Auto Liability Coverage Comparison between Markel's TBL program and New York Marine's CTLP program

We are asked to compare coverages from time-to-time and I offer the normal disclaimer that any review is subjective and,as such, is subject to the actual terms and conditions of the actual policy in place. One of our agent's asked us to compare the TBL product to Avalon's program with New York Marine so I thought I would add this to the blog to help our agents/ their insureds understand it better . This should help irrespective if the other contingent auto carrier is New York Marine or someone else- as the coverage issues are relative to all carriers. And, more importantly, it makes sense to look at the coverage intentions of each carrier and understand their strenghts and weaknesses as it related to the following coverage interpretation: I will tell you that the folks I know at Avalon are highly professional, and they have done a nice job creating a product called the Combined Transit Liability Program ( CTLP). They also include in one package other coverages and there are several bells and whistles in fringe coverages that are not available elsewhere- but I do not find them material. They also offer extremely cheap pricing so that makes them viewed with some interest by the marketplace. But the buck stops there in my view. While I certainly view the following interpretation as self-serving, I can tell you that Markel's TBL product is far superior in offering coverages for truck brokers versus New York Marine's CTLP. Here is why: •CTLP has policy aggregate of $1,000,000 . Most shippers are looking for auto coverage that has no aggregate. TBL has no aggregate in the current policy- A huge deficiency especially for truck brokers who have a larger sales volume. •CTLP policy form is contingent coverage. TBL is primary coverage. Does an insured want to see if another policy pays before the coverage responds in the current policy? The answer is of course not. •CTLP policy form is geared toward customs brokers. The TBL policy is specific to truck brokers. Not a big deal but there seems to be jargon and ambiguity that is not geared to truck brokers. •The CTLP policy excludes punitive damages. There have been punitive damages claims against truck brokers. The TBL does not exclude punitive damages presently. Obviously a big problem in the CTLP form... •Defense-I cannot tell whether defense costs are in the limits or excluded altogether based on the declarations pages and the coverage form . It does look like defense is optional. TBL is not optional in the current policy form. •CTLP will write specified contractual which is better than TBL. We are working on it. That being said, they exclude claims arising out of any agreement to indemnify which is the basis of most contracts so I feel this is a moot issue. •Pollution is excluded in the CTLP form; it is picked up subject to the terms by the TBL in the current policy. •CTLP has a 6 month claims timeline for turning in a claim under the CTLP form/ TBL does not have that provision •Policy form of CTLP excludes certain commodities- a big deal is the broker would have to pay attention not to broker certain commodities. TBL has no such exclusion. •CTLP policy has a deductible. The current TBL is no deductible. As mentioned the CTLP pricing is better than TBL pricing; however, that is about it except for contractual if they really provide same. -------------------------------------------------------------------------------- So at the end of the day, in my view the CTLP does not provide coverage that either the insured needs, nor does it satisfy the many broker-shipper contracts require. That being said, they sell a good bit of this coverage and I look forward to competing against it. I may have missed something but I do not think so. Again whether it is the CTLP or other coverage, look at the bullets above and make your own analysis.

Compliance, Safety, and Accountability Changes and The Carriers- Is It All Fair?

CSA continues to confound all stakeholders involved in the supply chain. There appears to be a change a month. The truth is CSA is unfair. While this is a purely conjectural statement, it should be noted that CSA is attempting to raise the bar on truck road safety- and that is a good thing. The challenge is that its strategy to raise the bar is to establish a better measurement system for looking at roadside inspection data and driver experiences. The reason why it is unfair is that so many truckers are "not rated" and so it penalizes those truckers who are rated- who might be actually worse than those that are not rated. Until ALL carriers are rated we will never know. The other challenge is that the only way a carrier can clean up his score is to get a clean inspection- so they have to try and get inspected when nothing is wrong. Does not seem to make sense, does it? And to add insult to injury, they keep changing things. I have to look at that as good since the system needs improvement. What people need to stop doing is saying it is irrelevant and any carrier that is approved to operate by DOT is viewed as safe. I can tell you plaintiff's lawyers, trial courts, and the insurance industry- other ancillary stakeholders in the supply chain do not view it that way at all. An insurance underwriter, rightly or wrongly, has established their own benchmarks that they feel their defense attorneys can successfully defend. So keep your eye on CSA, and look at who is doing what. So what changed this time? Our friends at the Central Analysis Bureau said there were the following changes to CSA this past month. They are: 1)The Cargo-Related BASIC is now aligned with the Hazardous Materials (HM) Compliance BASIC 2)The Vehicle Maintenance BASIC has been strengthened by including cargo and load securement violations that were previously in the Cargo-Related BASIC 3)CSA now counts intermodal equipment violations found during drivers’ pre-trip inspections 4)CSA is now trying to align speeding violations to be consistent with current speedometer regulations that require speedometers to be accurate within 5 mph 5)The Fatigued Driving BASIC is no more. The name has been changed to the Hours-of-Service (HOS) Compliance BASIC to more accurately reflect violations contained within the BASIC 6)CSA is now aligning the severity weight of paper and electronic logbook violations equally on the SMS for consistency purposes. The change applies to the prior 24 months of data used by the SMS and all SMS data moving forward. Keep your eyes open for CSA changes so you can help your clients. We will be looking at for changes as well. Some folks say change is good. Let's hope so.

Trends in Shipping that Affect Trucking and Brokerage- CSA

The Council of Supply Chain Management Professionals ( CSCMP) reported that transportation costs are rising. They rose 6.2% in 2011 with different sectors having different results: Railroads- up 15.3% 3PLs and freight forwarding- up 9% Trucking- up 6% Non asset based logistic providers ( including brokers)- up 10.9% Morgan Stanley coincidentally reported that 55% of polled shippers were hesitant to use a carrier that has at least one of its seven Basic scores in an Alert status ( over the threshold). New Hours of Service Rules are estimated decrease driver productivity by 3 to 8% because of the reduction in hours a driver can work in a week. So what does this mean to an insurance underwriter: 1) Everyone in the transportation sector is getting more revenue. Rates are up so if a trucker or broker is having a hard time making money today even with fuel costs, chances are they are not going to be able to sustain their business. 2) Drivers are going to have be paid more per mile or salaried as there will be an continued exodus to other jobs if they cannot get the hours or miles. The only thing helping driver retention is current unemployment but it clear the jobless do not view truck driving as a job solution. 3) Like it or not, CSA is here to stay. The brokers and the truckers want to view any carrier operating as acceptable; however, insurance companies and shippers are looking at it in an entirely different way. There will be a move for better selection while at the same time a suppposed scarcity of qualified truckers.

More Brokerage in Trucking

The Central Analysis Bureau obtained a report from Transport Capital Partners that the use of brokers by truckers as a way to solicit freight is on the increase. Approximately 33% of motor carriers used freight brokers in February, up from 11% at the same time last year. What is really interesting is that 34% of large carriers with at least $25 million in annual revenue used brokers compared to 28% of smaller carriers. It used to be construed that truckers who used truck brokers were getting paid less, and more involved in irregular route business- thus creating a worse insurance risk. That now is simply not the case. Truck Brokers are here to stay.....

The Latest Big Claim Against a Truck Broker Involving Double Brokered Loads- $5.1 Million Paid

Showing you the extended tail of transportation claims, a jury awarded $5.1 million against Heyl Logistics on a 1998 claim- a transportation broker and the driver Daniel Clarey. There are a number of things that make this case auspicious and several takeaways.

1) Double Brokered- Heyl brokered the load to Washington Trucking who brokered it to Daniel Clarey- who unbelievably lacked insurance and operating authority. Then to make things even more less than perfect, Clarey was cited with reckless driving and a DUI.

Takeaway- Look for underwriters of truck broker insurance to require contract language in the broker carrier contract that affirms that they do not allow the carrier to double or rebroker a load. Also look for them to decline immediately any risk that does so.

2) Punitive Damages- The court was sending a clear message of no tolerance and as such assigned $1.68 million directly against Heyl. ( The good news for Heyl is that they later settled for less)

Takeaway- Look for more caution when buying surplus lines casualty coverages that exclude punitive damages- as it is clear than borkers have the exposure.

3) Coverage Tail- We have seen a Lloyds policy and other policies that only allow a claim to be turned in within 24 months of the date of loss. Coverage would have been precluded.

Takeaway- watch for carriers that have a claims-made feature.

Look for the marketplace to get more cautious....

Truck Brokers and Truck Broker Insurance- 101 Part B

I continue to get calls from good folks that simply do not understand what truck brokers are and what insurance they need. While I have addressed this in a more simplistic basis in the past, I thought it made sense to revisit the world of truck brokers. So here you go:

According to industry sources, there are over 24,000 truck brokers. A truck broker is in essence a freight intermediary- linking the shipper to the carrier. Unlike a trucker, they own no assets involved in the transit of freight. What most people do not realize is how many different parties can be involved in the overall transportation of freight- otherwise known as the supply chain.

To illustrate how convoluted the supply chain can get with regard to freight in the supply chain, let's look at an example. As an example, transit of freight could have an ocean liner dropping a container to a third party logistics operation (3PL)-who has it transported by rail to a yard- whereupon a freight forwarder takes it on- and finds another broker -who has the carrier relationships- who in turn finds the trucker to get the freight to its final destination.

Where insurance kicks in is relative to understanding the liability during transit ( and sometimes). That liability that is assumed arises from the bill of lading or tariff along with the contractual liability and legal precedents of tort liability. Today, the insurance on truck brokers is a fledgling work in progress. Many folks confuse a truck broker with a freight forwarder (a freight forwarder is licensed as a motor carrier while a truck broker is not). There are many more truck brokers going into business today than freight forwarders and 3PLs due to the more economical nature of operating as truck broker with just a phone and software- and not assuming a greater legal liability that freight forwarders and 3PLs have and do assume. From a casualty perspective the auto is construed to have the largest exposure while the GL is mostly construed to be a premises exposure- if that. I have never seen a GL loss on a truck broker and candidly have only seen 1 loss for GL for a trucker in my over 25 years in the business. The reason for this is that an auto liability policy ( the motor carrier form) covers the ownership, maintenance and use so it picks up most exposures. Other casualty losses involve professional liability which covers financial loss due to errors and omissions- a growing product.

The cargo insurance demand is probably the second most important insurance and is written on a contingent cargo basis. What is especially odd about this is that statutorially the truck broker has, as an intermediary, no insurable interest in the cargo. However, does that mean the truck broker is not legally responsible for cargo loss anyway? The answer is no in that they sign agreements with shippers that require insurance, require full indemnification, and require waiver of subrogation. While the casualty insurance previously mentioned offers the biggest source of balance sheet protection, the most important insurance to a truck broker is contingent cargo- as the truck broker needs to protect his end client- the shipper. Without that protection, usually a truck broker is unable to obtain freight from that shipper.


Truck brokers come in many shapes and sizes and it is important to understand what they are from bottom to top. Currently truck brokers exist on two basis- one as a standalone operation autonomous to any other transportation operation and secondly as an adjunct to a trucker’s operation. (There are also freight forwarders and 3PLs that have brokerage operations but I do not wish to address that here.) With the recession just over and truck utilization at an all-time high, a trucker would rather be in control of a shipper by having a brokerage operation to assist when all their power units are dedicated and already out on the road.

With respect to insurance, the truck broker operating autonomously is a fairly easy operation to underwrite. A truck broker operating in conjunction with a trucker can have separate authority or have authority in conjunction with a trucker’s existing common and/or contract carrier status. Most truck liability writers have disdain for operations with brokerage authority as they view it as providing coverage for trip leasing.

From an insurance buyer perspective, truck brokers also come in various shape and sizes. To get their authority from the Federal Motor Carrier Safety Administration, truck brokers have to provide a bond of $10,000. This is a pretty easy process but it means a truck broker has to pay to play. From there we see five types of insurance prospects:



• New Truck Broker Operations- no sophistication- only buying insurance for what the shipper requires. Seldom have a broker carrier agreement. Usually only buy contingent cargo although more and more are being required to have contingent auto, contingent cargo, and general liability

• Small truck brokerage operation in conjunction with a trucker- minimal revenue- only buying contingent cargo as well but like new operations are being requested to have coverage for the contingent auto, the contingent cargo and the GL.

• New Operations having experience and sophistication- employing best practices- want all coverages and expect high growth- have both an existing shipper and carrier network- work with industry standard broker carrier agreements.

• Seasoned Operations but no carrier agreement and no best practices- these are “country “ operations that do not have broker carrier agreements or industry best practices but have operated well within their environment. They are irritated as their shipping customers have been demanding insurance and end up buying contingent auto, contingent cargo, and general liability.

• Seasoned operations having experience and sophistication –employing best practices- want all coverages and best coverage and expect growth- employ great broker carrier contracts



The broker carrier contract is a fairly big deal when underwriting truck brokers and a constant work in progress. When we underwrite the contingent cargo, we look for essentially 3 things in the broker carrier contract: indemnification, insurance limits mandated, and that the carrier is responsible for all losses. From a broker liability context, there is a need to have the broker carrier contract coincide with operational best practices and insurance underwriting requirements. Additionally, in any case where the broker can remove liability by requiring the carrier to name the broker as an additional insurable, our desire for writing coverage increases (note most trucking insurance companies do not want to name brokers as additional insureds but we see that changing.)


From an insurance distribution perspective, most insurance agents and MGA’s have no clue about truck brokers and the insurances needed. While some trucking agents are getting better and better, they do not write enough of it to show any proficiency. GTU is able to show proficiency with a daily understanding of the business and how it is evolving.



Insurance Coverage written on truck brokers from greater to lesser are as follows:

• Surety (previously discussed)

• Contingent Cargo

• Contingent Auto or Broker Liability- the fastest growing demand is for this product

• General Liability- no one provides contractual and that is what they are looking for

• E & O- greater interest is in this product- a really necessary product

• Property- primarily limited contents

• XS- more and more are asking for higher limits

Note there is vast interest in Cargo Identity Theft which we provide on a sublimit basis to some of the contingent cargo policies we write.

I hope this helps you have a better comfort of what truck brokers are, what insurance they need, and information that help you be more relevant/provide a value added to your client- the truck broker.

Markel's Professional Liability Insurance for Truck Brokers- Why They Need It and Coverage Intentions

Greetings.

A very new and very interesting insurance product has surfaced for the truck brokers- professional liability. What is fairly compelling about this is it raises the question as to why would a truck broker need professional liability coverage when professional liability for a trucker is not required and never sold? Well, in my view that will change in the future where you see truckers required to have professional liability too. But let's not get the trailer in front of the tractor ( cart before the horse metaphor...).

First of all, let's go back to what the truck broker is buying today ( in order of popularity):

* a broker bond for $10,000
* contingent cargo- most look for the coverage we sell that includes excess, difference in conditions and that includes sublimits for identity theft( no other policies provide) and earned freight
* truck broker liability - this is for best practices firms ( we sell this too so forgive the self-serving commentary) and provides primary coverage versus contingent auto coverage that most brokers need and their shippers require
* general liability - this is for premises and incidental exposures normal to truck broker operations

So why the sudden need for professional liability? Well, both the shippers and the truck brokers have figured out that while there has been a vast improvement of truck broker insurance coverages today versus years ago, it is still early days- meaning that the case precedents against truck brokers have not been completely assessed, examined or assimilated in the marketplace. Furthermore, it is pretty clear what is being covered by the coverages above. Contingent cargo covers the property or cargo loss that results from the failure of the truckers policy to provide coverage. Pretty simple.

The truck broker policy covers the legal liability of the broker for bodily injury, property damage, and pollution for negligence in the supply chain. General liability is like any general liability and it covers the premises and can include miscellaneous operation like sales out of the office. That looks pretty simple too.

So here is the gap. Could a truck broker be legally liable for loss that does not result in bodily injury, property damage, or pollution that is not covered in a TBL or GL policy? Could a truck broker be liable for financial loss that is not the property of others? The answer is you bet.

A professional liability policy covers errors and omissions that are committed during the course of a truck broker's business day. A truck broker may make mistakes while undertaking their work, overlook a critical piece of information, incorrectly state a fact, forget to do something and could be sued by their clients or whatever. This seems reasonable. The fact that a truck brokers is in essence a middleman between the shipper and the carrier can create a completely different exposure than just a carrier dealing directly with a shipper. So the answer is yes they really need coverage and yes they have an exposure that is not certainly not presently insured without buying a professional liability policy

So this is all well and good, but Ben can you be more specific relative to what it covers? While I am learning everyday, Markel has been helpful and teaching me the nuances of professional liability and understanding how it relates to the nuances of truck brokerage operations. Also I should preface any coverage intentions by communicating the usual disclaimer that all claims and coverages are only applicable to the policy in place at the time and certain circumstances or claims details may prejudice the opportunity for coverage to be in force.

So what do I see being covered, the following:

* Misdelivery- You instructed the carrier to deliver the goods to the wrong place
* Miscommunication- You said to the consignee have it there on Thursday when you meant Tuesday
* Regulatory Errors- the truck broker did not know the rules and the load got impounded by a civil authority
* Discrimination- the broker was seen to discriminate against a carrier that he had a long standing contract in favor of another one
* Negligent Hiring- the truck broker hired an incompetant carrier whose deficiencies resulted in financial loss other than bodily injury and property damage and loss of cargo
* Negiligent Acts- standard in professional liability policies
* Negligent Omissions- ditto

Note as well that coverages for professional liability are usually claims made. Deficient programs only offer coverage on claims-made and reported versus Markel's superior coverage of just claims made. Markel also covers punitive damages( where permissible by law), personal injury, disciplinary proceedings, loss of earnings and expense reimbursements- a superior product.


So what is a professional liability not covering? Aside from normal policy terms, conditions and exclusions, it is important to understand that a professional liability policy does not cover:
* the cargo or property lost or damaged in transit - (that's what contingent cargo policies are for).
* bodily injury or property damage- ( that is what the TBL and GL policies are for).

So Ben have you seen a great deal many claims that would have been covered by a professional liability policy? No. But does that not mean they are out there? Are you kidding? Truck brokers are like all humans- there is a general propensity to have errors and omissions in an otherwise perfect day.

And it needs to be considered in the sale of all other insurance coverages. Note when I am asked to consult with a truck broker about the world of truck broker insurance, risk management and the typical exposures, I deal with 4 parties:

* the head of safety- responsible for qualifying and maintaining carriers
* the head of sales- who needs to understand what insurances they have and why they are better when they are trying to secure freight from shippers
* general counsel- the lawyer who has the unenviable task of trying to quantify the risk that is being assumed by the contract the truck broker signs at the shipping letter, and the risk that has been passed on to the carrier in the broker carrier agreement. Then he or she needs to be able to ascertain and communicate to the CFO what the insured versus non-insured risk is
* the CFO- who pencils out whether insurance is needed and what the exposure is for being insured versus uninsured and what it means to the bottom line and the worth of the company.

One other important fact to know when dealing with these parties. The truck broker business is thriving and averaging 15-20% pretax profit. So if you have a broker doing $5 million in revenue he is making usually between $750,000 to $1 million . If they have any retained earnings, their business is worth way, way more than that pretax profit. So when you are discussing something that seems as insignificant as professional liability, the question (and thus the easy answer) is that if you business is worth as much as typical truck broker, why would you not have professional liability coverage that may and often does pick up a coverage gap?


Well the answer is you would have professional liability coverage. So go sell it and help your insured prevail.