Brokers, forwarders & NVOs. (multiple articles on customs brokers, the Customs Service and non-vessel operations)

Forwarders' Achilles heel

Some freight forwarders, especially small ones, have an Achilles heel: their liability insurance coverage.

"It's a misconception that a forwarder can pass his claims to the carrier," said Desiree M. Mizerek, director of development for Thomas Miller (America) in Chicago.

"Whether a container is washed overboard or an air freight shipment is inadvertently misdirected, a forwarder may be held accountable for physical damage and/or loss of market," she said. "Either scenario may prove to be time-consuming and costly.

"If a shipper is smart, he will ask the forwarder if he is insured, and if the forwarder can offer cargo insurance," Mizerek said. "Then the shipper can be fully indemnified for loss of freight by the forwarder. The forwarder should also list the limits of liability on the back of the bill of lading."

A few forwarder organizations, such as the British International Freight association and the Singapore Freight Forwarders Association, require members to have both legal liability and errors-and-omissions coverage.

FIATA, the international association of forwarding groups, does not require such coverage for its members. There's no U.S. legal requirement for it, and many forwarders operate without it.

Some shippers carry separate insurance policies for different parts of their business, and in the process leave out important liability coverage, such as errors and omissions.

"Forwarders who take on new incremental activities in their business must also be aware of the incremental liabilities that follow," Mizerek said. "Otherwise, they'll have gaps in their coverage."

Omnibus policies that include liability coverage are available from companies such as Intercargo Insurance, based in Schaumburg, Ill., and the Through Transport Club of the United Kingdom.

Intercargo recently began offering forwarders a total coverage policy, Integrated Transit …