Bhiwadi · Alwar · hazardous goods
Chemicals in Transit: Two Policies, Not One
A chemical consignment carries two quite different exposures. One is the value of the goods, which a cargo policy covers. The other is what the goods do to everyone else if they escape, which it does not. Businesses handling hazardous substances above the prescribed quantities are separately required to hold public liability cover, and the two are regularly confused.
Key takeaways
- Cargo cover and liability cover are different policies. The transit policy pays for your drums; it does not pay the people your drums harm.
- The Public Liability Insurance Act, 1991 makes insurance compulsory for owners handling hazardous substances above prescribed quantities. It provides no-fault relief to victims, so negligence does not have to be proved.
- Contamination of other cargo on a consolidated load is a liability exposure that surprises people, and it is not covered by the cargo policy.
- Leakage and spillage are not named perils under Inland Transit Clauses (B). Ordinary leakage is expressly excluded under every set.
- Packaging, labelling and the driver's documentation are regulatory obligations and, separately, the things an insurer will examine after a spill.
What actually goes wrong, and whether it is covered
Read this against your own policy schedule. The clause set named there decides which rows below you are insured for.
| Exposure | What it means in practice |
|---|---|
| Leakage and spillage | The characteristic chemical loss. Ordinary leakage is excluded under every clause set, and leakage following an accident is only covered where the accident itself is an insured peril. |
| Contamination of the consignment | Product rendered off-specification is a total loss even where the drums are intact. Proving specification at despatch matters. |
| Contamination of other cargo and property | A liability exposure rather than a cargo one. On a consolidated load this can exceed the value of your own goods by a wide margin. |
| Fire and explosion | Covered under ITC-B as a named peril, and the reason the rest of the load and the third-party exposure need thinking about together. |
| Third-party injury after an escape | The Public Liability Insurance Act exposure. No-fault, statutory, and outside the cargo policy entirely. |
If it happens: the first four things
In order. The first two are the ones people get wrong, and they are the ones that cannot be fixed afterwards.
- Safety first and the authorities immediately. A chemical spill is a reportable event before it is an insurance event.
- Do not attempt clean-up in a way that destroys evidence of what escaped and how much, unless safety requires it. Quantum on a spill claim is argued from what can be shown.
- Keep the despatch specification, the batch records and the packing certificate. Contamination claims turn on proving the product was in specification when it left.
- Record who else was affected and what property was touched. Liability exposure is assessed separately from the cargo loss and on a different timescale.
Written notice to the transporter must go within 180 days of the booking date under section 16 of the Carriage by Road Act, 2007. Not from the date of loss, and a claim bill does not count as notice. The wording is ready to copy at our claim letters page.
The words the trade actually uses
Useful when the loss is being described by a driver, a munshi or a godown supervisor rather than by you.
| Hindi | What it means for the policy |
|---|---|
| रसायन | chemicals |
| रिसाव | leakage, excluded when it is ordinary |
| ड्रम / कैरबॉय | drum, carboy |
| आग / विस्फोट | fire, explosion, both covered perils |
| सार्वजनिक दायित्व | public liability, the separate statutory cover |
Export and the sea leg
Chemical exports carry dangerous-goods declaration obligations on top of the insurance position, and the marine leg runs on Institute Cargo Clauses. Where the cargo is classified as dangerous goods, check that the policy does not carry an exclusion that removes precisely the cargo you are shipping.
The clause sets themselves are set out in full on our marine cargo clauses page, including the seven named perils under ITC-B taken from an insurer's filed wording.
Frequently asked questions
Is public liability insurance compulsory for chemical businesses in India?
Yes, for owners handling hazardous substances above the quantities prescribed under the Public Liability Insurance Act, 1991. The Act was a response to the Bhopal gas tragedy and provides immediate relief to victims on a no-fault basis, so the claimant does not have to prove negligence. It is a separate policy from the cargo cover.
Does transit insurance cover chemical spillage?
Ordinary leakage is excluded under every clause set. Spillage following an insured accident is covered where the accident itself is a covered peril, so a spill after a collision is treated differently from a drum that simply seeped. The cargo policy covers the value of what was lost, not the consequences of the escape.
Who pays if my chemicals contaminate another consignment?
That is a liability exposure, not a cargo one, and the transit policy does not respond to it. On consolidated loads the exposure can far exceed the value of your own goods, which is the usual reason a chemical business needs liability cover alongside the cargo policy.
What is the difference between cargo and liability cover for chemicals?
The cargo policy pays you for your goods. The liability policy pays other people for what your goods did to them. A business that carries only the first is insured for the smaller of its two exposures.
What documents matter after a chemical spill?
The despatch specification and batch records, the packing and labelling certificate, the dangerous-goods documentation carried by the driver, and a record of who and what was affected. Contamination claims are proved by showing the product was in specification when it left your premises.
Are dangerous goods excluded from marine policies?
Not automatically, but some wordings carry exclusions or conditions that apply to specified classes. Where the cargo is classified as dangerous goods, check the exclusions against your actual UN classification before shipment rather than after a loss.
Related: Marine cargo clauses explained · Public liability quote · Marine cargo quote · The letters to send after a loss.