Letters of indemnity is used to give protection or coverage to the line or carrier.
Instances where bills of lading are lost or damaged warrant the need for a letter of indemnity.
To have a duplicate set of bills of lading issued, the requesting party needs to provide a letter of indemnity, countersigned by a first-class bank, indemnifying the carrier in full for any costs or liabilities that may arise.
The letter of indemnity shall be unlimited in time and value, due to the unlimited liability for breach of contract that the carrier faces by issuing another set of original bills of lading.
Let us see the circumstances where the Letters of indemnity may be issued for Bill of Lading:
- When a carrier notates an exception on a bill of lading, he may, in certain circumstances, agree to issue a clean bill of lading against a letter of indemnity or guarantee, holding it harmless in case of subsequent claims in the context.
For example, in a shipment of 500 cartons of t-shirts, 498 cartons were received in perfect condition and 2 were slightly torn. There was no apparent damage to the content of the 2 cartons. The carrier may be asked to issue a clean bill of lading in order for the shipper to be able to present documents to the bank under a letter of credit
- When an original bill of lading has been lost or missing, a carrier may agree to issue a duplicate set of the bill of lading to the shipper against a letter of indemnity
- In an import context, a carrier may agree to release a shipment without presentation of the original bill of lading, when it has been delayed or has gone missing, against a letter of indemnity.
Usually, such letters of indemnity are issued and signed by the merchant (shipper or consignee, depending on the circumstances) and countersigned/guaranteed by a bank, although some carriers may require a separate bank guarantee.
