Carrier liability and freight insurance are not the same thing. Most shippers discover this difference only after a claim. Here's what actually covers your freight — and what doesn't.
In This Guide
What It Means
When freight is damaged or lost in transit, shippers often discover that carrier liability is not the same as full cargo coverage. In Canada, carrier liability for domestic truckload freight is governed by provincial tariffs and contracts, and the default liability limits are typically far below the actual value of the goods transported.
Freight insurance — also called cargo insurance — is a separate policy that covers the declared value of the shipment regardless of carrier fault. It is purchased by the shipper (or through the broker) and provides coverage that carrier liability does not. Understanding the difference between these two regimes before a loss is significantly more valuable than understanding it after.
Why It Matters
- Default carrier liability in Canada is typically $2 per kilogram — a 1,000 kg shipment is covered for $2,000 regardless of actual value
- Cannabis shipments are often explicitly excluded from standard cargo insurance policies without endorsement
- Pharmaceutical and temperature-sensitive goods require specific policy language to cover temperature damage claims
- Carrier liability claims require proving carrier negligence — cargo insurance pays based on the loss, not fault
- Brokers are typically not liable for cargo loss unless negligence in carrier selection can be proven
How It Works
Carrier Liability: The Default
Every carrier who accepts a shipment in Canada assumes a limited liability defined by their tariff and the applicable provincial or federal legislation. For domestic truckload freight, this is commonly $2 per kilogram of actual weight. A shipper claiming against carrier liability must also prove that the carrier was at fault — a high evidentiary bar for many claim types.
Declared Value: Increasing Carrier Liability
Most carriers allow shippers to declare a higher value on the BOL, which increases the carrier's liability limit for an additional charge. Declared value is not the same as insurance — it raises the ceiling on what the carrier owes if they are found liable, but it still requires proving fault and the recovery is capped at the declared amount.
Cargo Insurance: Full Coverage
Cargo insurance covers the declared value of the shipment against covered perils (typically theft, physical damage, and in some policies, temperature damage) regardless of carrier fault. Claims are processed through the insurance company, which then exercises subrogation rights against the carrier if negligence caused the loss. This is first-party coverage — you are insured, and the insurer fights the carrier on your behalf.
Common Challenges
- Assuming carrier liability covers full replacement value — it almost never does at default limits
- Purchasing cargo insurance without verifying that cannabis, pharmaceuticals, or temperature damage are covered under the specific policy
- Not declaring shipment value at booking and then being surprised by the $2/kg recovery limit after a loss
- Filing a claim without the required documentation — BOL, POD, commercial invoice, damage photographs, and loss statement
- Missing the claims filing deadline — most carrier liability claims must be filed within 60-120 days of delivery
Best Practices
- Know your commodity's value per kilogram and compare it to default carrier liability — the gap tells you whether additional coverage is needed
- For cannabis, pharmaceutical, and high-value produce shipments, obtain cargo insurance through your broker or directly
- Confirm that your cargo insurance policy covers your specific commodities, including temperature damage for reefer loads
- Document the shipment condition at dispatch with photographs — especially for high-value loads
- Inspect deliveries at receiving and note any damage on the POD before the driver leaves
- Know your claims filing deadline and calendar it for every significant shipment
When to Use This Service
- Any shipment where the commodity value significantly exceeds $2/kg default carrier liability
- Cannabis, pharmaceutical, and temperature-sensitive shipments where standard cargo policies may have exclusions
- High-value loads where the cost of a total loss would be material to your business
- Cross-border shipments where multiple legal regimes may apply to a single loss event
OTR Logistics Solutions can advise on cargo insurance options for your shipments. If you have experienced a freight claim that was not fully recovered through carrier liability, talk to our team about coverage structures that provide appropriate protection for your commodities.
Frequently Asked Questions
What is the standard carrier liability limit in Canada?
For domestic truckload freight in Canada, default carrier liability is typically $2.00 per kilogram of actual shipment weight, subject to the carrier's tariff. LTL carriers may apply different limits depending on freight class. The actual limit applicable to your shipment is defined by the carrier's filed tariff and your contract — always verify before shipping high-value goods.
Does cargo insurance cover temperature damage?
Standard cargo insurance policies often exclude or limit temperature damage claims. Coverage for temperature damage (refrigeration failure, pre-cooling failure, excursion) typically requires a specific endorsement or a specialized cold chain cargo policy. Verify your policy wording before assuming temperature damage is covered.
What documentation is required to file a freight claim?
At minimum: the original bill of lading, the signed proof of delivery noting any damage or shortage, the commercial invoice showing product value, photographs of damaged goods and packaging, a written description of the loss, and any temperature logs if the claim involves a cold chain failure. Submitting complete documentation at the time of filing significantly accelerates claim resolution.
Can cannabis be insured for freight transit?
Yes, but standard cargo insurance policies typically exclude cannabis unless specifically endorsed. Specialized cannabis cargo insurance is available through brokers who work with the licensed cannabis industry. Coverage terms vary significantly — verify that your policy covers your specific licence class, product type, and transport conditions.
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