Claim Blame

The shipping industry needs a comprehensive awareness on claims handling and must understand the importance of claims prevention

A healthy market requires that all marine industry sectors practice due diligence in their ordinary course of work. Many long standing medium and some small-sized enterprises in the UAE have successfully conducted their business for years without having to worry about professional insurance or affording the protection of national and international associations. Yet standards still need to be raised in line with the rapid increase of volumes that are entering the region.

Konstadina Kottoros, LL.M, is Legal Consultant (Corporate & Shipping Dept.), Fichte & Co. Legal Consultancy, Dubai

By following a few simple precautions, operators can considerably minimise their liability and strengthen their credibility in the market.

Claims Handling Service providers in the marine industry must always work with the notion that goods handled are another person’s income and the level of service provided will very much depend on the internal structure of a company. They should also remember that a potential claim against companies who handle goods and cargo as part of their core service can arise at any time, and businesses should be duly prepared for the occasion.

Thirdly, any work and decisions undertaken must be conducted with the insurer’s interest at all times.

Do: If a company has insurance in place and a claim has been lodged against any forwarder, warehousing facility, hauler, shipping line and other subcontractors, it is crucial that this is immediately communicated to the insurance company and that all parties to the transit have been put on notice. A preliminary notice of claim and its timing will govern whether a claim is valid and will assist with establishing the true defaulting party; however, this will not eliminate your responsibility towards your customer. The client will have contracted control and care of the goods over to his agent, whom, as far as the customer is concerned, will remain directly responsible as principal for any damage or loss to his property.

A preliminary notice of claim is simply a notification of loss or damage to the cargo in order to preserve the right to claim against a party in the future and to recover any loss subsequent to a claim. If damage is discovered after the goods have been delivered and the damage was not apparent upon receipt, the claim will not be entertained and will immediately be rejected by the insurers.

Don’t: Some companies have misconceptions that they can claim for a loss at any time, but if procedures are not followed and standards are not met the claim will either be substantially invalid or time-barred. Neither is it sufficient to claim against one party when there are a string of parties involved in the transit and handling process; and if it is eventually resolved that that specific party was in fact not responsible for the damage or loss, you will forever lose the right to claim against other contractors.

Another crucial word of advice when assisting a claim on behalf of a customer, the principal party must not admit liability unless the liability is very clear. Also, assisting a client in recovering his loss is a matter of courtesy and business efficacy and does not indicate or imply acceptance of legal responsibility.

Claims Prevention Alternatively, individuals or companies operating without any protection must at least have internal workable procedures in place which would ultimately minimise the number of claims that are likely to arise. Common forms of loss in multi-transit shipments extend from physical damage, shortage and non-delivery of goods, pilferage to consequential delays resulting in commercial damage such as non merchantable goods, loss of expected profit, business chance and alternative transportation costs.

Carefully devising a system of claims prevention would most certainly have a positive impact on the entire supply chain and will significantly reduce the number of claims prone to the industry. In order to minimise loss, adequate measures must be implemented and followed if such a system is to be successful. It is advisable to carry out a transit test to determine any delays, damage or pilferage and whether any serious measures need to be taken.

Documentation should continuously be improved to identify and/or eliminate liability, and each claim should be recorded in a comprehensive claim report specifying the parties, damage, claim amount, claims number and date along with any time bars that may be applicable that could potentially bar your claim.

Quality control can always be improved, such as transport services, cargo handling and packaging. Packaging, in particular, can be analysed for any defects and adequacy of handling and stowing, its compatibility with the goods being carried, weather exposure likely to be encountered and breakage. Packaging and correct labelling to assist in safe handling, is of crucial relevance; and the right type of material, size and strength has to be assessed in accordance to the nature of the goods and weight carried. Failing to do so could render the goods dangerous if packaging and labelling regulations are not complied with. Labelling is necessary for communicating the type of cargo contained inside the package and the level of handling required for safety purposes and for any special transport and storage requirements.

In order to prevent pilferage, transport companies must aim to improve security throughout entire transit; warehousing must be constantly manned at all times during working hours and CCTVs should be installed to monitor activities after working hours. Additionally, a security system can be connected to and monitored by the security company in question. Pilferage most commonly occurs while the goods are being trucked long distance and where trucks are left unattended. The transit test will also determine which areas are of potential hazard and if packaging must be marked clearly for identification purposes.

Staff training will ensure the right people are allocated for the right job and that all personnel have adequate claims awareness to handle matters eligibly and diligently. Staff training on claims is imperative at all levels within an organisation as most operations are conducted at the lower tiers of hierarchy. For instance cargo handling and stowage at ports or warehouses can be conducted with care and damage could be minimal provided employees have been exposed to the right type of training by way of safety awareness, internal procedural rules, code of conduct and sufficient training in operating heavy machinery and equipment.

Conclusion Above are only a few but very important factors to consider when handling a claim and enforcing effective prevention measures. The shipping and logistics sector is continuously exposed to a number of perils concerning multimodal shipments, such as weather, port/transit delays and negligence of subcontractors – all of which are completely beyond the physical control of the agent. Ultimately, any form of loss can be controlled legally by effecting suitable insurance to cover unforeseeable damages while synonymously limiting your liability.