Delivered goods lost: the carrier is liable only up to a limit – do you need cargo insurance?

A webshop sends twenty camera lenses, each worth several hundred thousand forints, by courier; the parcel disappears. The courier service expresses its regret and pays an amount that is a fraction of the invoice. A machinery dealer sends a control unit to a customer by carrier, and it gets smashed on the way; the carrier's insurer calculates on the basis of gross weight and offers a few tens of thousands of forints for a twelve-kilogram part worth ten million forints. As a broker, what I see is that these two stories happen at some point to almost every trader, webshop and small haulier, and the surprise is the same every time: “but the carrier is insured”. Yes – only not for the value of the goods, but for its own liability, which is limited by law. This article is about the difference between the two covers – carrier's liability insurance and cargo insurance – and about why it is hard for a courier company to get cover at all.

Why is the carrier liable only up to a limit?

The carrier is liable for loss of, destruction of and damage to the consignment from the moment it takes over the goods until delivery – but not without limit. For international road haulage, the yardstick is the CMR Convention (promulgated in Hungary by Law-Decree No. 3 of 1971; the SDR-based limit was introduced by the 1978 Protocol to the Convention, to which Hungary later acceded – the promulgated text of the law-decree still contains the old gold-franc limit): under Article 23, compensation may not exceed 8.33 units of account per kilogram of gross weight short, where the unit of account is the Special Drawing Right (SDR) of the International Monetary Fund, whose forint exchange rate changes daily. For machines weighing a tonne or more, this may come close to the value of the goods, but for a kilogram of electronics it falls far short of it. In addition, under the CMR the carrier is relieved of liability if the loss was caused by the fault of the claimant, by the inherent nature of the goods or by circumstances the carrier could not avoid; the limit falls away only if the carrier caused the loss wilfully or by a serious fault equivalent to wilful misconduct – and as a rule, it is the injured party who has to prove this. For domestic road haulage, the governing rules are the carriage provisions of the Hungarian Civil Code (Ptk.) and Government Decree 120/2016 (VI. 7.) on road haulage contracts; Section 19 of the decree calculates compensation from the value of the goods at the time they were taken over, but for the upper limit it refers to the measure in Article 23 of the CMR, which can be exceeded only if the conditions set out in Article 23 (a declaration of value or of special interest) are met. Within these limits, the general terms and conditions of carriers and courier services typically tie liability to a fixed amount per parcel or to a per-kilogram limit, and they accept a higher value only against a separate declaration of value and a surcharge. The exact cap can therefore only be read from the statutory ceiling and the carrier's terms together – not without your own consignment note and the carrier's general terms and conditions.

Carrier's liability insurance: whose policy is it?

CMR insurance (international) and domestic carrier's liability insurance (BÁF) are the carrier's contracts. They do not insure the goods but the carrier's legal liability: the insurer pays when, and as much as, the carrier is obliged to answer for under the law and the contract of carriage – that is, up to the per-kilogram or per-parcel limit, and only if the carrier is not relieved of liability. Hungarian policy conditions typically contain further exclusions and obligations: theft from a vehicle left unattended, parking in unauthorised places, goods requiring refrigeration carried without suitable equipment, cash, jewellery, works of art, use of a subcontractor without notification – with content that varies from insurer to insurer. From the point of view of the goods owner, two things follow from this. First, the fact that the carrier is “insured” does not mean that the value of the goods is covered. Second, the claim has to be pursued against the carrier, who passes it on to its insurer – the dispute belongs to the carrier, but the time it takes belongs to the trader. The article on certificates of insurance also applies in reverse: on the certificate you request from the carrier, look at the limit and the exclusions, not at the insurer's name.

Cargo insurance: for the value of the goods

Cargo insurance is taken out by the owner of the goods – the sender or the buyer, depending on who bears the risk of loss during transport – and it covers the value of the goods: the invoice value, the freight cost and, depending on the insurer, an anticipated profit margin. There are two basic types: named-perils cover (vehicle accident, fire, robbery) and all-risks cover, which pays for any external event not excluded in the policy conditions; the typical exclusions here are inadequate packaging, inherent defects of the goods, loss of value due to delay, and war and strike risks, which can be added by a separate clause. The key point: the insurer pays up to the value of the goods regardless of the carrier's fault, and after payment the claim against the carrier passes to the insurer under the insurance rules of the Civil Code. It can be taken out for individual consignments (single-shipment cover) or as an annual open cover, under which all the company's consignments are covered on the basis of its turnover, with declaration-based or turnover-based settlement. For a company trading in low-weight, high-value goods – electronics, spare parts, pharmaceuticals, jewellery, measuring instruments – this cover, not the courier's “insurance”, is the real answer to the delivery risk described in the insurance questions of webshops.

Courier companies and your own goods: two difficult cases

On the other side stand the small haulier and the courier business. In market practice, several Hungarian insurers do not write carrier's liability insurance for parcel-delivery, courier and “travelling salesman”-type activities at all, or do so only on narrow terms: many small consignments, frequent theft, unattended vehicles, unreliable proof-of-delivery documentation – an unfavourable picture in risk assessment. Where cover is available, the conditions typically include per-parcel and per-vehicle sublimits, strict parking and handover rules, and a precise description of the activity; if the company appears in the policy as “domestic haulage” but is in fact a door-to-door courier service, this raises a disclosure and change-reporting issue when a claim arises. If you work as a subcontractor for a large courier network, the network's contract specifies what cover you have to prove – this is worth reading before taking out the policy, not after the loss. The other difficult case is your own goods carried in your own vehicle: the property insurance for your premises protects the stock at the location stated in the policy, goods on the road typically fall outside it, and MTPL (compulsory motor third-party liability insurance) does not pay for the cargo carried, because the Gfbt. (the MTPL Act) excludes from cover damage to items carried in the vehicle that caused the damage, other than items for the passengers' personal use. In Hungarian policy conditions, the solution is cargo insurance taken out for your own transport, or an extension of property insurance beyond the premises, with a limit; the asset boundaries in the article on leased or own equipment apply to goods here as well.

When a loss occurs: the deadline for reservations and the paperwork

With both covers, documentation is decisive. Under Article 30 of the CMR, apparent loss or damage must be notified to the carrier in writing at the latest on delivery, and loss or damage that is not apparent within seven days of delivery, Sundays and public holidays excepted – otherwise the presumption is that the consignment arrived in the condition described in the consignment note; domestic terms follow the same logic, with their own deadlines. In practice this means: inspect the parcel in the courier's presence, note any damage on the consignment note or the delivery device, photograph the packaging and the contents, and keep the invoice, the consignment note and the proof of dispatch. With cargo insurance, your own insurer needs the same documents; the primary route for reporting is the insurer's claims line, within the deadline set in the policy conditions; in a case that gets stuck or disputed I help where I can, but pursuing the claim against the carrier remains the company's decision and task. The exclusion logic of the article what business insurance covers holds here too: the insurer pays only for what is an insured event under your contract.

What should you do now?

List what you have transported by others and what you transport yourself: the average and largest consignment value, weight, route, and who bears the risk of loss towards the buyer (this is a question of your general terms and conditions and delivery terms). Ask your carrier and courier service for their terms and conditions, and find in them the liability limit and the option of declaring a value. If there is a large gap between the limit and the value of the goods, an annual open cover for cargo insurance is the cover worth requesting quotes for; if you work as a carrier, it is worth starting with a precise description of your activity and your clients' requirements. If you contact me with this information, I prepare the comparison of the offers and the paperwork – the decision is yours.

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Sources

• CMR Convention, Article 23(3) and (7) – 8.33 units of account (SDR) per kilogram; text of bill T/16306 on the promulgation of the Protocol (Hungarian National Assembly)
• Government Decree 120/2016 (VI. 7.) on road haulage contracts
• Hungarian Civil Code (Ptk., Act V of 2013) – rules on the contract of carriage and on the insurer's recovery claim
• DHL – Limited liability in freight transport: why carrier liability does not cover the value of the goods
• Law-Decree 3 of 1971 (CMR Convention) – Art. 23(3): promulgated gold-franc limit; Art. 30(1): written reservation for hidden damage within seven days
• MTPL Act (Gfbt., Act LXII of 2009) Section 15(a) – exclusion of damage to items carried in the at-fault vehicle

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