Goods in Transit (GIT) Insurance: Legal Considerations in Kenya

Lesile Selelo Goods in Transit Insurance 0

Goods in Transit (GIT) insurance is a critical aspect of risk management for businesses operating in Kenya, particularly for those involved in the transportation and logistics sectors.

In a country where goods are constantly moved from one region to another, ensuring that those goods are protected during transit is not just a precaution, it’s a necessity.

GIT insurance offers financial protection against the risks associated with the transportation of goods, including theft, damage, loss, or destruction.

With the rapid expansion of trade, both locally and internationally, businesses need to secure their shipments and minimise the financial repercussions of any untoward event.

Kenya, as a hub for East African trade, presents unique challenges and opportunities for transporters, importers, and exporters. Whether it’s goods transported over long distances on road, rail, or air, the risk of damage or loss is ever-present. The country’s infrastructure, while improving, still faces challenges like potholes, poor roads, and unpredictable weather conditions, all of which can contribute to the vulnerability of goods in transit.

Additionally, with the growing number of vehicles on the road, traffic accidents have become more frequent, posing significant threats to the safety of transported goods.

Furthermore, the country’s strategic position along key international shipping routes makes it susceptible to global supply chain disruptions, including theft or damage during transit.

Legal considerations surrounding GIT insurance in Kenya are multifaceted and require careful attention. Business owners, transporters, and insurers must ensure that the policy not only meets their specific needs but also complies with Kenya’s legal framework. The Insurance Act and the Transport and Safety Regulations set the groundwork for liability and insurance obligations, and failure to adhere to these legal requirements can result in severe financial and legal consequences.

For instance, businesses must ensure that their GIT policies are aligned with both national and international transport laws, including customs regulations, as failure to do so could result in invalid claims.

Another key legal consideration is the contractual obligations that govern the relationship between businesses, transporters, and insurers. In many cases, the terms of the transport agreement may impact the GIT insurance coverage. A transporter’s liability can vary depending on whether they are legally bound to certain levels of protection, and whether the goods being transported are subject to specific exclusions in the policy. This complexity can often lead to legal disputes if all parties are not on the same page about the terms of coverage.

Moreover, understanding the types of risks that are covered, including political unrest or natural disasters, is essential for businesses engaged in high-risk transit areas.

With all these moving parts, GIT insurance in Kenya is not just a financial safety net, it is a legally binding tool that requires businesses to navigate a range of regulations, contractual obligations, and risk management strategies. Having a robust understanding of the legal landscape and ensuring compliance with the relevant laws will provide businesses with the peace of mind to continue their operations efficiently while minimising the financial impact of unforeseen events during transit.

Below is a comprehensive guide:

1. Regulatory Compliance

In Kenya, GIT insurance is governed by the Insurance Act, which sets out regulations for both insurers and policyholders. Businesses must ensure that their insurance providers are licensed by the Insurance Regulatory Authority (IRA).

Using unauthorised insurers can lead to denied claims and legal complications.

Additionally, compliance with transport laws and licensing for vehicles used in transit is crucial, as non-compliance may void insurance claims.

2. Contractual Agreements

Transporters and cargo owners often have contractual agreements that outline liability and responsibilities during transit. The presence of GIT insurance does not absolve the transporter of their obligations unless explicitly stated in the contract.

Therefore, businesses must carefully review and draft contracts to avoid ambiguities in liability and ensure that the insurance policy aligns with contractual terms.

3. Policy Scope and Exclusions

Understanding the terms, conditions, and exclusions of GIT policies is essential. Common exclusions in Kenyan GIT insurance include:

Losses due to political violence or terrorism.
Damages from poor packaging.
Loss during unapproved transit routes.
Employee theft unless covered under a fidelity guarantee policy.

Businesses must work closely with their insurers to ensure their policy adequately covers the intended risks, particularly in high-risk areas or when transporting high-value goods.

4. Documentation and Claims Process

Legal disputes often arise due to improper documentation or delayed claims submissions. Kenyan businesses must ensure that:

Waybills, invoices, and receipts are accurately maintained.
Damages or losses are reported promptly to the insurer.
Claims are filed within the timeframe stipulated in the policy.

Failure to adhere to these documentation requirements can result in denied claims or prolonged litigation.

5. Liability for Third-Party Transporters

For businesses using third-party transporters, determining liability in the event of a loss or damage can be complex. Kenyan law emphasises that the party at fault bears responsibility unless otherwise agreed upon in the contract.

Including GIT insurance clauses in transporter contracts is advisable to mitigate disputes.

6. Political and Regional Risks

Kenya’s geographical location exposes goods in transit to risks like political unrest, theft in high-crime zones, and natural disasters. While insurers may offer add-ons for specific risks, businesses must evaluate whether these are included and understand the legal implications of operating in volatile areas.

7. Dispute Resolution Mechanisms

Disputes between policyholders and insurers are common in GIT insurance claims. Businesses should be familiar with their rights under Kenyan law, including:

Arbitration clauses in insurance contracts.
Accessing legal recourse through the Insurance Complaints Tribunal.
Using alternative dispute resolution (ADR) methods to avoid lengthy court processes.

8. Compliance with Tax and Customs Regulations

For importers, compliance with Kenya Revenue Authority (KRA) regulations and customs requirements is critical. Non-compliance can invalidate GIT insurance claims, especially for goods seized or delayed due to customs violations.

Challenges in GIT Insurance Legal Considerations in Kenya

The challenges faced in navigating Goods in Transit (GIT) insurance legal considerations in Kenya are multi-faceted, often requiring businesses to balance regulatory compliance with practical risk management strategies.

Below are some of the primary challenges that businesses encounter:

1. Complex Regulatory Framework
The legal landscape surrounding GIT insurance in Kenya is shaped by various regulations, including the Insurance Act and guidelines from the Insurance Regulatory Authority (IRA).

These regulations stipulate the minimum requirements for GIT policies, but the complexity of interpreting these rules can lead to challenges for businesses that are unsure of the extent of their coverage. Lack of clarity about insurance policies can result in companies being underinsured or overpaying for coverage.

Additionally, the enforcement of these regulations can vary, leading to inconsistencies in compliance.

2. Inadequate Coverage for Specific Goods
GIT insurance policies are often drafted to provide general coverage, but they may not always cater to the unique needs of businesses that transport specific or high-risk goods, such as perishable items, hazardous materials, or luxury goods.

This creates a gap where businesses might find themselves with insufficient protection, leaving them vulnerable to potential losses.

Ensuring that insurance covers these specific needs requires careful negotiation and sometimes additional endorsements, which can complicate the legal process.

3. Disputes Over Liability and Claims Processing
The determination of liability in the event of a claim under GIT insurance can be difficult, particularly when goods are damaged, lost, or stolen during transit. One of the most common challenges arises from disputes between the insurer, the business owner, and third-party carriers about the scope of coverage and who is ultimately responsible for the loss.

Claims processing can also be delayed due to documentation errors or disagreements over whether the conditions of the insurance policy were met, further complicating legal resolution.

4. Non-compliance with International Shipping and Customs Laws
Businesses engaged in international trade often face the added challenge of ensuring that their GIT policies comply with both local Kenyan regulations and international shipping laws.

The need to understand customs procedures, taxes, duties, and the proper documentation required for cross-border shipments can create significant legal hurdles. Without this compliance, businesses risk facing penalties, claims rejections, or complications in the event of an incident during transit.

5. Exclusions in GIT Insurance Policies
GIT insurance policies typically come with several exclusions—risks that are not covered under the terms of the policy. For instance, many policies exclude damage due to negligence, inadequate packaging, or certain types of natural disasters.

The legal challenge lies in ensuring that businesses are fully aware of these exclusions, as a failure to understand them could lead to a false sense of security and unexpected financial burdens when claims are denied.

These challenges underscore the importance of consulting with experienced insurance professionals and legal advisors when navigating GIT insurance in Kenya. By doing so, businesses can ensure that their policies align with legal requirements and cover all potential risks associated with the transportation of goods.

Solutions to Challenges in GIT Insurance Legal Considerations in Kenya

To address the challenges faced in Goods in Transit (GIT) insurance legal considerations in Kenya, businesses and stakeholders must take proactive measures to ensure they are well-equipped to navigate the regulatory environment, mitigate risks, and enhance their operational efficiency.

Below are solutions that can be implemented to tackle the identified challenges:

Simplify and Clarify Regulatory Compliance

Solution: Businesses should engage with insurance professionals and legal experts who specialise in Kenyan regulations related to GIT insurance to ensure full compliance with the Insurance Act and the Insurance Regulatory Authority (IRA) guidelines. Regular training and seminars on evolving insurance regulations would help businesses stay up to date and avoid legal pitfalls.
Actionable Step: Collaborate with insurance brokers like Step By Step Insurance and legal advisors to review policy requirements regularly and adapt to changes in local and international laws to avoid any compliance-related issues.

Tailor Policies to Specific Goods

Solution: To avoid inadequate coverage, businesses should work with insurers to create tailored policies that account for the specific risks associated with the goods being transported. For high-value or high-risk goods like perishables or hazardous materials, businesses can negotiate additional endorsements that specifically cover these types of cargo.
Actionable Step: Before purchasing GIT insurance, conduct a thorough risk assessment of the types of goods being transported and engage the insurer to customise the policy to meet those needs.

Streamline Claims Processing and Dispute Resolution

Solution: Clear documentation and detailed contracts with transporters and third-party service providers can reduce disputes over liability. Insurers should simplify the claims process, ensuring that clear guidelines are provided for businesses to follow when making claims, along with transparent timelines for processing. Additionally, businesses should maintain accurate and up-to-date records of the goods being transported.
Actionable Step: Establish internal processes for claims management, such as maintaining photographic evidence of goods and packaging, creating clear protocols for reporting losses, and ensuring effective communication with the insurer to address potential claims promptly.

Ensure Compliance with International Shipping and Customs Laws

Solution: For businesses engaged in international trade, it’s crucial to ensure that GIT insurance policies also align with international shipping, customs laws, and any bilateral agreements between Kenya and the countries involved. Consulting with customs experts and international logistics professionals can help businesses understand the various regulations governing cross-border transit.
Actionable Step: Businesses should integrate their GIT insurance policies into their broader logistics and compliance strategies, ensuring that international regulations, including customs duties, import/export permits, and tariffs, are considered in the policy structure.

Enhance Understanding of Policy Exclusions

Solution: To avoid surprises in the event of a claim, businesses should conduct a thorough review of policy exclusions and ensure these exclusions are clearly defined and understood. Regular meetings with insurers can clarify the circumstances under which coverage may not apply, helping businesses make informed decisions about risk management.
Actionable Step: Businesses should read through every exclusion listed in their policy and consult with their insurer or broker to discuss scenarios where exclusions may apply. This will help ensure that businesses take additional steps, such as improving packaging or investing in preventive measures for specific types of losses.

By implementing these solutions, businesses can navigate the legal complexities of GIT insurance in Kenya with greater ease and security. With a comprehensive understanding of the challenges and proactive measures in place, companies can safeguard their goods and minimise risks associated with the transportation of cargo, ultimately ensuring smooth operations and reducing financial exposure.

Conclusion

Navigating the legal landscape of Goods in Transit (GIT) insurance in Kenya requires careful attention to regulatory compliance, contractual clarity, and comprehensive risk assessment. Businesses involved in the transportation of goods must not only be aware of the risks associated with transit but also the complex web of legal considerations that govern these activities.

Ensuring that GIT policies are not just financially sound, but also legally compliant, is critical to mitigating the financial and legal repercussions that may arise in the event of an unforeseen incident.

The first step in this process is ensuring that businesses’ insurance policies align with the regulations set forth by Kenyan authorities. The Insurance Act, along with Transport and Safety Regulations, provides the legal framework for GIT insurance, ensuring that businesses and insurers comply with established guidelines.

Failure to adhere to these regulations can result in penalties, rejected claims, or even legal action. A sound policy should therefore incorporate coverage for various risks, including damage to goods, theft, accidents, and natural disasters, ensuring that the business is adequately protected against unforeseen circumstances.

Furthermore, businesses must work closely with their insurers to ensure that their policies are comprehensive and tailored to the nature of their operations. Different types of goods, transport routes, and business models present varying levels of risk, and as such, insurance policies should be customised to cover specific needs.

For example, a business involved in the transport of perishable goods may need a more specialised policy that takes into account the potential for spoilage during transit.

Similarly, businesses engaging in international trade may need to ensure their policies cover risks associated with customs clearance and compliance with international shipping laws.

Protect your goods every step of the way with tailored Goods in Transit Insurance. At Step By Step Insurance Agency, we ensure you get comprehensive coverage and expert guidance on navigating the legalities of transit insurance in Kenya.

Reach out today for a free consultation!

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