Double Cargo Insurance: Why Two Policies Do Not Mean Double Compensation

Alexandra Ulyanova, Deputy General Director of CARGO-EXPRESS LTD

In international logistics, we periodically encounter situations where the same cargo is insured twice. For example, a client takes out cargo insurance independently, and the freight forwarder subsequently arranges insurance for the same shipment. Alternatively, the supplier has already insured the cargo, but the Russian consignee, unaware of this or seeking additional protection for their interests, takes out another policy.

At first glance, it may seem that two policies mean two insurance payouts if the cargo is damaged or lost.

In practice, this is not the case.

Insurance is intended to compensate for actual financial loss, not to generate a profit from an insured event. Therefore, having two or more policies covering the same cargo does not, in itself, entitle the policyholder to recover compensation multiple times.

What Is Double Insurance?

Property insurance is subject to the rule established by Article 951 of the Civil Code of the Russian Federation: if property is insured with several insurers against the same risks and the aggregate sum insured exceeds its insurable value, special rules apply to determine the insurers’ liability.

Simply put, a typical case of double insurance requires several conditions to be met simultaneously:

• the same insurable interest is covered;
• insurance is taken out with several insurers;
• the policies cover the same risk;
• the periods of cover overlap;
• the aggregate sum insured exceeds the insurable value of the property.

The mere existence of two insurance policies does not constitute a breach.

This distinction is particularly important for cargo.

When Two Policies Are Acceptable

Consider cargo valued at RUB 10 million.

Under one contract, it is insured for RUB 6 million; under another, for RUB 4 million against the same risks.

The aggregate sum insured is RUB 10 million and does not exceed the cargo’s insurable value. Having two insurance contracts does not, in itself, entitle the policyholder to receive more than the amount of the loss sustained.

Another example is where one contract covers the risk of cargo damage or loss during transport, while the other covers a different property-related risk.

In this case, it is necessary to examine not only the sums insured, but also the risks covered, the period of cover under each policy, the subject matter insured, and the policyholder’s specific insurable interest.

This is why, when insuring international shipments, simply asking the client, “Is the cargo already insured?” is not enough.

It is important to understand who has insured it, for what amount, against which risks, and for what period.

What Happens If the Same Cargo Is Insured Several Times?

The main rule is straightforward:

the policyholder must not receive more compensation for the same loss than the amount of that loss.

If the aggregate sums insured under several contracts exceed the insurable value, the statutory limits apply.

Article 951 of the Civil Code of the Russian Federation provides, in particular, that the portion of the sum insured exceeding the insurable value does not create an entitlement to additional compensation.

Where the same subject matter is insured against the same risks with several insurers, each insurer’s payout is determined according to the proportion prescribed by law.

For example, cargo valued at RUB 10 million is insured against the same risk with three insurers:

• first policy — RUB 10 million;
• second policy — RUB 6 million;
• third policy — RUB 4 million.

The aggregate sum insured is RUB 20 million.

This does not mean that the owner will receive RUB 20 million if the cargo is a total loss.

The maximum compensation for the same loss is limited to the actual amount of that loss. If cargo worth RUB 10 million is completely lost, the combined payouts from the insurers must not become a RUB 20 million payment merely because several policies were taken out.

Why Double Insurance Is Relatively Common in Logistics

In practice, the reason is usually far more ordinary than an attempt to obtain double compensation.

An international shipment may involve many parties: the seller, buyer, consignor, consignee, freight forwarder, carrier, overseas agent, and bank.

Insurance may be required by the delivery terms or the foreign trade contract, arranged independently by the supplier or buyer, and then additionally requested from the freight forwarder.

As a result, by the time of dispatch, it becomes apparent that two sets of insurance cover exist for the same cargo.

At CARGO-EXPRESS, we therefore recommend that clients disclose any existing insurance when the shipment arrangements are being agreed.

This allows us to check in advance whether an additional policy is needed and whether it genuinely extends the insurance protection.

Is Carrier Liability Insurance Also Double Insurance?

No. This is one of the most common misconceptions.

Cargo insurance and carrier or freight forwarder liability insurance are not the same thing.

Cargo insurance covers an insurable interest in the cargo itself.

Liability insurance covers the risk of the relevant party to the transport operation incurring liability to third parties.

Therefore, the fact that an airline, road carrier, or freight forwarder has liability insurance does not mean that the client’s cargo is automatically insured for its full value.

Moreover, the carrier’s liability may be limited by legislation, international conventions, and the terms of carriage.

This is why, when transporting high-value cargo, we recommend separately assessing the need for cargo insurance.

What to Tell Your Freight Forwarder

Before arranging insurance, it is advisable to check four things:

1. Whether there is already a policy in force covering this cargo.
2. Who the policyholder and beneficiary are.
3. Which risks and which leg of the shipment the policy covers.
4. The sum insured and the cargo’s insurable value.

Existing insurance does not necessarily mean that an additional policy is unnecessary. The first contract may cover only part of the route or a limited range of risks, or it may not fully meet the requirements of the particular shipment.

However, it is better to clarify this before the cargo is dispatched, rather than after an insured event occurs.

Two Policies Do Not Mean Double Protection

In my view, this is the key point that cargo owners need to understand.

The number of insurance policies does not, in itself, determine the quality of the insurance protection.

What matters far more is what is insured, against which risks, on which leg of the route, how the insurable value is determined, who the beneficiary is, and which exclusions the contract contains.

The freight forwarder’s role is therefore not simply to offer the client a box to tick for cargo insurance.

Our role is to look at the shipment as a whole and help the client understand which risk they are actually transferring to the insurer and what compensation they can receive if something happens to the cargo.

This is precisely the approach we use at CARGO-EXPRESS LTD when arranging cargo insurance for our clients.