b'AdvertorialCLEARING THE HURDLES:HOW TO SUCCESSFULLY NAVIGATE PROJECT CARGO RISKSby Andrew JohnsonAccount Executive, Roanoke Insurance Group Inc.Imagine you have spent six months planning and bidding the transportation of a large piece of equipment. The shipment travels from origin to port and is loaded onto an awaiting vessel for the ocean voyage to the destination port. The equipment is offloaded to a railcar at the destination port, surveyed, and tied down with no apparent damages. Upon arrival at the rail siding, you are notified of paint transfer and un-determined damage to the equipment. Your first step is to notify the cargo owner so they arent surprised. Next comes a scramble to review the terms and conditions of all the contractors and the language of all signed agreements. And of course a notification has to be sent to the insurance company to start the claims process. If navigating through this maze sounds familiar, you arent alone. Welcome to the intricacies of project cargo risk management.The Complexities of Project Cargo Risk standard terms and conditions found in legal liability coverage. Project cargo can be a complicated risk to insure, and there areTherefore, the contract terms must beagreed to by underwriters in a number of factors that a transportation intermediary should con- writing and premium must be paid. One instance where this is typ-sider when seeking coverage. Master Service Agreements (MSA)ically occurs is when the shipper has a separate cargo insurance are often integral to project cargo, and these MSAs may includepolicy in place and desires to have their cargo insurance deductible complex contract language, sometimes requiring predeterminedpaid in case of damage. This is called the insurance of a deductible loss amounts in the form of liquidated damages and consequentiallayer or a self-insured retention layer. These layers are tough to damages.These terms are difficult risks to insure. Project cargoplace in the insurance market as it is a contract requirement.moves often involve unconventional modes of transportation withSub-Contractor InsuranceDue Diligence is Essential multiple connecting conveyances. Shipments may require millionsA practical risk management action that every transportation or tens of millions of dollars to execute, and these costs may beintermediary should take is to verify the insurance of all sub-con-part of one move or accrue over the course of many moves. Uncon- tractors and look for gaps in coverage. Its not enough to know that ventional modes of transit, complex contract terms, and the highthe sub-contractor has a policy on file. Are the policy limits ade-value of the cargo are exacerbated by the current hard insurancequate to cover the risk of a high value project cargo move? What market. It falls to the transportation intermediary to find the bestare the coverages that the sub-contractor has in place, and what way to navigate the risks of insuring project cargo. exclusions in their policies might impact a potential loss? These The First HurdleContract Risk are questions that need to be answered before the transportation Thecontract,orpurchaseorder,istypicallythefirstitemtointermediary signs a sub-contractor, not after a loss occurs. Deter-comeacrossthetransportationintermediarysdeskforbothmining that appropriate coverage is in place with adequate limits new and repeat business. Before signing a MSA or contract, themay involve reading the actual policy language of the contractor. transportation intermediary should consult with professionals whoIt is highly recommended that an experienced insurance broker understand the dangers inherent in contract language. A trustedor legal counsel reviews policy language with the transportation insurancebrokerwithexperienceinthelogisticsindustryandintermediary.transportation attorneys are highly recommended. It is critical toThe transportation intermediary may need to have the sub-con-understand what risks are being assumed in any contract and totractor obtain additional insurance coverage or increase the limits properly evaluate what risks you can transfer and what risks will beon their existing policies. All sub-contractor insurance policy limits carried by the transportation intermediary in the contract language.should also be provided to the cargo owners and transportation Specific clauses that transportation intermediaries should be par- intermediarys insurers to ensure there are no issues or language ticularly alert for include Hold Harmless, Liquidated Damages orthat would limit subrogation in case of damage. Subrogation is the Consequential Damages, and Penalties. insurance companys right to legally pursue parties responsible for Some contract risk can be transferred from the transportationloss or damage after they pay a claim. Waivers of subrogation may intermediary to an insurance provider via a cargo legal liabilityimpact the amount of coverage an insurance company will offer. policy, but typically contractual liability is excluded as it is above 14 Advertorial'