A private carrier warranty or special contract in marine insurance policy is a clause that determines the use of a private carrier or vessel for transporting goods from one place to another. This act is governed under the Carriers Act of 1865, which defines the rights and liabilities of carriers.

Under the clause, vehicles that are private or non-common carriers are allowed to transport goods unless specified in policy documents. If the vehicle is used, the insurance provider will only pay up to a certain percentage of an agreed-upon amount in case of damage or loss. However, a consignment note needs to be provided that limits or specifies the carrier’s liability.

In simple terms, this clause ensures that the marine insurance coverage remains valid when the goods are transported by carriers specified in the policy documents.

However, the limit only matters while the goods are with the carrier during actual transportation. If the goods are lost or damaged outside the carrier’s custody, this reduced liability clause does not apply.

Also Read: Warranties in Marine Insurance

The private carrier warranty in marine insurance is crucial for business due to safety and risk management protocols. Here are some reasons why a private carrier warranty is crucial for businesses.

Legal Compliance

When a business uses the carriers mentioned in the policy documents or those listed under the Carriers Act of 1865, it helps to remain compliant with the law.

Any use of carriers not specified in the policy terms and conditions is considered a breach and may result in fines and penalties.

Define Liability and Scope

Another important reason for using the private carrier warranty in marine insurance is to help define liability and scope for non-common carriers while transporting goods.

It confirms that insurance coverage applies only when goods are in the control of those carriers and only up to the limits specified in the consignment note.

Preventing Claim Disputes

The private carrier warranty in marine insurance also helps in avoiding claim disputes arising from the insurance plan. The clause clearly specifies the coverage condition and when and how the insurance applies.

Also Read: Principle of Warranty in Marine Insurance

Let us look at a warranty in a private carrier example. Suppose a company named ABC uses a private carrier, such as a truck, with a consignment note that limits liability.

During the transit, the damage and loss occur. According to the private carrier warranty clause, the insurance provider will pay a percentage of the assessed loss as mentioned in policy terms and conditions. The warranty does not apply to losses occurring outside the custody of the specified carriers.

Private carrier warranty and conditions in marine insurance plans are the written statements that policyholders need to comply with. If the policyholder breaches these warranties, then it will have some serious consequences from the insurance provider, such as:

Policy Voidance

Another consequence of breaching the marine insurance warranty is policy voidance. It means that the coverage of the policy is no longer valid from the occurrence of a breach until the breach is remedied. In such cases, the goods and cargo are no longer covered under the policy.

Financial Losses

Due to breaches of warranty in marine insurance, businesses also face financial losses. When a warranty in marine insurance is breached, the insurance provider is automatically released from liability from the moment of breach, regardless of whether the breach caused the loss. This forces the business to cover all subsequent losses out of their pocket.

Understanding the private carrier warranty in marine insurance is crucial for a business to comprehend its scope of coverage when transporting goods via non-common carriers.
Understanding the details of this warranty in marine and transit insurance helps businesses comply with the policy conditions and avoid potential financial losses and claim denials.

With TATA AIG’s online marine insurance policy, businesses can easily access comprehensive coverage for their shipments.

We also offer a wide range of small business insurance options such as Worker Compensation, Shop Insurance, Theft Insurance, etc that are customised to offer protection to businesses of all kinds.