What is L.O.T.T. Insurance and Who is Obligated to Offer It?
Carrier's Civil Liability Insurance, commonly known as L.O.T.T. Insurance (Land Transport Ordinance Law), is a compulsory insurance policy for all carriers providing road freight transport services for remuneration in Spain, where the origin and destination are both within Spain, commonly known as "domestic service".
Its name comes from the Land Transport Ordinance Law (Ley 16/1987), which establishes the rules governing the sector. This law obliges carriers to have minimum coverage to respond to damages they may cause to goods during transport vis-à-vis their shippers/clients.
Its purpose is not to insure the goods, but to cover the carrier's legal liability to the cargo owner.
The most important aspect, and often unknown to shippers, is the indemnity limit. In case of total or partial loss or damage to the goods, L.O.T.T. insurance only covers a maximum amount based on weight, not on the commercial value of the cargo.
The indemnity limit is 6 euros per kilogram of gross weight of the lost or damaged goods.
Practical example:
If you send a pallet of 200 kg with laptops valued at €30,000 and it is lost or damaged, the carrier's L.O.T.T. insurance will compensate you a maximum of:
200 kg x €6/kg = €1,200
This leaves a shortfall of €28,800, which must be borne by your company, demonstrating why this insurance, although mandatory, is insufficient for high-value goods.
What Cargo Does It Cover and What Not?
This insurance covers the loss or physical damage to goods. However, it has important exclusions that you should be aware of before contracting a national freight transport service:
Delays
L.O.T.T. insurance does not cover financial losses arising from delivery delays.
Inadequate Packaging
It does not cover damages caused by deficient packaging on the part of the shipper.
Nature of the Goods
It does not cover damages caused by the inherent nature of the product itself (for example, deterioration of perishable foods).
Force Majeure
It does not cover damages caused by force majeure events (floods, earthquakes, etc.).
Who Does This Insurance Truly Protect?
The answer is clear: it primarily protects the carrier. It allows them to operate legally and covers them against claims from their clients up to the limit established by law. For the cargo owner, it offers minimum coverage that rarely approaches the actual value of the cargo.
To ensure, as the shipper, that your goods are protected throughout the transport process for their full value, all-risk cargo insurance is the perfect and necessary complement. This policy, contracted by you as the shipper, covers the total commercial value of your cargo, without weight limitations.
Remember that there are only these two options:
L.O.T.T. Insurance:
- • Mandatory for the carrier
- • Protects the carrier
- • Limit of €6/kg
All-Risk Insurance:
- • Optional for the shipper
- • Protect your investment
- • Covers the total value of the goods