The Chain of Responsibility in Cargo Claims
Kerryn Woonings from Crawford & Co (our Lloyd's Agent in Sydney, Australia) identifies key points that every good Marine cargo surveyor should know.
Sometimes, trying to work out who is who in the zoo of cargo claims is a difficult exercise. It may not always be straight forward, but it is important for every cargo surveyor to have a solid understanding of the chain(s) of responsibility.
Understanding the role of all the parties in a transport chain can properly identify matters, such as:
- whether any party has participated in a fraud
- establishing who is ultimately responsible for the damage – both actually, and in contract
- establishing the entire quantum of the claim.
Regardless of who a cargo surveyor may be representing, each of us should endeavour to find out, and understand, all the parties involved in the transit. They are generally broken down into the following areas:
- Cargo interests: The person or entity that has an interest in the goods (i.e. the owner of the goods, the purchaser, or the seller)
- Logistics provider/Principal carrier: The party who arranges the transport, but may not necessarily be the party who actually carries the goods (i.e. a freight forwarder or linehaul operator)
- Sub-contractor: Any person or entity that is contracted by someone else to perform a task. In the case of a freight forwarder, this could be a local courier, or in the case of a linehaul operator, this could be another trucking company
- Actual carrier: Any person or entity that actually carries the goods.
Each of the various parties above are likely, at some point in the transit chain, to enter into a contract that sets out each of their rights, responsibilities and obligations relating to, for instance, how the goods are to be packed, how they are to be carried, and what protections are available to each party if something goes wrong.
From a surveyor’s point of view, understanding your client’s role in the chain of responsibility should limit and direct your enquiries regarding proof of loss, and addressing liability matters (if asked to do so). If a surveyor does not understand the basic principles of chain of responsibility, there is a risk that enquiries will be directed to the wrong party, which can potentially prejudice your client’s position in any claim.
Set out below are two case examples that we have been involved with at Crawford, where properly understanding the chain of responsibility has allowed us to protect our client’s interests and to also be cautious in handling a direct instruction.
Case study one
The first case involved a consignment of frozen seafood, which was imported into Australia from Vietnam. We received contact from a local seafood agent, who was purportedly responsible for arranging import of the goods for their client, a local wholesale seafood distributor.
When initially reviewing the relevant cargo documents – in particular the bill of lading – we noted that the agent was not listed as a party on the bill of lading; the Consignee was another seafood agent. We queried with our client whether they were related to the party named on the bill of lading, and were advised that they acted as a ‘common agent’ for the named Consignee, as they did not have an appropriate import permit for the goods. We subsequently contacted the named Consignee, who advised that they were not aware their name was being used for importing this particular consignment. This immediately raised a red flag for us, and we continued to approach the matter with caution.
We noted that the agent had issued an invoice to the distributor, however, had not provided us with a copy of the Commercial Invoice from the Vietnamese supplier. This Invoice was subsequently provided, and it was immediately apparent that the invoice had been issued to the named Consignee on the bill of lading.
Upon closer examination of the two invoices, it was immediately obvious that save for the named parties and company logo, the two documents were identical, indicating the possibility that the local agent may have either created both, or modified one of the documents.
Additionally, there was no invoice or other document that confirmed that title had passed from the named Consignee to the local agent.
After thorough examination of all the documents, we contacted the local agent, to discuss the concerns we had regarding the chain of documents, and that, as we could not establish proper title to the goods and were concerned about the possible import of goods without proper licence, we were reluctant to complete the instruction.
In this particular case, properly understanding the chain of responsibility allowed us to identify a possible fraud and remove ourselves from the situation at the earliest possible opportunity.
Case study two
The second case involved a consignment of steel that was involved in a heavy vehicle rollover. Our client was the liability insurer of the principal transport contractor. The actual carrier (with whom our client had a contract) had also appointed a surveyor to investigate the circumstances of the incident and a joint survey was conducted to assess the damaged material.
At the time of joint survey, it was agreed that the cargo interest (the steel manufacturer) would undertake actions in mitigation and quantify a claim which would then be submitted to our client, to be assessed in accordance with the Services Agreement that was in place between the parties. Subject to receipt of the claim, our client would then pursue the actual carrier for an indemnity.
In this particular case, the surveyor for the actual carrier appeared to circumvent the chain of responsibility and directly put the cargo interest to proof in relation to the quantum of the claim. Naturally, the cargo interest contacted our client who, understandably, was not looking to ‘invite’ the cargo interest to claim. The actual carrier’s insurer purportedly offered settlement directly to the cargo interest (apparently on the surveyor’s recommendation), even though no cargo or contractual documents had been provided.
The actions of the actual carrier’s surveyor in this instance made it apparent that there was a lack of proper understanding of the chain of responsibility, which resulted in frustration from all other parties in a situation where a quantified claim had not yet been presented. Had the proper chain of responsibility been clearly understood, the correct recommendation of the surveyor would have been for their client to maintain a low profile, and not invite parties to claim.
Historically, insurance companies have favoured the appointment of ex-Master Mariners as marine surveyors (hull or P&I) for inland transit claims as much as ocean voyages. In our experience, such surveyors can often lack understanding of proper chain of responsibility which, as the above examples show, can lead to the possibility of a potential fraud being overlooked or missed, or the possibility of an insurer paying a claim for their client when their client may not be contractually obligated to do so.
It is critically important – regardless of the nature of the cargo claim – for each marine cargo surveyor to properly understand and apply chain of responsibility rules when investigating cargo claims to insurer their own interests and reputation are properly protected, and those of their clients.