What Is the Liability of the Carrier for Cargos in Their Care?
When cargos are under the care and custody of a carrier, responsibility for any loss or damage becomes critical. The process for handling such cases typically unfolds as follows:
- Damage Occurrence: Cargo may be either insured or uninsured.
- Uninsured Cargo:The carrier settles by paying the cargo owner 50-60% of the cargo’s value.
- Insured Cargo:The cargo owner obtains a damage certificate from the transporter and submits it to the insurance company to claim compensation.
- Insurance Recovery:After compensating the owner, the insurance company appoints recovery agents to pursue the transporter for reimbursement or files a legal suit.
- Settlement Issues:Some carriers settle amicably, while others refuse payment to the insurance company.
- Legal Action:If no amicable settlement occurs, the insurance company may file a lawsuit against the carrier.
Legal Framework: Carriage By Road Act 2007
The Carriage By Road Act, 2007 governs the liability of common carriers in India.
- Section 10:
Carrier liability is limited to the value, freight, and nature of the goods unless a higher rate is mutually agreed upon. - Section 11:
Carriers may charge higher rates for riskier shipments if they display a written notice of such charges at their business premises in English and the state’s vernacular.
Key Highlights:
- Liability is generally limited based on cargo value and freight under normal conditions.
- For risky shipments, carrier liability can be contractually adjusted.
- Mandatory display of higher rate notices is required to enforce higher charges.
Common Points of Confusion
- Some transporters believe their liability is capped at 10 times the freight paid or payable, a figure mentioned in Section 12 of the Carriage by Road Rules 2017but not in the Act itself.
- If a rule contradicts the Act, the Act supersedes the rulesince it is a parliamentary law.
Judicial and Practical Scenario
Since the implementation of the Act in 2011, no court has officially limited carrier liability to 10 times the freight. Despite many court cases regarding carrier liability, this specific limit has not been upheld as a precedent.
Can Insurance Companies Approach Consumer Forums?
There has been debate over whether insurance companies can file claims in Consumer Forums against carriers.
- Earlier, some cases were admitted.
- The Supreme Court ruled that insurance companies are not consumers under the Consumer Protection Act and thus cannot file such claims.
- However, a notable exception is a 2021 case where the State Consumer Forum ruled in favor of Bajaj Allianz General Insurance Co Ltdagainst Globe Eco Logistics Pvt Ltd. The forum considered the cargo owner and insurance company as consumers and awarded damages totaling Rs. 75 Lakhs plus interest.
Practical Recommendations for Transporters
Based on over 20 years of experience handling insurance recovery cases, the following is advised for the transport industry:
- Reserve funds for potential liabilities.
- Carefully issue damage certificates to insured parties as this establishes liability.
- Aim to settle disputes amicably with insurance companies at the earliest possible stage.
- Transfer risk to insurance companies by purchasing Carrier’s Legal Liability (CLL) Insurance.
Carrier’s Legal Liability (CLL) Insurance Policy
Previously, the CLL policy was limited or unavailable to small carriers, with many exclusions making claims difficult to recover.
At BimaSathi, we have worked with insurers to customize comprehensive CLL coverage:
- Coverage for all types of commodities and vehicles.
- Includes hired vehicles, third-party trucks, hazardous cargo, and oversize/over-dimensional cargo (ODC).
- Eliminates the need for carriers to settle directly with insurance companies or recovery agents.
- The insurer handles all claims and recoveries.
For more details on Carrier’s Legal Liability Insurance and how it protects your business, contact us at:
Mobile: +91 9999682324
Email: abad@bimasathi.in
