What Every Freight Forwarder Needs to Know About Subrogation in Insurance

What is subrogation in insurance?

Subrogation is a process where an insurance company steps in to take the place of an insured party after they have suffered a loss. This occurs when the insurance company pays out a claim for damages, and then takes legal action against the party that caused the damages in order to recover the costs of the claim.

Key Takeaways

• Subrogation is a process where an insurance company pays out a claim for damages, and then takes legal action against the party that caused the damages in order to recover the costs of the claim.
• Based on contractual obligations, freight forwarders are often in a position where they can be held legally liable for damages that occur during the shipping process – even though they are not physically responsible for the damage or loss.
• There are some important actions freight forwarders should take to protect themselves against subrogation. 

Why is subrogation important for freight forwarders?

Based on contractual obligations, freight forwarders are often in a position where they can be held legally liable for damages that occur during the shipping process – even though they are not physically responsible for the damage or loss.

One example of subrogation in freight forwarding would be if a carrier damages goods in transit. The insurance company would step in to take the place of the freight forwarder and file a claim against the carrier. This would help to protect the freight forwarder from any potential liability in the event of a loss.

Another example is when your customer’s own insurance company pays a claim, that insurer may attempt to recoup the cost from you, the freight forwarder. What that means for you is that, when your customer says, “I don’t need cargo insurance from you, as I have my own”, this puts you at risk of subrogation.

By understanding how subrogation works, you can protect yourself and your business from potential liability and ensure that you are not held responsible for any damages that occur.

How can freight forwarders protect themselves from potential liability related to subrogation?

In order to protect yourself from potential liability as a freight forwarder, there are a few precautions you can take. First and foremost, obtaining adequate insurance coverage is a must. This will ensure that you have the funds available to pay for any damages that may occur. 

Second, you should carefully document all aspects of your shipments, including any special instructions that were given by the customer. Depending on the type and value of the goods, this may include measuring and photographing outbound cargo. This will help to prove that you took all reasonable steps to protect the shipment. 

Finally, familiarize yourself with the laws governing subrogation in your jurisdiction. This will help you understand your rights and obligations in the event of a claim. By taking these steps, freight forwarders can minimize their exposure to liability related to subrogation.

What should you do if you are involved in a claim?

It’s important to cooperate fully if you are involved in a claim. You will want to immediately notify your own insurer to determine how they can assist you. A subrogation claim is not going to go away on its own. If you ignore the letter, the insurer will file a lawsuit against you, the party being held responsible, and the insurer will win, almost every time. 

How Magaya Insurance Services can Help With Subrogation Claims

Did you know that you can control the entire insurance process and organize all related documents in one place when you use Magaya Supply Chain and Magaya Insurance Services? 

As experts in the freight forwarding field, we know exactly how to best protect your business and offer tailor-made solutions for all types of freight forwarders and shipments. After all, we know that every freight forwarder is unique, and your individual risk profile is based on specific contracts with your vendors, suppliers, shippers, and customers. 

At Magaya Insurance Services, we understand the logistics industry and we know insurance. We have helped many companies avoid subrogation claims by getting the proper coverage for their business. Should you have any questions please contact us at 786-363-0500 or visit https://www.magayainsurance.com/ .