Shippers hear the same assurance from carriers every day: “Don’t worry, you’re covered.” It’s reassuring until something actually goes wrong. When a shipment is delayed, damaged, lost, or caught in a headline-making disaster, most companies learn the hard way: carrier liability is not the same thing as cargo insurance.
Supply chains depend on predictable deliveries and limited financial risk; don’t learn the hard way. You can’t afford not to know the difference between carrier liability and cargo insurance. Let’s take a look at carrier liability vs cargo insurance and the differences.
Why the Distinction Matters Today
The last two years have been some of the most disruptive in global trade. This includes:
- Fires aboard major container vessels, including the Fremantle Highway car-carrier fire and multiple incidents attributed to lithium-ion batteries.
- Misdeclared hazardous materials, causing smoke events on Ro-Ro vessels.
- Rising cargo theft, especially in high-value corridors moving electronics, apparel, and consumer goods.
- Severe weather events, causing container stacks to collapse on several Asia-to-U.S. routes.
Carrier liability didn’t cover the majority of these incidents, but cargo insurance did. We break down the difference between the two so you know how to safeguard your shipment against unforeseen risks and losses.
Carrier Liability Isn’t Insurance
Carrier liability is a legal framework that limits how much a carrier is required to pay if they are proven responsible for loss or damage. That last part matters. Liability only applies if you can successfully prove fault, and even then, the payout is typically capped at levels far below shipment value.
Here’s what most shippers don’t realize:
- Ocean carriers often limit liability to $500 per package or container, not per unit inside the container.
- Airlines typically pay around $35 per kilogram (approximately 2.205 pounds) under the Montreal Convention.
- Trucking carriers often pay cents per pound depending on tariffs.
If your container or pallet contains $40,000 worth of electronics and weighs 300 pounds, in all three scenarios—ocean, air, and ground—carrier liability won’t come close to making you whole.
When Liability Doesn’t Apply At All
Many events fall outside carrier responsibility:
- Fire not caused by carrier negligence
- Acts of God such as storms, rough seas, or flooding
- General Average events such as vessel grounding or machinery failure
- Inherent vice, where cargo damages itself
- Theft without proven carrier fault
- Misdeclared cargo by another shipper
- Strikes, riots, or civil commotion
- War-related events
In recent cargo-fire incidents, including the ONE Henry Hudson, carriers declared General Average. This requires all parties to share emergency response costs regardless of fault. Without insurance, shippers must pay before accessing their own cargo.
Carrier liability was never designed to fully compensate shippers. It was designed to protect carriers from devastating financial exposure.
Cargo Insurance Protects the Shipper, Not the Carrier
Dedicated cargo insurance is a separate, full-value policy that covers the commercial value of the shipment, freight costs, and often duties. Instead of capped payouts and legal disputes, you receive direct coverage for common loss scenarios.
A full-value cargo insurance policy generally includes protection against:
- Total loss
- Partial loss
- Theft and pilferage
- Fire and smoke damage
- Water damage
- Weather-related loss
- Container collapse
- Rough handling during loading and unloading
- General Average events
When insurance is structured correctly, you also gain faster claims processing, better documentation support, clear valuation formulas, lower financial exposure, and greater leverage during disputes.
Cargo insurance is built to protect your supply chain, not the vessel owner, airline, or trucking company.
A Clear Comparison: Carrier Liability vs Cargo Insurance
| Category | Carrier Liability | Cargo Insurance |
|---|---|---|
| Who it protects | The carrier | The shipper |
| Coverage basis | Only if negligence is proven; limited by law | Full commercial value of the goods |
| Typical payout limits | Capped by weight or package | Full value including freight and uplift |
| Covers fire | Only if carrier is at fault | Yes, even without negligence |
| Covers General Average | No, shipper pays upfront | Yes |
| Covers weather damage | Often excluded | Typically covered |
| Covers theft | Limited or excluded | Covered in most policies |
| Claims timeline | Slow | Faster |
| Documentation support | Minimal | Full support |
| Cost | Free but limited | Low cost relative to exposure |
Modern Risk Demands Modern Protection
Treating carrier liability as real insurance is a gamble most companies don’t realize they’re taking. In a global environment where disruptions are increasingly common, relying on liability is like driving without your own auto insurance and hoping others always admit fault.
With lithium-ion batteries, higher container density, longer transit lanes, extreme weather, and port congestion, companies without full-value cargo insurance face limited recovery and long delays. Those with insurance see faster resolution and significantly higher recovery.
The Bottom Line
Full-value cargo insurance is one of the simplest and lowest-cost ways to stabilize your supply chain and protect your bottom line. When a shipment goes sideways and every shipper eventually encounters this; you want coverage built for your protection, not the carrier’s.
Don’t leave your shipment unprotected. Contact Zarach Logistics to learn how our cargo insurance, EZ Protect solutions can safeguard your cargo against unforeseen risks and losses. It’s one more way we keep freight moving with confidence.
