Canadian Accredited Insurance Broker (CAIB) Two Practice Exam

What potential issue may arise if a carrier's insurance has lapsed?

1. The carrier becomes uninsurable

2. The liability shifts to the owner of the goods

3. Damage claims cannot be processed

4. The shipping contract becomes void

The correct answer is: The liability shifts to the owner of the goods

When a carrier's insurance has lapsed, the primary concern is that the liability for any potential damages or losses during transit can shift to the owner of the goods. This occurs because the carrier, who is responsible for the safe transport and protection of the goods while in their custody, would no longer have the financial backing to cover any claims. Thus, if any incident arises that damages the cargo or results in loss, the owner of the goods would need to bear the financial burden directly. The shipping contract may still be considered valid; however, the lack of insurance fundamentally alters the risk profile of the agreement, making it less secure for the owner of the goods. While damage claims may still be processed, they would be pursued directly against the carrier without insurance coverage, complicating the situation for the goods' owner who must deal with an uninsured party. Additionally, not all carriers become uninsurable due to a lapse in insurance; they may still acquire coverage subsequently. This highlights that the shifting of liability to the owner is a significant consequence when a carrier lacks the necessary insurance protections.