Inherent Vice - Why You Can't Make an Insurance Claim

Inherent Vice: Why You Can’t Make an Insurance Claim

Did you know that your cargo is only insured for $500 per shipping unit (often defined as a container) per COGSA law? Ocean carriers aren’t liable to pay for you cargo even if they are responsible for the breakage. The unfortunate thing is that most shippers are operating under the false assumption that their cargo is insured. However, even in the case of having your cargo covered, there is one major instance in which you may not be eligible for a cargo claim: Inherent Vice.

What Constitutes Inherent Vice?

If your goods are damaged due to inherent vice, chances are you’ll be “ship out of luck” (thank you, we really tried with that one). Unfortunately, a lot of shippers are not prepared to deal with the claims processes associated with inherent vice. For those of you who don’t know what inherent vice is, here is a simple definition.

Inherent vice is generally referred to as any damage caused to cargo due to the inherent nature of the product as opposed to any damages inflicted on the goods by the carrier themselves. In other words, it’s damage done by internal causes rather than external ones. A coupe simple examples of inherent vice would be deterioration due to product instability, rust forming due to metal materials/ moisture, combustion (batteries or other substances), and a slew of other possibilities. It’s simply just any damage which occurs naturally as a result of the nature of a product.

Why You Aren’t Eligible for a Claim: Inherent Vice

As stated before, the most unfortunate part about inherent vice is… well, you may not be eligible to make a cargo claim. Depending on the insurance policy you have, it’s likely that you agreed to having your cargo covered with the exception of damages caused by inherent vice. In summary, here are a few reasons you may not be eligible for a claim:

Contract Terms

Most insurance providers clearly outline in their contracts that damages due to inherent vice will not be covered by the policy. Before you sign onto an insurance policy, carefully read the fine print. If you are frequently shipping products that are prone to internal damage due to the nature of the product (rather than by external causes), you may want to look for a more suiting policy.

Lack of Causation

The other huge issue here is that there is a complete lack of causation between the product’s malfunction or damage and any one particular carrier. Since a product damaged by inherent vice is, generally speaking, due to the nature of the product by no exterior causes, it’s not directly linkable to any one carrier’s involvement.

There are a few exceptions that can be made to this. For example, iron is prone to rust, so iron products showing up rusted may be listed as damaged due to inherent vice. However, if an ocean carrier ended up getting water in the container, it could be their liability to deal with the product. As mentioned before, this is why it’s incredibly important to have cargo insurance. Without it, the ocean carrier would only be liable to pay up to $500 in compensation for damaged cargo.

Conclusion

Inherent vice is, simply put, any damage caused to goods while in transit due to the nature of the product. Food spoiling, iron rusting from moisture in the air, and a product deteriorating due to materials and construction would be a few of many examples of inherent vice. Most insurance policies cover cargo in all cases except inherent vice, leaving victims without a means for compensation. If your cargo gets damaged by means of inherent vice, make sure you validate it. If iron rusts or food goes bad, was it due to the nature of the product, or did a carrier fail to properly handle the cargo (i.e., getting water in the container, forgetting to put it in a refrigerated container, etc.) Take time to carefully review your cargo insurance policy and fine print to understand precisely what is and isn’t covered regarding damaged caused by inherent vice.

 

Our team at Interlog USA would love to help and answer and questions you might have! Click here to get in contact with one of our experienced team members.

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