue. These contracts or agreements tend to be somewhat one-sided in favor of the shipper, and typically define the claim value of lost or damaged cargo as the full invoice price, or in some cases essentially “whatever we say it should be”. Motor carriers, in their apparent eagerness to pick up new business, oftentimes seem to sign these contracts without being particularly aware of their provisions.
Cargo / Inland Marine underwriters also don’t seem to have a great deal of interest in the presence of these types of contracts, even though they can make a large difference in the costs of claims.
No More BMC-32?:
Last summer the FMCSA issued a ruling which will eliminate the mandatory financial responsibility filing and required BMC-32 policy endorsement for most motor carriers operating in interstate commerce. The ruling, scheduled to go into effect in March 2011, doesn’t apply to household goods carriers or household goods freight forwarders. No one seems to be sure what effect this will have on existing filings and BMC-32 endorsements – whether they will be cancelled immediately or with the expiration of the policy, etc.