Underwriting Transportation of Cargo by Barge


Alan Jervis B.A. Hons., F.C.I.I., M.A.E., Chartered Insurers

Member of the Academy of Experts

Barge shipments, as a means of transporting cargo, are very popular. Tugs and their tows can be seen on the rivers and lakes of North America, the rivers of Europe and within the Asia Pacific Continent, for example and are an essential part of maritime commerce within those regions. The advantages of shipping cargo by barge versus shipping cargo on a traditional larger ocean going vessel is that barges can operate in narrow shipping lanes, small bodies of water and have a lower draught. Hence, they can operate in shallow waters in remote areas. Tug and barges also operate in the open seas particularly on the north east coast of Canada and parts of the arctic where materials and supplies are shipped to remote communities. But many barges are not self-propelled and require a tow by tug. The type of tow can vary between a single tow, for example, or a double or tandem tow where one tug tows two barges. Another configuration is where there are two tugs pulling one barge. A less common figuration is a triple tow.

It is of prime importance that barge shipments are properly risk managed from an underwriting perspective. Proper loading, securing and stowing of the cargo is key to stability on a barge, particularly in cases of transporting heavy equipment or machinery which create concerns with regard to centre of gravity.

Weather windows are also important to ensure that the barge and its cargo not only sails in calm waters but that weather conditions remain favourable throughout the voyage. Underwriters may be particularly interested in the track record of the tug and tow / barge company (and its fleet) in question to ensure that it is reputable and has adequate experience in the movement of certain cargo. Tow lines also have to be secure and properly configured to avoid a barge drifting away, capsizing or colliding with another vessel. Double or triple tows can be particularly challenging, whether these take place in congested inland waters or on the high seas, both bodies of water presenting different risks and exposures.

Before accepting a particular cargo risk by barge, an underwriter will want to ensure adequate and proper risk management is in place and this can be achieved by imposing a strict warranty that tug and tow is subject to approval by a qualified marine surveyor. Hence, a survey will approve proper loading and securing of the cargo on the barge, tow lines are properly configured and towage arrangements are adequate (eg the tug has sufficient power) and that the window is signed off. The ‘tug and tow warranty’ is an important resource and tool for the underwriter and as it is a ‘warranty’, it must be strictly complied with.

Another factor that a cargo underwriter must consider is whether there is a possibility of subrogation against the tow company in the event of loss or damage, or, if there is subrogation, what the limitations of liability are against the third party tug company. It is not unusual in such cases for subrogation to be waived and an underwriter would be wise to take this into account in his assessment of the risk.

Once the underwriter is satisfied with the risk management arrangements, the next step are the applicable insuring terms and conditions. If a an underwriter was to consider offering ‘all risks’ or ‘all perils’ cover, he would be concerned with the obvious risk of water damage exposure from the elements and if the barge shipment was to take place on the open seas, there is the obvious additional risk of corrosion by sea water. Accordingly, if it is an unprotected piece of cargo that is susceptible to damage by water (This may be the case with a large piece of machinery that has no outside protection such as crating or tarping), then an underwriter may well exclude ‘water damage, sea water damage alone or, for example, exclude rust, oxidation and discoloration. In other cases, it is not entirely uncommon to offer a ‘named perils’ form of cover that may well limit indemnity to a major casualty occurring to avoid the risk of so-called inevitable losses.

Another factor that a cargo underwriter needs to be fully aware of is whether there is an intention to include loading onto and offloading from the barge. This can be a significant risk particularly in the case of oversized heavy equipment, for example. Many barge related claims occur during the loading and offloading stage. Additionally, a cargo underwriter must decide whether it is prepared to cover the inland transit taking place prior to loading or subsequent to discharge. The inland transportation leg of the risk may be less onerous that the water borne leg from a risk management perspective but may involve other exposures that may not be so apparent. One of these is the state and condition of the roads in remote areas.

As far as insuring conditions are concerned, a cargo policy may well contemplate coverage for shipments by barge but a number of qualifications could apply. For example, barge shipments may be subject to a lower policy limit, may be subject to a more restricted cover such as ‘named perils’ or may be subject to a ‘tug and tow survey warranty’ as discussed above. In other cases, specific dedicated clauses and insuring conditions may apply, the Pacific Scow Clauses being one example.

The type of losses that can be seen in respect to cargo shipments by barge are:
a) Stranding and foundering
b) Engine failure of tug
c) Capsizing due to weather related issues or due to instability of cargo being carried.
d) Collision with other vessels.

All of these risk management concerns aside, shipments of cargo by barge are generally a very effective means of transportation and are a commercial necessity.


Alan Jervis is an insurance consultant, expert witness and offers contentious claims, audit and peer review services