New rules applicable to Carrier’s Liability Insurance submitted to public consultation by SUSEP

The Superintendence of Private Insurance (“SUSEP”) submitted a draft resolution to public consultation providing for the new rules applicable to Liability Insurance for Cargo Carriers.

The matter had already been the subject of a public consultation in December 2022, through Notice No. 28/2022, however, shortly after publication, Provisional Measure No. 1,153/2022 was published immediately changing the entire dynamics of purchasing road carrier’s liability insurance, which directly impacted the resolution submitted to public consultation.

After Conversion Bill of Provisional Measure No. 10/2023 was processed in Brazil’s National Congress, on June 20, 2023, Law No. 14,599/2023 was published, which established a new contracting regime for civil liability insurance for cargo carriers and cargo insurance, in addition to impacting other practices already established in the market.

As a result, SUSEP identified the need to adjust the draft previously made available in order to adapt it to the new legal provisions. This measure resulted in the submission of the current draft to public consultation, which also complies with SUSEP’s Regulation Plan for 2024, providing for the review of regulations relating to civil liability insurance for cargo carriers within the first half of 2024.

The new draft resolution addresses Civil Liability Insurance Plans for:

• Air Cargo Carriers (RCTA-C);
• Waterway Cargo Carriers (RCA-C);
• Railway Cargo Carriers (RCTF-C);
• Road Cargo Carriers (RCTR-C);
• Multimodal Cargo Transport Operator (RCOTM-C); and
• Road Carriers due to Disappearance of Cargo (RC-DC).

It is worth highlighting, at first, that the draft resolution does not suggest a standardized policy wording, but provides for general guidelines and minimum mandatory elements that must be included in each insurance product, in line with the positioning that has been adopted by SUSEP towards making both the contractual structuring and the creation of insurance products more flexible.

Among the proposed changes, the provisions relating to contracting a single policy linked to the National Registry of Road Cargo Carriers (RNTR-C) for RCTR-C and RC-DC insurance (art. 9, sole paragraph; art. 18, sole paragraph and art. 40, § 4 of the draft) stand out.

This has been a widely debated topic since the publication of Law No. 14,599/2023, which amended art. 13 of Law 11,442/2007 to include § 5 with the following wording:

“§ 5 The insurance provided for in items I and II of the caput of this article will be contracted through a single policy for each type of insurance, per insured person, linked to the respective RNTR-C.”

This is because given the single policy provision, the purchase of RCTR-C and RC-DC insurance policies by the shipper in the name of the carrier is restricted to cases in which the carrier operates for a single shipper, as the insured will no longer be able to maintain more than one RCTR-C and RC-DC policy with the same insurer or another, under penalty of losing the right to insurance compensation and cancellation of the insurance, without any rights to refund of the premium.

With regard to other insurance covered by the draft resolution, art. 39 provides for exceptions to the contracting of a single policy, such as:

1. for situations in which the insured has branches not covered by the main policy and provided that the place where the shipping begins is mentioned in each of the additional policies;
2. when the other additional policies address a certain type of product, not covered by the main policy; or
3. when the amount of the shipment exceeds the Maximum Limit of Guarantee (“MLG”) and the insurer refuses to accept it within the deadlines established in the draft.

As for the RCOTM-C insurance, it is worth noting that it is the only one among the insurance covered by the resolution that provides for deductibles or compulsory participation by the insured (art. 17). In addition, the draft highlights that the RCOTM-C insurance does not replace the mandatory civil liability insurance for carriers of other categories when they are third parties hired by the multimodal carrier operator to carry out the shipment (art. 14).

Also, the draft establishes that if the multimodal cargo transport operator either has its own or leased fleet, in any transport category, it will be exempt from purchasing the respective mandatory insurance (except for RC-DC), if it contracted the RCOTM-C insurance.

Regarding the RC-DC insurance, which is now mandatory under Law No. 14,599/2023, the draft resolution upholds the condition that the theft of the cargo has taken place simultaneously with the vehicle, which, although not provided for in the current law, had been questioned in the explanatory memorandum of Provisional Measure No. 1,153/2022. In addition, the draft now prohibits the provision of deductibles for the coverages listed in art. 19, which was previously permitted by SUSEP Circular No. 422/2011.

We also highlight that the provisions addressing RCTA-C, RCA-C and RCTF-C insurance plans do not introduce innovations, since they provide for similar sections to those contained in the resolutions that currently address this type of insurance and whose repeal is being proposed by the draft under discussion.

Regarding the provisions that are common to all the insurance types covered by the resolution, the draft establishes:

• Prohibition on collective contracting (art. 22): the policy must be individualized per insured.
• Covered risks (arts. 23 to 27): in addition to the damage caused to cargo, the policies will also cover expenses aimed at avoiding loss, mitigating damages or saving goods, up to the limit of the insured amount for the shipment when specific coverage is not contracted; as well as defense costs, when provided for in the contract. Regarding the risks of fire or explosion while storing goods and products by the insured, the draft limits the coverage to only 15 days, except for the RC-DC insurance plan.
• Maximum limit of guarantee (art. 33): the MLG for each shipment must be provided in the policy and the insured must notify the insurer if the operation exceeds this limit within three business days in advance of the shipment date, considering that the insurer must respond within the same deadline, under penalty of implied acceptance.
• Proposal (arts. 36 to 38): the insured must notify the insurer of any changes in the proposal within three business days in advance of the date when the intended change should be effective, considering that the insurer must respond within the same deadline, under penalty of implied acceptance. Regarding the RCTR-C and RC-DC insurance plans, the Risk Management Plan must be agreed upon between the carrier (insured) and the insurer, in a specific document that will not be subject to SUSEP.
• Joint inspection in RCTR-C and RC-DC (art. 50): the deadlines and criteria for carrying out a joint inspection, in the event of a loss, by the insured, shipper and insurers involved, must be provided for in the policy and will prevail over those established in the transport insurance contract executed by the shipper in case of conflicting provisions.
• Compensation (arts. 52 and 53): for mandatory insurance plans, payment of compensation will be made directly by the insurer to the third-party claimant, upon the insured’s knowledge. Depending on the criteria established in the policy, the insurer can authorize the insured to make the payment, reimbursing them within ten business days from the date when the proof of payment was submitted. As for insurance plans that are not legally mandatory, the policy must establish the indemnity payment method – whether by reimbursement, direct payment to a third party, or any other methods chosen.

Regarding the Waiver of Subrogation (“DDR”), widely used by insurers in transport operations, art. 55 of the draft resolution provides that the existence of a clause to this effect, or of any other instrument with the same purpose, does not exempt the contracting of mandatory civil liability insurance for the carrier. SUSEP’s specific approach towards this instrument appears to resolve the controversy that had been created in the market in the sense that such waiver had allegedly been extinguished through Law 14,599/2023, which, in fact, did not happen.

As for the products currently traded, articles 57 and 58 of the draft suggest a period of 180 days for adapting insurance plans to the new rules, noting that RCTR-C and RC-DC insurance plans that are not in compliance will be automatically cancelled.

Finally, the draft proposes that CNSP Resolutions No. 182/2008; No. 183/2008; No. 184/2008; No. 219/2010; No. 247/2011; No. 256/2012; and No. 361/2018 be revoked.

Interested parties can submit contributions to the text via e-mail to cgres.rj@susep.gov.br, and fill in a specific standardized table, by  March 21, 2024.

» Access the full draft of the circular

Demarest’s Insurance, Reinsurance, Health and Private Pension team has been closely monitoring the changes in transport insurance as well as the practices adopted by the market following the publication of Provisional Measure No. 1,153/2022 and of Law No. 14,599/2023, and will continue to monitor this topic through to its final publication, remaining available to provide any further clarifications that may be necessary.