When a shipment is lost or damaged, two very different things can pay: the carrier, because the law makes it liable, and an insurer, because you bought a policy. Many shippers assume the first makes the second unnecessary. This guide explains why that assumption is usually expensive.
What "carrier liability" actually means
A carrier (shipping line, airline, trucker or railway) that takes your goods is legally responsible for them while they are in its care. But international transport law does three things that shrink that responsibility:
- It caps the amount. Each convention sets a maximum, usually per kilogram of gross weight or per package. Under the Hague-Visby Rules it is 666.67 SDR per package or 2 SDR per kilogram, whichever is higher (Art. IV r.5(a)). Under the CMR road convention it is 8.33 SDR per kilogram (Art. 23(3) as amended by the 1978 Protocol). Under the Montreal Convention for air cargo it is 26 SDR per kilogram since 28 December 2024.
- It gives the carrier defences. An ocean carrier under Hague or Hague-Visby is not responsible for loss arising from, among other things, the "act, neglect, or default of the master, mariner, pilot, or the servants of the carrier in the navigation or in the management of the ship", fire (unless caused by the actual fault or privity of the carrier), perils of the sea, or inherent defect of the goods (Art. IV r.2). A road carrier under CMR is relieved where the loss was caused by circumstances it could not avoid, by inherent vice, or by several "special risks" such as defective packing (Art. 17(2) and (4)).
- It imposes short deadlines. Written notice within days and a lawsuit within one or two years. Miss them and even a valid claim can be lost.
The result: even when the carrier is clearly at fault, what it must pay can be a small fraction of what the goods were worth. Our calculator shows that fraction for your shipment.
Why the law caps carriers' liability
The caps are a deliberate bargain. Carriers handle millions of shipments whose value they cannot check. Conventions let them price freight on weight and volume rather than value, and in exchange they cannot contract out of a minimum level of responsibility. Hague-Visby says any clause "relieving the carrier or the ship from liability ... or lessening such liability otherwise than as provided in these Rules, shall be null and void" (Art. III r.8). The shipper who wants more protection has two options: declare a higher value to the carrier (usually for extra freight), or insure. See our guide on ad valorem declarations.
What cargo insurance does differently
Cargo insurance is a contract between you (or your buyer or seller) and an insurer. The most widely used wordings in international trade are the Institute Cargo Clauses (ICC). Under ICC (A), "this insurance covers all risks of loss of or damage to the subject-matter insured except as excluded" by its exclusion clauses (Clause 1). Key differences:
| Carrier liability | Cargo insurance (ICC A) | |
|---|---|---|
| Amount | Capped per kg or package | Agreed insured value |
| Who must prove what | You prove loss in the carrier's care; carrier then raises defences | You prove a loss during the insured transit; insurer must show an exclusion applies |
| Nautical fault, fire, perils of the sea | Often a full defence for ocean carriers | Covered (not excluded) |
| General average | You may have to contribute | Covered (Clause 2) and the insurer usually provides the guarantee |
| Duration | Depends on the regime (tackle to tackle, port to port, receipt to delivery) | Warehouse to warehouse under the Transit Clause (Clause 8) |
Insurance has exclusions too: wilful misconduct of the assured, ordinary leakage and wear and tear, insufficient packing by the assured, inherent vice, delay, and (unless added back) war and strikes (ICC A Clauses 4 to 7). Read our guide to ICC A, B and C.
Insurance and carrier claims work together
Buying insurance does not mean ignoring the carrier. When an insurer pays you, it normally takes over ("is subrogated to") your rights against the carrier and pursues recovery. That is why the ICC require the assured "to ensure that all rights against carriers, bailees or other third parties are properly preserved and exercised" (Clause 16.2). In practice: give the carrier written notice on time, keep the documents, and tell your insurer immediately. Our cargo claim guide lists the deadlines per convention.
Three common misconceptions
"The carrier has insurance, so I'm covered."
Carriers insure their own liability. Their insurer pays what the carrier owes, which is the capped amount and only when no defence applies. It is not cover for your cargo.
"US trucking is full value, so I don't need insurance."
The Carmack Amendment does start from "the actual loss or injury to the property" (49 U.S.C. § 14706(a)(1)). But carriers may establish released rates that limit liability to a declared or agreed value (§ 14706(c)(1)(A)), and most LTL tariffs do. See Carmack and released rates.
"My forwarder handles it."
Freight forwarders often act as carriers on their own terms, which typically incorporate trade-association conditions with their own limits. Ask for the terms in writing and check the limit against your cargo value.
How to decide
- Find the regime that applies and the carrier's maximum liability with the calculator.
- Compare it with the full replacement value (goods + freight + duties + expected margin).
- If the gap matters to you, either declare value to the carrier or insure. For most commercial cargo, insurance is broader and simpler.
- Whatever you choose, diary the notice and time-bar deadlines.
For a longer comparison table and worked example, read the full explainer: Carrier liability vs cargo insurance.