CMR liability: Art. 23 para. 4 well insured?

This means that the UK Supreme Court is taking a different line to that predominantly represented in continental Europe! The impact of the decision can be described as "massive" - many carriers transporting goods to the United Kingdom should now urgently check whether their CMR insurance policy offers sufficient insurance cover!

But first things first; what happened?

A long-standing customer of Lutz Assekuranz was en route from Poland to England with a load of cigarettes (1,429 cartons). While the carrier was taking a break at a rest area on the M25 freeway in England, 289 cartons were stolen - these had a value of GBP 72,512; this was reimbursed from the carrier's Lutz CMR policy, as well as proportionate freight costs and expert costs.

The so-called "excise duties" in the amount of GBP 449,557, which the United Kingdom had prescribed on the basis of the "Customs and Excise Management Act 1979", remained in dispute. This financial loss - incurred by the owner of the goods - was passed on by the latter in the order chain and ultimately ended up with the carrier with a request for payment. Rightly so?

Two possible interpretations of Art 23 (4) CMR:

The claimant had based his claim on Article 23(4) CMR; as is well known, this reads:

In addition, freight, customs duties and other charges incurred in connection with the carriage of the goods shall be refunded, without further compensation, in the case of total loss in full and in the case of partial loss on a pro rata basis.

There are different views on how the words "other [...] costs" should be interpreted:

• Narrow interpretation
  In the context of the above article, this interpretation regards as recoverable only those costs which would have been incurred in the same way if the goods had been transported in accordance with the contract and which would have contributed to the value of the goods at their destination; in other words, which are not attributable to the course of events contrary to the contract. (in short: only "transport-related costs" are eligible for compensation)
• Broad interpretation
  In contrast, the broad interpretation stipulates that all costs that are closely associated with the specific transportation and costs that the sender/consignee has incurred with regard to the contractual course of the transportation as well as such costs that have only arisen from the development of the transportation contrary to the contract are covered. (In short: "damage-related costs" are also eligible for compensation).

The reasons for the two possible interpretations are manifold; one of the biggest factors is the different languages in which the CMR Convention was drafted. There are also different teleological considerations in both directions.

In continental Europe (in particular the Netherlands, Germany, Austria, Italy, Latvia, Poland, Romania and Bulgaria), the courts generally rule on the basis of the narrow interpretation. In the United Kingdom, at the time of the incident, there was already a decision by a high court that proclaimed the broad interpretation; however, the ruling had long been subject to massive criticism. This offered the opportunity to obtain a deviating (corrective) decision from the UK Supreme Court - with the result of greater legal standardization in Europe and noticeable relief for internationally operating carriers.

Disappointingly, however, the UK Supreme Court ultimately followed the previous line - meaning that carriers must continue to be liable for excise duties if such cases are brought before UK courts.

High-quality insurance cover is essential!

In this specific case, the owner of the goods was ultimately compensated on the basis of the ruling; the carrier's Lutz policy ultimately paid out - all in all - total compensation of almost EUR 1,200,000 (this includes damage to goods, excise duties as excise duty): Damage to goods, excise duties as pecuniary loss, pro rata freight costs, expert costs, interest, court and representation costs of own and opposing party).

But even if there had been no court proceedings - note how high the excise duties are now in relation to the actual value of the goods. (620%!)

All this makes the following clear:

1. Today, it is no longer possible to dispense with co-insuring Art 23 (4) CMR. Unfortunately, Lutz Assekuranz has observed that some local CMR insurers have still not integrated this liability element into their scope of insurance as standard - a dangerous stumbling block for inexperienced interested parties.
2. High sums insured are more important than ever. In particular, carriers should take a close look at their own CMR policy to ensure that no sensitive sublimits have been agreed. In this case, limiting the costs associated with Art. 23 (4) CMR to EUR 25,000 (or less) per claim, or a general sum insured of only EUR 200,000 per claim, would have meant the certain closure of the carrier company, with all the unpleasant consequences for the staff and the owner of the business.
3. Carriers transporting goods subject to excise duty (tobacco, spirits, mineral oil, coffee, etc.) should definitely put themselves in the hands of specialized brokers - such as Lutz Assekuranz - who are familiar with the subject matter. Off-the-shelf products may be cheaper, but they do not offer the necessary insurance cover.

CMR insurance from Lutz Assekuranz

Lutz Assekuranz is one of the few specialist brokers that can offer a standard sum insured of EUR 1,200,000 million per claim. Especially for cases such as those mentioned above or cases of gross negligence / willful misconduct (Art. 29 (2) CMR) by employees of the company, such insurance is absolutely necessary. As part of the general terms and conditions of insurance, every customer has Art. 23 Para. 4 CMR insured as standard - without any dangerous sublimits.

All this at reasonable premiums; unlike many insurance companies, the premiums issued by Lutz Assekuranz have not automatically increased in line with inflation, but have remained the same; moreover, there is no link to an index.

See for yourself and arrange a non-binding consultation with the specialists at Lutz Assekuranz. Our staff will be happy to provide you with advice and assistance at any time.