In the shipping business, there exist an array of different insurances available to protect your freight brokerage company from losses and lawsuits. One type of policy not required by law but that can help protect your brokerage company is contingent cargo liability. Brokers, who act as third-party freight brokers for goods, can be held liable for any damage or losses occurring to those goods during shipment. If the shipper refuses to pay for the damages to the goods, then your brokerage company could be sued for the losses. Contingent cargo liability insurance protects your brokerage firm from lawsuits resulting from claims made by the owner of the goods.
An example of when this kind of insurance could come into play is if you, as a freight broker, negotiated a shipping contract for the owner of a container of sneakers from Hong Kong to California. If, as the cargo ship crossed the Pacific, the cargo carrier encounters a storm, that storm could knock cargo containers overboard, including yours. If this happens, someone has to pay for those lost sneakers. If the ship’s insurance company refuses to honor the loss claim filed by the owner of the sneakers, the sneaker’s owner could file a lawsuit against your brokerage company. This claim would activate your supplemental policy of contingent cargo liability. Brokers without this supplemental policy would have to pay the damages out of their pocket.