Are you a freight forwarder who is always on the move, involved in transporting goods across different borders? Then you have a lot of responsibility on your shoulders. You act as a liaison between your clients and different transport services. You need to transfer goods from one location to another, which frequently involves multiple carriers (trucking companies, rail, air freighters, and ocean liners) as well as numerous requirements and regulations. Clients rely on your experience and expertise to handle customs clearance when crossing borders, negotiate the best deals and routes, organize for proper packaging of goods, and handle all of the tedious details and documentation that are parts of the entire transporting process.

Yet, you know that things can go wrong, in spite of your best and untiring efforts. From lost or damaged shipments to unexpected delays in delivery, your business is exposed to various risks that can result in financial losses. That's why every freight forwarder needs Errors & Omissions insurance as it protects him from liability claims arising from errors or omissions made during the transportation process. In this blog post, we will explore why having E&O insurance is crucial for any freight forwarding company and how it can help protect both your business's reputation and bottom line.

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What is Error & Omissions insurance?

As a type of liability insurance, errors & omissions insurance (abbreviated as "E&O" or "Professional Indemnity Insurance") protects businesses, their employees, and other professionals from negligence claims.

It shields businesses and professionals (such as a consultant, financial advisors, insurance agents, or lawyers) from the cost of a client's claim related to advice or services offered. If a company provides services to a customer for a fee, it is common for them to obtain E&O insurance.

E&O insurance, in general, covers:

  • Mistakes, errors, or oversights that may occur while working.
  • Failure to meet a deadline or provide a promised service to a customer.
  • Not meeting a specific standard of care, particularly one established by a specific profession.
  • Professional negligence.
  • Contract violation.
Types of Risks Faced Often by Freight Forwarders

Types of risks faced often by Freight Forwarders

  • Cargo damage- Legal liability for cargo damage during transit, consequential loss incurred by clients as a result of late delivery, or physical damage to goods constitutes a few of the major risk exposures faced by freight forwarders.
  • Third-Party Lawsuits- Legal liability claims in this category may arise as a result of physical damage to third-party property, bodily injury, or legally recoverable losses incurred, resulting from freight forwarders' operations.
  • Negligent Acts- Any loss or damage incurred by clients as a result of negligent acts by freight forwarders, their subcontractors or agents are subject to error and omission claims.
  • Fines & duty- A freight forwarder could be held liable for regulatory or statutory non-compliance. Legal liabilities to authorities such as customs and port authorities pose a risk to freight forwarders.

How important are Errors & Omissions insurance for freight forwarders?

As we discussed above, the entire process of freight forwarding involves many complicated sub-processes. Things that go wrong, which is not surprising considering the wide range of activities freight forwarders is typically responsible for. Incomplete shipping documents, incorrectly labelled or packaged items, misdirected freight, non-receipt of advanced documents, and failure to insure cargo are just some of the things that can go wrong.

This is the reason why you need errors and omissions insurance if you are a freight forwarder. Getting an E&O insurance is an important part of any freight forwarder's risk management strategy. This insurance covers legal liabilities arising due to cargo damage or consequential losses due to late delivery. Coverage of all modes of transport under one sum insured is provided. It largely covers claims in which the carrier or freight forwarder is at fault. Advantages of this insurance include-

  • Coverage is provided for legal liabilities to authorities such as Customs and Port Authorities for any violations of regulations.
  • Claims for errors and omissions, as well as third-party liability, may be covered.
  • Cargo insurance endorsement covers all risks associated with cargo damage. It protects all types of cargo from various risk exposures like fire, lightning, and vessel collisions with external objects.
  • Cargo Cover gives your client peace of mind and a sense of security, while also increasing your market credibility.
  • By arranging insurance for your clients, you can add value to your freight forwarding business.


A freight forwarder arranged for the shipment of textiles from Chennai to Kolkata. The freight forwarder was informed that the shipment was to go directly to Kolkata without transshipments or partial shipments. Since the goods were transhipped through Visakhapatnam, they arrived at their final destination three weeks later than expected. As a result, the order was cancelled and the shipper lost the textile sale. The freight forwarder was sued for market loss. In such a scenario, E&O insurance would cover the loss incurred by the freight forwarder, as a result of the suit or claim.

When should you purchase Errors & Omissions insurance?

Here are some key considerations to keep in mind when determining when to purchase this type of coverage:

  1. The size and scope of your business: The larger your business, the greater the exposure to risk you may have. As such, it is generally advisable for larger businesses to have errors and omissions insurance in place at the earliest.
  2. Your industry: Certain industries are more likely to face lawsuits than others. If you work in an industry that is prone to litigation, it is particularly important to have this type of coverage.
  3. Your clients: If you work with high-value shipments or clients who demand a higher level of service, they may expect you to carry this type of insurance.
  4. Your geographic location: Certain states or regions may have a higher frequency of litigation than others. If you do business in an area with a high rate of lawsuits, it may be wise to purchase E&O insurance coverage at the earliest.

Conclusion -

E&O insurance ensures that freight forwarders are protected from the costs of mistakes or negligence on their part, which can be incredibly expensive if left unprotected. This Insurance also helps build trust with shippers by providing them peace of mind in knowing that their shipments are safe and secure while being transported by a reliable freight forwarder. With these benefits in mind, every freight forwarder should consider investing in E&O Insurance today! For the best recommendation on Errors & Omissions insurance policies, you may contact BimaKavach. Here, you can get the best recommendation for any insurance product in just 5 minutes.