Forward, Summer 2016 Issue

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AfA Special Features
34 Forward Magazine Q Summer 2016 Airforwarders Association
Intermediary may find themselves exposed
with no protection via insurance.
1. The BCO misstates VGM on an export
and transmits a false VGM which is
less than actual VGM. The container is
involved in a bodily injury or property
damage claim and the BCO’s general
liability insurer denies coverage citing that
the claim was not a fortuitous occurrence.
2. The BCO acting as importing knowingly
accepts overweight containers from its
overseas supplier and one such container
is involved in a bodily injury or property
damage claim. The BCO’s general liability
insurer denies coverage citing that the
claim was not a fortuitous occurrence.
3. The Transportation Intermediary
knowingly accepts incorrect VGM
documentation and am overweight
container is involved in a bodily
injury or property damage claim. The
Transportation Intermediary’s general
liability insurer denies coverage citing that
the claim was not a fortuitous occurrence.
4. A third party BCO seeks to recover
consequential losses from an NVOCC
who consolidated individual BCO
shipments into an overweight container
and knowingly transmitted inaccurate
VGM. The Transportation Intermediary’s
Professional Liability Insurance and/or
Cargo Liability Insurance would likely
deny the claim citing an exclusion similar
to one of these which has been extracted
from the most common Professional
Liability and Cargo Liability Insurance
forms in the US market. Example 1,
Exclusions, this policy does not apply
to any claim arising out of dishonest,
criminal, fraudulent, malicious, or
knowingly wrongful act of any insured
or willful violation of any ordinance.
Example 2 Exclusions, this insurance
does not cover: Losses due to infidelity,
conversion, or dishonest acts of the
Assured, or the Assureds’ employees.
5. A BCO seeks to recover a loss via their
cargo insurer following a container/
truck overturn, container floor collapse,
with a container the BCO loaded. The
cargo insurer may try and deny the
claim citing improper packing or
willful misconduct.
6. If fines and penalties become part
of SOLAS VGM enforcement, most
intermediary policies will not cover fines
and penalties if they are assessed directly
against the transportation intermediary.
Depending upon the circumstances,
fines and penalties imposed upon a
shipper for negligent actions caused by
the intermediary would likely be covered
under the intermediary’s professional
liability policy.
Best Practices for BCOs and
Transportation Intermediaries
Both BCOs and Transportation
Intermediaries must take their
responsibilities for SOLAS VGA
compliance seriously and be able to
evidence a process that places accountability
on the individuals responsible for this task.
BCOs and Transportation Intermediaries
have a shared responsibility and are co-
dependent on each other for full compliance
so there should be full transparency as to
the responsibilities of each entity.
Some considerations:
1. Transportation Intermediaries should
broaden BCO indemnification agreements
in their Terms and Conditions of Service
to address SOLAS VGM and BCOs may
want to consider incorporating reference
SOLAS VGM compliance in their own
Master Service Agreements. Insurers
must be more diligent at reviewing TI
Terms and Conditions as part of their
underwriting process as this will serve to
help insurer and insured minimize losses.
2. The traditional silos of risk management
and trade compliance need to come
together on SOLAS VGM to ensure that
all parties understand their responsibilities
and the possible consequences of less than
complete compliance.
Risk management within BCO and
Intermediary companies need to reinforce
the importance of taking a risk vs. reward
view on activities within the company to
avoid the price and price only decision of
freight and logistics vendor selection.
[1] Richard Williams and Mark Adams of the
Mercatus Center, George Mason University
discuss the impacts of too many regulations on
companies that simply cannot properly comply
with all of the regulations they are supposed to
follow. See Regulatory Overload –Mercatus on
Policy No. 103 February 2012,http://mercatus.
org/sites/default/files/Regulatory_Overload_
WilliamsAdams_MOP103.pdf
[2]
results/1650000-settlement-truck-plunges-off-
bay-bridge-at-s-curve/