What is Loss of Indemnity in Shipping?
Loss of indemnity in shipping refers to a situation where a cargo owner or shipper loses their right to claim compensation (indemnity) under an insurance policy or contract of carriage due to a breach of terms, misrepresentation, or other disqualifying actions.
In shipping, indemnity is typically the financial compensation paid by a carrier or insurer when goods are lost, damaged, or delayed. Losing indemnity protection means the shipper or cargo owner may have to absorb the full cost of the loss.
Common Causes of Loss of Indemnity
- Failure to declare hazardous cargo
- Improper or insufficient packaging
- Incorrect or missing documentation (e.g., bill of lading discrepancies)
- Violation of carrier or insurance terms
- Misrepresentation of cargo value or nature
- Failure to file a timely claim under the policy
Why It Matters
Loss of indemnity coverage can result in significant financial losses, especially in cases of high-value or sensitive cargo. Understanding your responsibilities under the terms of sale, shipping contract, and cargo insurance policy is key to protecting your goods in transit.
Example in Practice
A shipper sends undeclared flammable chemicals in a general cargo container. A fire damages the shipment. Because the cargo was not properly declared or labeled, the insurance provider denies the claim, resulting in loss of indemnity.
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