Summing up insurance
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by T. L. Jose
FROM April 1976, to May 21 1976, CM carried a series of short, sharp articles on "Updating insurance."
Did you read—and learn ?
I hope so. Because while the results of carelessness can be cushioned by insurance—you must not be careless about your insurance arrangements. Let me try to tie the series up for you; if at the end of this article you are still in doubt about any particular insurance aspect I have endeavoured to cover, then contact CM; they will usually be able to provide an answer—fast.
Small print is certainly still used in some insurance policies but the tendency over the past few years has been to endeavour to standardise on one type for the whole document.
In any event a great many of the conditions and exclusion clauses in an insurance policy are merely there to spell out what the law — Common or Statute—requires of all of us. You as an insured person or company have a duty to act at all times as though you were uninsured; in fact you must take all reasonable steps open to you to prevent or minimise any loss or damage, direct or indirect, which may arise as the result of an accident.
Be reasonable
Always be reasonable in your approach to your insurance adviser, be completely truthful and if you have chosen your brokers with care for their knowledge and expertise, in the field of transport, particularly, road transport, they will see you through "thick and thin" should this ever become necessary.
However, even the most highly skilled broker would have difficulty in persuading any motor insurer to pay a frost damage claim for, say, a cracked block, where clearly, no attempt had been made to ensure that anti-freeze had been used in the cooling system at the appropriate time of year. Nevertheless, a case could be made by the broker, perhaps, if he were able to establish that the injured company or individual had given written instructions to the maintenance staff that all vehicle cooling systems were to be drained and refilled with an anti-freeze solution on or before a certain date. In the case in question through neglect, inefficiency or whatever other excuse was to hand, the vehicle which had sustained the damage had been overlooked for this treatment.
When a policy of insurance states that a vehicle must be roadworthy, whether in small print or large, you do not need, or should not need to concern yourself because, do we state the obvious, this is just what the law requires. Now hear this : many "Goods in Transit" policies contain this condition regarding roadworthiness and not just motor policies.
Remember that an insurance underwriter can be breaking' the law if he pays claims which result directly from the operation of an unroadworthy vehicle. In this context we are talking, generally, about loss or damage sustained by an operator, not to an innocent third party; that is quite another subject.
Off the highway
Where motor insurance is concerned, an underwriter will obviously be a lot happier if vehicle's when left at the end of their day's work are pl in a garage or other building of sound construction or a compound—at the very least off the public highway. However, all operators must take particular care over their night parking arrangements, particularly with regard to their goods in transit insurance.
This is of especial concern to operators outside the main urban areas like London and Glasgow. Why ? Because the majority of sound insurers who issue goods in transit liability policies make use of a clause which specifically excludes claims for theft where a vehicle is left loaded and unattended at the end of the day's work unless in a building which is securely closed and locked or within a compound having secure walls and/or fences and securely locked gates.
This clause can be, and in fact is, on occasions amended to include security parks — those which have, or claim to have, 24-hour manning. But, where are such parks ? There are very few real security parks in the United Kingdon , as a whole let alone London or Glasgow, So beware !
There was a move some little time ago to set up a chain of such security lorry parks at strategic centres , throughout the country, but this, regrettably, because of ' the cut back in government spending, would seem to have been "pigeon-holed " indefinitely. I wonder why no one else is doing something.
Even greater caution is required if the conditions of carriage governing a particular load are the Carriage of Goods By Road Act 1965, popularly known as CMR. This is the convention which governs traffic "On Wheels across Frontiers "—and the monetary limits imposed are much greater than those accepted under Road Haulage Association (April 1967) conditions.
The maximum amount for which a haulier can be held liable under CMR is generally considered to be approximately £3,500 per ton; however, the Act also states that in addition to the material loss the carrier may be liable for Customs duty, delay and other charges.
One of the leading insurance brokers in road transport has for many years advocated a figure of £4,000 per ton and in broad terms uses this figure for all clients.
Now hear this, loud and clear — such a limit per ton means a potential maximum monetary loss with a 32-ton gvw outfit, loaded to maximum permissible carrying capacity, of £88,000.
Responsible insurers therefore require, and in this they are supported by the expert brokers who know what is best for their clients, that such high-value loads must be garaged in a locked building or secure compound or warranted never left loaded and unattended — throughout the United Kingdom.
While on the complex subject of CMR liability, let is spell out clearly and unequivocally when the convention is believed to apply ; a 'haulier does not need to venture outside the boundaries of the United Kingdom to become involved in a CMR consignment.
A simple test is, as already mentioned, "On Wheels across Frontiers." You will readily see, therefore, that if you are asked to provide "traction only" and you send an antic unit into a dock complex to collect an unaccompanied trailer which has been "slaved" off a ro/ro ship you are immediately involved in the CMR chain and as you will know, or should know, of this situation your goods in transit liability policy must be so arranged as to provide you with indemnity for known UK CMR liability.
Every case, as we all know, too well, is not always so clear cut and in your book using this criteria of "On Wheels across Frontiers," CMR cover will not• be necessary—but can you be sure ? No, you cannot ! There fore, to cater for a situation where an operator unknowingly becomes involved in a transit or part of a transit, which is governed by CMR conditions you must make certain that your insurers have made provision to indemnify you in respect of "unwitting CMR."
Hazardous goods
Let us now turn to the question of hazardous goods or to be more explicit the commodities which have t h e greatest attraction for thieves and villains and for which most, if not all, reputable insurers provide only limited indemnity under their standard policies for goods in transit liability. These vary a little as between various underwriters, but as a general guide such a list could well contain the following : Wines, spirits, tobacco, cigarrettes, razor blades, antiques, jewellery, furs, watches, perfumery, radios, televisions, tape recorders and similar equipment, non-ferroi metals (in scrap, bar, pelle blank or ingot form), articl. made of or containir precious metal.
Liability for such proper is usually limited to £1,500 the aggregate any one vehic: load subject to the weigi value ratio 'appropriate to ti particular consignment, either RHA Conditions at £8( per ton or CMR at £4,000 p ton. Extensions for any or of these goods to a high. monetary limit can be arrang( within the scope of the bas conditions, ie if RHA (196 full loads of, say, wines up the maximum permissible loz of 22 tons •an indemnity £17,600 and any one vehic load could be provided.
This would suit many cust mers, but others with, hig value/low weight merchandil would not necessarily he ame able. While such traders a frequently quite happy accept the basic concept RHA conditions they C juest that the "ton clause" deleted from the monetary its and substituted for what known as a limit load, le [A (1967) but with condition deleted and substituted by, 7, a limit load of £25,000 any a vehicle. This means that in a event of a partial loss or leed total loss, the yardstick £800 per ton will not be lied when the claim Is adjusted but all other clauses will have had to be complied with as far as the insurance aspect is concerned.
Another method which can be adapted to suit the needs of the haulier's customers is for clause 12 to be amended from £800 per ton to, perhaps, £1,500 per ton for specific commodities which with a maximum capacity vehicle of 22 tons would necessitate a limit load of £33,000 any one vehicle. Having said all this, however, the haulier, in his own best interests, should understand clearly the difference between: 1, the "liability" for loss or damage to goods which he accepts under RHA (1967) conditions ; 2, the "liability" imposed on him under .CMR conditions, and 3, "all risks" insurance on the goods. All prudent . customers, that is the people responsible for arranging the transport of merchandise do in many cases and should, always, take care of the "all risks" cover. In the event of loss or damage occurring while in transit the customer first of all, and as a matter of course, makes reservations against the carrier.
This done, they then make a claim under their own all-risks policy. In most oases this is settled promptly and with a minimum of paper work ; the insurer having paid the allrisks claim then seeks whatever recourse may be available to him from the carrier under the terms of the carrier's conditions. A simple example would be : 20 cartons of fancy goods value £2,000, weight 1.25 tons being conveyed in a newt carrying capacity truck, which owing to an electrical fault, is totally destroyed by fire. The total value of the loss of goods £2,000. Liability of the haulier under RHA (1967) conditions 1.25 tons at £800 per ton £1,000, this being the maximum amount payable under the haulier's liability policy.
Smallish claim
With this example in mind, if, for commercial reasons, you decide to pay, say, a smallish claim for damage to a carton or short delivery of a package, be sure to check on the weight and pay only that amount for which you are strictly liable.
Sub-contracting is part of the life-blood of the road haulage industry, but in venturing into this field great care must be exercised in the selection of sub-contractors. Tell your subcontractors that they must accept the same liability as you have to your customers. And by telling I mean: put it in writing. Do make certain you employ only established sub-contractors, people known to you as sound and reliable. Make every endeavour to obtain a sight of their motor insurance certificates and goods in transit policies.
The safest method Is to ask your insurance broker to check these for you. He will if he is on the ball. The next precaution is to establish between yourself and your subcontractors the conditions between you. The best method is to write setting out the terms of a confirmation note which you should state will govern all work passed down by you. State further your intention to issue a confirmation bearing the aforesaid wording prior to collection of the sub-contracted load or accompanying the goods at the time of collection.
Where CMR traffic is concerned the liability of the subcontractor is statutory, whether or not a CMR consignment note has been issued. However, the prudent haulier who uses sub-contractors will not be wasting his time if he commits to paper that he may be passing down CMR traffic and warn the sub-contractor to arrange his insurances accordingly. In this day and age, there are several other conditions under which a haulier may be called upon to operate or which he may with advantage adopt, should he have any intention of diversifying into warehousing for reward including break bulk and distribution and/or freight forwarding. In such cases he may well decide to use either or both of 1, the National Association of Warehouse keepers Conditions (NAWK); 2, the conditions of the Institute of Freight Forwarders Ltd (IFF).
Finally, and if last, certainly not least, are the conditions of that very substantial • active and forward-looking limb of the road haulage industry, the British Assocation of Removers who issue their own very stringent conditions governing both transit and storage risks.
Good management
Remember that proper attention to detailed insurance arrangements and the adoption of recommendations by a specialist broker will save you a great deal of sweat, toil, tears and loss of sleep. What it all boils down to in the end is .good management and this means that all members of your organisation must be aware of their duty to act responsibly in any situation involving an insurance claim or potential claim.
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