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.
Friday, February 24, 2012
Monday, February 13, 2012
Hanover Contingent Cargo Best Practices for Broker Carrier Agreements
Hanover has the best coverage in the marketplace- but like so many insurers they want their insureds to exhibit best practices so that losses can be averted and so they can keep their premiums low. Part of those best practices is having the truck broker require better cargo coverage from their carriers.
That is done 2 ways:
•by having a more explicit broker carrier contract
•by requiring that insurance certificates spell out the terms of that contract.
We saw a great insurance provision in a broker carrier contract:
" Carrier shall procure and maintain at its sole cost or expense the following insurance coverages:
All Risk Broad Form Motor Truck Cargo Legal Liability Coverage in an amount not less than $100,000 per occurrence. The coverage provided under the policy shall have no exclusions or restrictions of any type that would forseeably preclude coverage relating to cargo claims including, but not limited to, exclusions for unattended or unattached trailers, theft, or for any commodities transported under this Agreement, refrigeration breakdown or lack of refrigerator fuel. Furthermore, if the commodity being hauled is refrigerated, refrigeration breakdown coverage will be provided and the carrier will honor and abide by the servicing requirements set forth in the insurance policy or endorsement. Furthermore, if the commodity being hauled is on a flatbed or similar open conveyance, that there be no exclusion for wetness, rust, corrosion or moisture"
This is about as good as you can do as a truck broker and you should require a certificate spelling out same
That is done 2 ways:
•by having a more explicit broker carrier contract
•by requiring that insurance certificates spell out the terms of that contract.
We saw a great insurance provision in a broker carrier contract:
" Carrier shall procure and maintain at its sole cost or expense the following insurance coverages:
All Risk Broad Form Motor Truck Cargo Legal Liability Coverage in an amount not less than $100,000 per occurrence. The coverage provided under the policy shall have no exclusions or restrictions of any type that would forseeably preclude coverage relating to cargo claims including, but not limited to, exclusions for unattended or unattached trailers, theft, or for any commodities transported under this Agreement, refrigeration breakdown or lack of refrigerator fuel. Furthermore, if the commodity being hauled is refrigerated, refrigeration breakdown coverage will be provided and the carrier will honor and abide by the servicing requirements set forth in the insurance policy or endorsement. Furthermore, if the commodity being hauled is on a flatbed or similar open conveyance, that there be no exclusion for wetness, rust, corrosion or moisture"
This is about as good as you can do as a truck broker and you should require a certificate spelling out same
Frequently Asked Questions
Revenue- the rating basis for most contingent cargo and truck broker liability policies is revenue.
Q- What revenue do they actually use to determine the revenue? Is it the gross or the net?
A- Well like trucking it is always on a gross basis.
Q- Why should the bill of lading never be in the name of the broker? A- The insured asserts himself as an independent contractor and merely a facilitator of freight that assumes no legal liability. Since the bill of lading sets forth the legal liability during transit, it is very hard for a broker to assume that they were an independent contractor, and thereby absolved from an liability when they are listed as the carrier for hire on the bill of lading. Then there is the representation issue. The FMCSA says the carrier shall issue the bill of lading. That does not mean might, ought to, or that the shipper should put the broker’s name on the bill of lading because he does not know who the carriers name is. Check out federal carrier compliance regulation 49 U.S.C. §80101. If the insured represents himself as the carrier for hire, you can bet it will be very hard to defend in a court of law. Q- Why if a load is double brokered is that bad? A- Double Brokering lends itself to a lack of control in the supply chain and has been known to cause more losses. Part of our underwriting process is that we base our premiums and risk acceptability on an insured’s operations and carrier selection. When cargo is double brokered, neither we nor the broker have any idea with respect to the quality of the carrier, whether there is a written agreement in place, if the broker has insurance, if the carrier has adequate or comprehensive insurance, whether the carrier is upper tier by FMCSA standards, whether there is a unfavorable previous loss history, how long the other broker has known or done business with the other carrier, to name a few of many concerns… Not all double broker situations ( sometimes called co-broker) situations are bad. The broker may be very professional and have a tip-top operation and his own insurance. Double brokering situations exist. Insurance companies don’t like it and some cases it can void coverage in that a contract is required to determine legal liability and in a double brokered situation there may not be on
Contingent Cargo
Is Hijacking terrorism?- while it could be, hijacking would be considered theft in most policies and covered.
Are Illegal Acts Covered- while all cargo and contingent cargo policies are different, we do not see coverage either on a primary cargo or a contingent cargo basis for illegal acts
Hanover Contingent Cargo Coverage-
Q- Are double brokered loads covered?
A- Hanover's intention is to cover most cases where a load would be double brokered unknowingly by the subcontractor originally intended to handle the shipment. Could there be caveats where a double brokered load is not covered? The answer is yes. So if our insured brokers a load to a trucker that he/she has a broker contract with and the BOL and the contract makes them legally liable for the load- and the load is rebrokered. Then there is coverage. I do see other contingent cargo carriers deny losses if the carrier who was intended to haul the load never actually hauled the load- a very big problem. An example where there would not be coverage would be if the insured rebrokers a load to another truck broker who in turn has a trucker that has the BOL in the name of an unknown, non-contracted party, and then Hanover claims would have a problem. Whereas, I believe Hanover's coverage is the industry's broadest, I do not think other contingent cargo insurance carriers would handle this situation in a dissimilar fashion. What we see in the industry is that even companies like CH Robinson, the nation's largest truck broker,are in the rebrokering business. You can bet they think they have the "umbrella" of contingent cargo coverage and do not
Truck Broker Liability and Contingent Auto Liability
Q - Does there need to be a seperate entity for the trucking operation versus truck brokerage Operation:o
A-The hardest part about underwriting brokerage operations in the same name as the trucking operation with their common and/or contract authority is the stacking of limits issue. One of the challenges even though most all policies have other insurance provisions the trucking policy ( usually written on the motor carrier form). One of the challenges is if the brokerage side is integrating the trucking operation into the equation. Typically there is an owned vehicle exclusion ( as owned vehicles are covered in the primary auto) so if the insured is spotting his own trailers in his brokerage operation, he may be thinking he is covered by his brokerage casualty policies- when in fact he is most probably covered by his primary auto policies.
Just another reason to have the brokerage operation in another entity- which the commercial auto underwriters want anyway.....
Q- Does the truck broker liability cover losses where there is no written contract between the broker and the carrier?
A- No, a written agreement is required. While that may sound onerous, in my view it is fair as it establishes the basis for legal liability in the supply chain between a trucker and the truck broker. Food for thought...
Q- Is a written agreement always required for TBL coverage? A- Yes. Here's why: The fact of the matter is that all carriers both large and small do get in at-fault accidents and our broker insured can be exposed as co-defendants, which increases LAE, inclusive of adjustment and investigative expense and legal defense costs. Under CSA, there are big carriers can and are deficient in 2-3 BASICs. So they are not immune from greater scrutiny and liability. Markel views it as literally imprudent to enter into these sorts of transactions without a written agreement. There’s a lot more to it as well than just protecting the broker from liability Q-Is there a deductible for Contingent Auto and Truck Broker Liability? A- No, not at this time. For larger accounts, there is an SIR program starting at $50,000 General Liability
Q- Why is General Liability Even Needed anyway for a truck broker
A- Trucking insurance does not mirror truck brokerage insurance in the former involves the utilization of physical assets and the latter is non-asset based. Truckers buy Auto Liability, Physical Damage, Motor Truck Cargo, GL, Property and WC. Truck Brokers buy Truck Broker Liability, Professional Liability, Contingent Cargo, GL, Property and WC. They are also required to have a bond. Shippers often don’t distinguish between truckers and truck brokers. So they require GL in most cases. It’s valid to require same in that both truck broker liability and contingent auto do not provide premises coverage. GL provides that coverage amongst other coverages.
Q- What revenue do they actually use to determine the revenue? Is it the gross or the net?
A- Well like trucking it is always on a gross basis.
Q- Why should the bill of lading never be in the name of the broker? A- The insured asserts himself as an independent contractor and merely a facilitator of freight that assumes no legal liability. Since the bill of lading sets forth the legal liability during transit, it is very hard for a broker to assume that they were an independent contractor, and thereby absolved from an liability when they are listed as the carrier for hire on the bill of lading. Then there is the representation issue. The FMCSA says the carrier shall issue the bill of lading. That does not mean might, ought to, or that the shipper should put the broker’s name on the bill of lading because he does not know who the carriers name is. Check out federal carrier compliance regulation 49 U.S.C. §80101. If the insured represents himself as the carrier for hire, you can bet it will be very hard to defend in a court of law. Q- Why if a load is double brokered is that bad? A- Double Brokering lends itself to a lack of control in the supply chain and has been known to cause more losses. Part of our underwriting process is that we base our premiums and risk acceptability on an insured’s operations and carrier selection. When cargo is double brokered, neither we nor the broker have any idea with respect to the quality of the carrier, whether there is a written agreement in place, if the broker has insurance, if the carrier has adequate or comprehensive insurance, whether the carrier is upper tier by FMCSA standards, whether there is a unfavorable previous loss history, how long the other broker has known or done business with the other carrier, to name a few of many concerns… Not all double broker situations ( sometimes called co-broker) situations are bad. The broker may be very professional and have a tip-top operation and his own insurance. Double brokering situations exist. Insurance companies don’t like it and some cases it can void coverage in that a contract is required to determine legal liability and in a double brokered situation there may not be on
Contingent Cargo
Is Hijacking terrorism?- while it could be, hijacking would be considered theft in most policies and covered.
Are Illegal Acts Covered- while all cargo and contingent cargo policies are different, we do not see coverage either on a primary cargo or a contingent cargo basis for illegal acts
Hanover Contingent Cargo Coverage-
Q- Are double brokered loads covered?
A- Hanover's intention is to cover most cases where a load would be double brokered unknowingly by the subcontractor originally intended to handle the shipment. Could there be caveats where a double brokered load is not covered? The answer is yes. So if our insured brokers a load to a trucker that he/she has a broker contract with and the BOL and the contract makes them legally liable for the load- and the load is rebrokered. Then there is coverage. I do see other contingent cargo carriers deny losses if the carrier who was intended to haul the load never actually hauled the load- a very big problem. An example where there would not be coverage would be if the insured rebrokers a load to another truck broker who in turn has a trucker that has the BOL in the name of an unknown, non-contracted party, and then Hanover claims would have a problem. Whereas, I believe Hanover's coverage is the industry's broadest, I do not think other contingent cargo insurance carriers would handle this situation in a dissimilar fashion. What we see in the industry is that even companies like CH Robinson, the nation's largest truck broker,are in the rebrokering business. You can bet they think they have the "umbrella" of contingent cargo coverage and do not
Truck Broker Liability and Contingent Auto Liability
Q - Does there need to be a seperate entity for the trucking operation versus truck brokerage Operation:o
A-The hardest part about underwriting brokerage operations in the same name as the trucking operation with their common and/or contract authority is the stacking of limits issue. One of the challenges even though most all policies have other insurance provisions the trucking policy ( usually written on the motor carrier form). One of the challenges is if the brokerage side is integrating the trucking operation into the equation. Typically there is an owned vehicle exclusion ( as owned vehicles are covered in the primary auto) so if the insured is spotting his own trailers in his brokerage operation, he may be thinking he is covered by his brokerage casualty policies- when in fact he is most probably covered by his primary auto policies.
Just another reason to have the brokerage operation in another entity- which the commercial auto underwriters want anyway.....
Q- Does the truck broker liability cover losses where there is no written contract between the broker and the carrier?
A- No, a written agreement is required. While that may sound onerous, in my view it is fair as it establishes the basis for legal liability in the supply chain between a trucker and the truck broker. Food for thought...
Q- Is a written agreement always required for TBL coverage? A- Yes. Here's why: The fact of the matter is that all carriers both large and small do get in at-fault accidents and our broker insured can be exposed as co-defendants, which increases LAE, inclusive of adjustment and investigative expense and legal defense costs. Under CSA, there are big carriers can and are deficient in 2-3 BASICs. So they are not immune from greater scrutiny and liability. Markel views it as literally imprudent to enter into these sorts of transactions without a written agreement. There’s a lot more to it as well than just protecting the broker from liability Q-Is there a deductible for Contingent Auto and Truck Broker Liability? A- No, not at this time. For larger accounts, there is an SIR program starting at $50,000 General Liability
Q- Why is General Liability Even Needed anyway for a truck broker
A- Trucking insurance does not mirror truck brokerage insurance in the former involves the utilization of physical assets and the latter is non-asset based. Truckers buy Auto Liability, Physical Damage, Motor Truck Cargo, GL, Property and WC. Truck Brokers buy Truck Broker Liability, Professional Liability, Contingent Cargo, GL, Property and WC. They are also required to have a bond. Shippers often don’t distinguish between truckers and truck brokers. So they require GL in most cases. It’s valid to require same in that both truck broker liability and contingent auto do not provide premises coverage. GL provides that coverage amongst other coverages.
Markel Broker Carrier Contract Best Practices for HazMat
More and more of our agents recognize the name of the game is for the truck broker to transfer as much insured risk down the supply chain as possible. That means two things:
1) Having a better broker carrier contract
2) Certifying te particulars of the broker carrier contract in an insurance certificate.
Markel is looking for truck brokers that exhibit best practices or are willing to exhibit best practices. Most truck brokers do not want to go to the trouble of changing their obsolete contract so you should help them to understand why they should do same.
For example, we occasionally write incidental haz-mat coverage. The drill with haz-mat is to know what limit is required by the DOT( $1 million or $5 million) and to certify that the carrier has the CA 9948.
What is the CA 9948? It's an ISO endorsement for Pollution Liability-Broadened Coverage for Covered Autos. As pollution is a much bigger exposure and is covered under the Markel Truck Broker Liability Form subject to the terms and conditions, they look to see that a haz mat carrier has sudden and accidental pollution liability coverage provided by the CA9948.
So the contract should state ( obviously a lawyer should incorporate the wording )that if the carrier is hauling haz mat that they will have the necessary limits and also have the CA 9948 sudden and accidental coverage form attached and certify same to the truck broker by insurance certificate.
That way, the broker has protected himself and Markel from being in a primary position for pollution loss.
1) Having a better broker carrier contract
2) Certifying te particulars of the broker carrier contract in an insurance certificate.
Markel is looking for truck brokers that exhibit best practices or are willing to exhibit best practices. Most truck brokers do not want to go to the trouble of changing their obsolete contract so you should help them to understand why they should do same.
For example, we occasionally write incidental haz-mat coverage. The drill with haz-mat is to know what limit is required by the DOT( $1 million or $5 million) and to certify that the carrier has the CA 9948.
What is the CA 9948? It's an ISO endorsement for Pollution Liability-Broadened Coverage for Covered Autos. As pollution is a much bigger exposure and is covered under the Markel Truck Broker Liability Form subject to the terms and conditions, they look to see that a haz mat carrier has sudden and accidental pollution liability coverage provided by the CA9948.
So the contract should state ( obviously a lawyer should incorporate the wording )that if the carrier is hauling haz mat that they will have the necessary limits and also have the CA 9948 sudden and accidental coverage form attached and certify same to the truck broker by insurance certificate.
That way, the broker has protected himself and Markel from being in a primary position for pollution loss.
If Truckers (Carriers) are having more Fatalities, What Does That Mean For The Truck Broker?
It's an 18% jump in trucking fatalities in one year. Imagine how that translates to the higher incidence of injury claims. Candidly, that is not good news for truck brokers either as the loss cost per load has just risen.
In a press release issued Friday, the Truck Safety Coalition says truck crash fatalities rose to nearly 4000 in 2010, from 3,380 casualties in 2009. Citing testimony on November 30 from Federal Motor Carrier Safety Administration Administrator, Anne Ferro, before a House Oversight and Government Reform Subcommittee on the pending truck driver hours of service(HOS) reforms, TSC says the new data supports the position of safety groups, families of truck crash victims,and labor. Those groups have been urging the U.S. Department of Transportation and the Obama Administration to issue a safer truck driver HOS rule to reduce driver fatigue. "This newly released data proves that the 'Trucking Industry Emperor' has no clothes. We already knew that there were no facts or evidence whatsoever that linked the current HOS rule and the recent improvements in truck crash and fatality data. Now it's time for the Obama Administration to do the right thing and protect innocent motorists and truck drivers," said Joan Claybook, Chair of Citizens for Reliable and Safe Highways. The TSC has joined with Advocates for Highway and Auto Safety and other safety groups in sending a letter today to the Office of Management and Budget's Office of Information and Regulatory Affairs Administrator, Cass Sunstein, disputing phony claims by the ATA and urging a new, safer HOS rule.
So if you think the trucking business is going to stay away from further regulation, think again. If you don't think the trucking insurance will be hardening, think twice. And if you think the market for contingent auto liability and truck broker liability will stay the same, you are just not thinking.
And for your clients that are not buying coverage at all, that simply defies logic.
Posted 5th December 2011 by Benji
In a press release issued Friday, the Truck Safety Coalition says truck crash fatalities rose to nearly 4000 in 2010, from 3,380 casualties in 2009. Citing testimony on November 30 from Federal Motor Carrier Safety Administration Administrator, Anne Ferro, before a House Oversight and Government Reform Subcommittee on the pending truck driver hours of service(HOS) reforms, TSC says the new data supports the position of safety groups, families of truck crash victims,and labor. Those groups have been urging the U.S. Department of Transportation and the Obama Administration to issue a safer truck driver HOS rule to reduce driver fatigue. "This newly released data proves that the 'Trucking Industry Emperor' has no clothes. We already knew that there were no facts or evidence whatsoever that linked the current HOS rule and the recent improvements in truck crash and fatality data. Now it's time for the Obama Administration to do the right thing and protect innocent motorists and truck drivers," said Joan Claybook, Chair of Citizens for Reliable and Safe Highways. The TSC has joined with Advocates for Highway and Auto Safety and other safety groups in sending a letter today to the Office of Management and Budget's Office of Information and Regulatory Affairs Administrator, Cass Sunstein, disputing phony claims by the ATA and urging a new, safer HOS rule.
So if you think the trucking business is going to stay away from further regulation, think again. If you don't think the trucking insurance will be hardening, think twice. And if you think the market for contingent auto liability and truck broker liability will stay the same, you are just not thinking.
And for your clients that are not buying coverage at all, that simply defies logic.
Posted 5th December 2011 by Benji
Contingent Cargo Coverage Form Comparison- Hanover versus Essex
Both Hanover and Essex are leading carriers in the contingent cargo space . Hanover is known as the industry leader with the premier policy forms but they will not write every account. That being said, Essex has more limited coverage but will write the tough stuff. We like both carriers and feel they both have a place in the market.
So what are the main differences ( there can obviously be modifications and improvements):
First and foremost, Hanover is a legal liability form subject to terms, conditions and exclusions- so in essense they pay unless it is excluded. Conversely, Essex is a specified perils form. It pays only if the loss meets the definition of specified perils. Since most folks are looking for excess coverage or difference in conditions coverage (DIC), a specifed perils form is not construed to be comprehensive. Hanover offers a comprehensive form.
Other issues:
The exclusions seem to mirrror each other: Civil Authority, Nuclear Hazard, War and Military action, Pollutants, Loss of use, Criminal or Dishonest Acts, Spoilage and Terminal to name most of them. Essex also excludes Wetness and Loading and Unloading
The property covered is a bit more restictive in Essex which excludes eggs, items left for more than 72 hours. Essex usually includes a special theft endorsement that has a sublimit of $5000 for target commodities
Defense costs are covered by Hanover; it appears that Essex is silent with respect to this issue
Essex also has a 100% co-insurance clause on their coverage form.
Obviously coverage is determined by the actual policy being issued but as you can see, Hanover and Essex are an apples versus oranges approach respectively relative to contingent cargo coverage.
For further information, please contact your underwriter.
So what are the main differences ( there can obviously be modifications and improvements):
First and foremost, Hanover is a legal liability form subject to terms, conditions and exclusions- so in essense they pay unless it is excluded. Conversely, Essex is a specified perils form. It pays only if the loss meets the definition of specified perils. Since most folks are looking for excess coverage or difference in conditions coverage (DIC), a specifed perils form is not construed to be comprehensive. Hanover offers a comprehensive form.
Other issues:
The exclusions seem to mirrror each other: Civil Authority, Nuclear Hazard, War and Military action, Pollutants, Loss of use, Criminal or Dishonest Acts, Spoilage and Terminal to name most of them. Essex also excludes Wetness and Loading and Unloading
The property covered is a bit more restictive in Essex which excludes eggs, items left for more than 72 hours. Essex usually includes a special theft endorsement that has a sublimit of $5000 for target commodities
Defense costs are covered by Hanover; it appears that Essex is silent with respect to this issue
Essex also has a 100% co-insurance clause on their coverage form.
Obviously coverage is determined by the actual policy being issued but as you can see, Hanover and Essex are an apples versus oranges approach respectively relative to contingent cargo coverage.
For further information, please contact your underwriter.
Contingent Cargo Coverage Comparison- Lloyds Roanoke versus Hanover
Frequently I am asked to do a coverage comparison on policies due to the technical nature of the business. While any coverage comparison should include a disclaimer that spells out any review is subject to the terms and conditions of the actual policy in force, it is interesting to see the wide array of coverages being sold and the lack of uniformity in the marketplace.
In looking at these two coverage forms, I should point out that I used to work at Lloyds and have a great affinity for their way of doing business. That being said, I have never seen a good contingent cargo policy form out of London. I regret the Lloyds Roanoke form is not a comprehensive form as well.
Interestingly, the Lloyds Roanoke form we see used is sold through Registry Monitoring Insurance Services ( RMIS), a good operation that has had a long history in the insurance certificate monitoring business. We see such services now offered elsewhere with more technological capability. But it was smart of RMIS to offer a product with insurance. It is a shame the product is less than satisfactory.
What I thought made sense is to go over what I see as strenghts along with small deficiencies and big ones :
Strenghts:
•covers road, rail and air
•specifically covers insurer insolvency
•It looks like dishonesty of others is covered which is a big deal
•Freight charges included
•10% debris removal
Small Deficiencies:
•Policy period is mentioned as annual but is cancelable anytime with notice. So if the insured has a bunch of losses and gets canceled midway through the policy period, they are in trouble.
•Limit is subject to annual aggregate- While it is highly unlikely, I have never seen a cargo carrier have an annual aggregate and would be surprised if certificate holders ( shippers) like that.
•Insured expenses over the limit not covered.
•the wording is convoluted which is typical out of London- Take " only while the subject-matter insured". Not sure what that means and it is not defined.
•deductible is higher than industry standards.
Big Deficiencies:
•Commodity exclusions- I have never seen such a large list of commodity exclusions. That puts additional pressure on any insured to make sure #1 that they are not only being asked to broker any excluded commodities ( such as tobacco products, electronics. etc..) but also #2 they have not agreed to imdemnify the shippers for that excluded commodity
•72 hour limitation if commodity at one location
•Dampness exclusions- basically means that if you are hauling flatbed, you are not going to pick up the main exposure to loss
•Unattended vehicle exclusion- a known big problem
•Excludes Refrigeration breakdown on any trailer over 10 years old
•No Excess insurance provided. Only pays up to the limit or sublimit of the primary carrier
•No Difference in Conditions Coverage provided- it is the main coverage a shipper and an insured is looking for
The Hanover form offers a nice solution for all the big deficiencies in the Lloyds Roanoke form and also offers coverage for an additional premium for spoilage, E & O, and identity theft- a very big deal. It candidly is why brokers buy insurance in the marketplace. The Lloyds Roanoke form is known disparigingly in the marketplace as a "following form" policy. While I am not sure that is fair, it certainly has its limitations.
I understand a lot of brokers are buying the Lloyds Roanoke form. I am not sure why with all these issues....
As always, this is simply one viewpoint but I suggest your insured and your agents do their homework.
Posted 24th October 2011 by Benji
In looking at these two coverage forms, I should point out that I used to work at Lloyds and have a great affinity for their way of doing business. That being said, I have never seen a good contingent cargo policy form out of London. I regret the Lloyds Roanoke form is not a comprehensive form as well.
Interestingly, the Lloyds Roanoke form we see used is sold through Registry Monitoring Insurance Services ( RMIS), a good operation that has had a long history in the insurance certificate monitoring business. We see such services now offered elsewhere with more technological capability. But it was smart of RMIS to offer a product with insurance. It is a shame the product is less than satisfactory.
What I thought made sense is to go over what I see as strenghts along with small deficiencies and big ones :
Strenghts:
•covers road, rail and air
•specifically covers insurer insolvency
•It looks like dishonesty of others is covered which is a big deal
•Freight charges included
•10% debris removal
Small Deficiencies:
•Policy period is mentioned as annual but is cancelable anytime with notice. So if the insured has a bunch of losses and gets canceled midway through the policy period, they are in trouble.
•Limit is subject to annual aggregate- While it is highly unlikely, I have never seen a cargo carrier have an annual aggregate and would be surprised if certificate holders ( shippers) like that.
•Insured expenses over the limit not covered.
•the wording is convoluted which is typical out of London- Take " only while the subject-matter insured". Not sure what that means and it is not defined.
•deductible is higher than industry standards.
Big Deficiencies:
•Commodity exclusions- I have never seen such a large list of commodity exclusions. That puts additional pressure on any insured to make sure #1 that they are not only being asked to broker any excluded commodities ( such as tobacco products, electronics. etc..) but also #2 they have not agreed to imdemnify the shippers for that excluded commodity
•72 hour limitation if commodity at one location
•Dampness exclusions- basically means that if you are hauling flatbed, you are not going to pick up the main exposure to loss
•Unattended vehicle exclusion- a known big problem
•Excludes Refrigeration breakdown on any trailer over 10 years old
•No Excess insurance provided. Only pays up to the limit or sublimit of the primary carrier
•No Difference in Conditions Coverage provided- it is the main coverage a shipper and an insured is looking for
The Hanover form offers a nice solution for all the big deficiencies in the Lloyds Roanoke form and also offers coverage for an additional premium for spoilage, E & O, and identity theft- a very big deal. It candidly is why brokers buy insurance in the marketplace. The Lloyds Roanoke form is known disparigingly in the marketplace as a "following form" policy. While I am not sure that is fair, it certainly has its limitations.
I understand a lot of brokers are buying the Lloyds Roanoke form. I am not sure why with all these issues....
As always, this is simply one viewpoint but I suggest your insured and your agents do their homework.
Posted 24th October 2011 by Benji
What Contingent Cargo Insurance Actually Is
We often get asked what contingent cargo insurance actually is. While we think it is pretty simple, it is not really easy for those that are not in that space every day.
As an underwriter of this coverage, I feel you get specificity and a better definition by actually looking at the insuring agreement and property covered by a specific policy.
Contingent Cargo is designed to cover property in vehicles for which the insured ( usually a truck broker) and their subcontractor ( usually a trucker/ carrier) are legally liable for direct physical loss or damage to property of others in the due course of transit. That is pretty simple.
Contingent Cargo coverage is triggered by the inability to collect from the subcontractor's insurer. That inability should be based on 3 reasons:
1) the subcontractor's insurance policy was canceled or non-renewed
2) the subcontractor's insurance policy limits were insufficient to cover the loss
3) the loss or damage is excluded under the terms of the subcontractor's insurance policy
That's pretty simple too.
It is typically a condition of coverage that the insured must obtain evidence of motor truck cargo legal liability insurance( MTC) AND that those MTC limits are equal to or greater than the subcontractor's legal liability.
We see a good many policies that have commodity exclusions or terms and conditions that invite agent error and omissions ( unattended vehicle warranty as an example). Most insurance policies do not cover 2) and 3) above. These are known as following form policies and we are surprised that they are allowed to be sold.
Fortunately we offer preferred contingent cargo products that do not have these limitations- if the insured is willing to be a "best practices" operation. The first place to start a review of a potential insured is to look at their broker carrier contract and make sure that they have the following:
* adequate insurance limits for the load
* indemnification of the insured
* waiver of subrogration
We hope this helps you and offers a matter-of-fact way of looking at this important coverage
As an underwriter of this coverage, I feel you get specificity and a better definition by actually looking at the insuring agreement and property covered by a specific policy.
Contingent Cargo is designed to cover property in vehicles for which the insured ( usually a truck broker) and their subcontractor ( usually a trucker/ carrier) are legally liable for direct physical loss or damage to property of others in the due course of transit. That is pretty simple.
Contingent Cargo coverage is triggered by the inability to collect from the subcontractor's insurer. That inability should be based on 3 reasons:
1) the subcontractor's insurance policy was canceled or non-renewed
2) the subcontractor's insurance policy limits were insufficient to cover the loss
3) the loss or damage is excluded under the terms of the subcontractor's insurance policy
That's pretty simple too.
It is typically a condition of coverage that the insured must obtain evidence of motor truck cargo legal liability insurance( MTC) AND that those MTC limits are equal to or greater than the subcontractor's legal liability.
We see a good many policies that have commodity exclusions or terms and conditions that invite agent error and omissions ( unattended vehicle warranty as an example). Most insurance policies do not cover 2) and 3) above. These are known as following form policies and we are surprised that they are allowed to be sold.
Fortunately we offer preferred contingent cargo products that do not have these limitations- if the insured is willing to be a "best practices" operation. The first place to start a review of a potential insured is to look at their broker carrier contract and make sure that they have the following:
* adequate insurance limits for the load
* indemnification of the insured
* waiver of subrogration
We hope this helps you and offers a matter-of-fact way of looking at this important coverage
Truck Broker Best Practices For Insurance
Why should a truck broker care to exhibit insurance best practices in the first place? Well, the answer is easy frankly and dovetails the reason they bought insurance coverage in the first place- risk management, sales and ultimately profitability. By exhibiting insurance best practices, a truck broker will minimize their loss or claims potential which translates positively to the bottom line by holding down insurance premium costs- and just as important minimize potential conflicts with their shippers and their truckers.
So what is the first and most important requirement
A Very Good Broker Carrier Contract Used In All Transactions- amongst other things it should spell out the following:
1.the carrier is undertaking carriage under the motor carriers own FMCSA authority
2.that the carriers has a minimum of $1,000,000 in commercial auto liability insurance and the highest limit for any load of motor truck cargo
3.Has indemnification agreements and waiver of subrogration provisions
4.Stipulates that no double brokering is allowed or sanctioned
5.Confirms that the bill of lading or the contract of carriage is in the carriers name and not the broker's name
6.That the insurance covers all vehicles whether scheduled or not
7.the carrier's commercial auto and general liability insurance policy names the broker as additional insured
The next set of best practices has to do with operations:
Operational Best Practices
1.While a broker may request a delivery timeframe , they do not mandate same.
2.The broker states that delivery, pick up dates and hours will not require the motor carrier to violate hours of service regulations and that routing instructions, if any, are for informational purposes only.
3.the broker only uses authorized carriers where prequalification is in file before a load is rejected
4.The broker periodically reviews each carrier to obtain credit, proof of insurance, CSA scores are not at a ! threshold, and that there is an overall safety evaluation
Other best practices:
Carrier Insurance- the broker has written evidence in each file
1.The broker requires all motor carriers to have proof of liability insurance and names the broker as an additional insured and waive subrogration
2.the broker always requires carrier motor truck cargo(MTC) insurance for the limit of the cargo being hauled and what the broker is legally liable for
3.that the MTC insurance has conditions or warranties that would preclude coverage under circumstance and that the commodity being hauled is not excluded from coverage or limited in coverage
4.For refrigerated shipments, that the carrier maintains and has written maintenance agreements on all reefer trailers as required by his insurance to comply with refrigeration breakdown provisions ( it is assumed you will mandate refrigeration breakdown coverage for all reefer loads)
5.For flatbed shipments, that the carrier has no exclusions for wetness, dampness or moisture and that he has tarps in good condition ( it is assumed that the broker will mandate wetness coverage and is legally responsible for same)
6.When the broker is responsible for loading and unloading, that the Certificate of Insurance ( COI) includes coverage for same
7.Add the broker as an additional insured
Carrier Files - the broker has a file on every carrier that includes:
1.the broker-carrier agreement previously mentioned
2.insurance information previously mentioned
3.copy of the carrier operating authority
4.Safer licensing and Insurance- BMC 91-X
5.Safety rating- BASIC scores
6.copy of insurance policy
Best Practices are changing daily for truck brokers. Why not set a standard that helps you be more professional and mitigate loss?
At the end of the day you will get more business because of it.
Posted 8th April 2011 by Benji
So what is the first and most important requirement
A Very Good Broker Carrier Contract Used In All Transactions- amongst other things it should spell out the following:
1.the carrier is undertaking carriage under the motor carriers own FMCSA authority
2.that the carriers has a minimum of $1,000,000 in commercial auto liability insurance and the highest limit for any load of motor truck cargo
3.Has indemnification agreements and waiver of subrogration provisions
4.Stipulates that no double brokering is allowed or sanctioned
5.Confirms that the bill of lading or the contract of carriage is in the carriers name and not the broker's name
6.That the insurance covers all vehicles whether scheduled or not
7.the carrier's commercial auto and general liability insurance policy names the broker as additional insured
The next set of best practices has to do with operations:
Operational Best Practices
1.While a broker may request a delivery timeframe , they do not mandate same.
2.The broker states that delivery, pick up dates and hours will not require the motor carrier to violate hours of service regulations and that routing instructions, if any, are for informational purposes only.
3.the broker only uses authorized carriers where prequalification is in file before a load is rejected
4.The broker periodically reviews each carrier to obtain credit, proof of insurance, CSA scores are not at a ! threshold, and that there is an overall safety evaluation
Other best practices:
Carrier Insurance- the broker has written evidence in each file
1.The broker requires all motor carriers to have proof of liability insurance and names the broker as an additional insured and waive subrogration
2.the broker always requires carrier motor truck cargo(MTC) insurance for the limit of the cargo being hauled and what the broker is legally liable for
3.that the MTC insurance has conditions or warranties that would preclude coverage under circumstance and that the commodity being hauled is not excluded from coverage or limited in coverage
4.For refrigerated shipments, that the carrier maintains and has written maintenance agreements on all reefer trailers as required by his insurance to comply with refrigeration breakdown provisions ( it is assumed you will mandate refrigeration breakdown coverage for all reefer loads)
5.For flatbed shipments, that the carrier has no exclusions for wetness, dampness or moisture and that he has tarps in good condition ( it is assumed that the broker will mandate wetness coverage and is legally responsible for same)
6.When the broker is responsible for loading and unloading, that the Certificate of Insurance ( COI) includes coverage for same
7.Add the broker as an additional insured
Carrier Files - the broker has a file on every carrier that includes:
1.the broker-carrier agreement previously mentioned
2.insurance information previously mentioned
3.copy of the carrier operating authority
4.Safer licensing and Insurance- BMC 91-X
5.Safety rating- BASIC scores
6.copy of insurance policy
Best Practices are changing daily for truck brokers. Why not set a standard that helps you be more professional and mitigate loss?
At the end of the day you will get more business because of it.
Posted 8th April 2011 by Benji
Why Truck Brokers Need Insurance
Not unlike trucking companies, truck brokers, although not operating as an asset based carrier, need insurance too.
Why?
Even tough they are not liable through federal statute, truck brokers deal with both shippers (their customers) and trucking companies ( their vendors). Typically the truck broker has to sign a broker-shipper agreement which makes them legally responsible for the auto liability and motor truck cargo exposures as they arrange shipments on behalf of the shipper. Sometimes the shipper will require the truck broker to have general liability coverage- where there is minimal exposure. Those contractural requirements necessitate insurance.
There is a growing trend on behalf of the shipping community to be added as an additional insured and also provide a waiver of subrogation. They frequently make requests now of truck brokers' insurance carriers to be added to their truck broker liability policy ( formerly known as contingent auto coverage) along with a request on the other coverages.
What is odd that the lawyers doing the contracts do not understand that adding a shipper to a motor truck cargo policy is a mistake. Motor truck cargo is third party legal liability for goods under your care custody and control. So the truck broker is legally liable to the shipper- no different than a trucker would be. So adding a shipper to an MTC policy in essence negates coverage as a shipper cannot be legally liable to themselves. A solution is to add them as a loss payee.
So no unlike other insurances, truck brokers buy insurance, primarilly truck broker liability and contingent cargo insurance to protect their balance sheets from their legal liability exposure. That is risk management 101.
But also since the truck broker has insurance, it becomes a sales tool. Since the truck broker is involved in moving freight down the supply chain, they provide a better product to the shipper- in that they have insurance and they also confirm the trucker has insurance. So if the shipper was just dealing with the trucker, there is only one policy available to protect their mutual interest. If a truck broker is involved in the supply chain there are now two policies. That is a sales opportunity.
Why?
Even tough they are not liable through federal statute, truck brokers deal with both shippers (their customers) and trucking companies ( their vendors). Typically the truck broker has to sign a broker-shipper agreement which makes them legally responsible for the auto liability and motor truck cargo exposures as they arrange shipments on behalf of the shipper. Sometimes the shipper will require the truck broker to have general liability coverage- where there is minimal exposure. Those contractural requirements necessitate insurance.
There is a growing trend on behalf of the shipping community to be added as an additional insured and also provide a waiver of subrogation. They frequently make requests now of truck brokers' insurance carriers to be added to their truck broker liability policy ( formerly known as contingent auto coverage) along with a request on the other coverages.
What is odd that the lawyers doing the contracts do not understand that adding a shipper to a motor truck cargo policy is a mistake. Motor truck cargo is third party legal liability for goods under your care custody and control. So the truck broker is legally liable to the shipper- no different than a trucker would be. So adding a shipper to an MTC policy in essence negates coverage as a shipper cannot be legally liable to themselves. A solution is to add them as a loss payee.
So no unlike other insurances, truck brokers buy insurance, primarilly truck broker liability and contingent cargo insurance to protect their balance sheets from their legal liability exposure. That is risk management 101.
But also since the truck broker has insurance, it becomes a sales tool. Since the truck broker is involved in moving freight down the supply chain, they provide a better product to the shipper- in that they have insurance and they also confirm the trucker has insurance. So if the shipper was just dealing with the trucker, there is only one policy available to protect their mutual interest. If a truck broker is involved in the supply chain there are now two policies. That is a sales opportunity.
Truck Broker Liability Legal Precedents
What is peculiar about insurance sometimes is that sometimes there needs to be communicated where the losses could happen- ergo the legal precedents. It is important to understand that broker liability is a developing area, not a mature area of the law. This exercise and narrative below will simply prove the need for coverage.
As relates to truck brokers, the insurance coverages being offered today in the marketplace vary from truck broker liability ( viewed as the best coverage available today) to hired and non-owned to contingent auto liability. The bottom line is that there is a growing trend on behalf of plaintiff's attorneys to show both malfeasance and tort liability in truck brokers'operations- specifically as it relates to carrier selection.
Case # 1 Shramm versus Foster (Maryland )-2004
This is the case that changed everything. Prior to this case being tried there was no known legal precedent establishing and confirming liability on behalf of the broker.
In Schramm, C. H. Robinson (CHR) was a 3PL specializing in brokering the shipment of goods. CHR did not own or maintain equipment but matched shippers with motor carriers who did own and operate equipment. Robinson had brokerage contracts whereby truckers ( carriers) agreed to haul loads on behalf of shippers. CHR's promotion material provided that CHR was the one point of contact in its services to shippers. The promotional material also asserted that CHR only worked with motor carriers with adequate insurance. Finally their "promotional" material stated that they had excess liability to pay for damages in the event of exhaustion of a carriers insurance limits. As you will see, their advertising and marketing materials ended up hampering their defense in this case.
The trucker that CHR hired was an authorized motor carrier. This carrier unfortunately ran an intersection and hit a pickup truck and caused severe injury with irreparable neurological damage. The driver had been driving over the maximum hours allowed by law..
CHR's defense successfully confirmed with the court that CHR was not liable for damages under the Motor Carrier Act or for Federal Motor Safety Violations. CHR also successfully averted liability under negligence/ respondeat superior that Robinson was an agent of the driver. ( there was no written agreement between the driver, the trucker and CHR- basically confirming the agreement that the trucking company and driver were independent of CHR ). That is the good news that came out of this case.
The bad news is that the court found CHR liable for negligent hiring of an independent contractor. The reason for this is that CHR did not use reasonable care in their selection of a carrier. What is too bad is that even though Safestat had a threshold at the time that a score of 75 or below was satisfactory, the trucker CHR hired had a score of 74!
In the Schramm case, CHR only lost the negligent hiring aspect of the case- but that was enough to start the precedent of broker liability.
See more complete information on this case based on the link below:
http://www.sfl-legal.com/Recent%2005/SchrammvFoster.htm
Whereas Schramm is the decision that changed the game, there are other legal precedents where tort liability was established against the truck broker. In these cases, this involved defendent C. H. Robinson ( the nations largest truck broker). Likewise, I would be stunned if CHR is still doing business ( i. e. carrier selection and risk management) the same way today as they were prior to these claims, judgements, and loss payments.
Case # 2- Jones versus D'Souza ( Virginia)-2007
This case involves another unfortunate death claim where CH Robinson brokered a load to a trucking company whose driver crossed the median and hit another tractor trailer.
Like Schramm was able to successfully defend their claim that they were not:
•Negligent per se
•Violated conditions relative to the Motor Carrier Act
C. H. Robinson lost however specifically the negligent nuances of negligent hiring and negligent entrustment. What is interesting is that even though the negligent trucker was deemed to be an independent contractor supported by a contractural arrangement of same with a motor carrier, the court still deemed that the trucker should not have been hired nor should CH Robinson have entrusted the load to such a potentially high risk trucker. By the way the trucker had a conditional DOT.
See link below for a more eloquent analysis of this case:
http://www.forwarderlaw.com/library/view.php?article_id=474
Case # 3- Sperl versus Henry (Illinois) -2009
This case got a lot of peoples attention. Two reasons:
1.It again involved C. H. Robinson
2.The jury verdict against CH Robinson was $24,000,000 ( almost)
The case involved another death claim. This time the tractor trailer involved rear-ended a number of private passenger cars involving injury and death. And to add insult to that injury, the trucker hired by Robinson had previously been fined for falsifying hours of service log books and had a lapsed drivers license. Unlike the Jones v. Souza case, the jury failed to rule in any favor to CH Robinson. Basically the jury found that C.H. Robinson was vicariously liable and had been involved in negligent hiring.
So what theories were proved here
•Vicarious liability. C. H. Robinson was held liable for the acts of a third party as if C. H. Robinson was driving and operating the truck. There need not be any direct relationship between the parties, and their mere involvement in certain, often hazardous, transactions render them liable.
•Negligent hiring of a subcontractor. C. H Robinson failed to ascertain that the carrier was properly qualified to undertake the move.The lapsed state of the driver's license most certainly was a factor in establishing liability.
Another link that offers a better perspective:
http://www.truckline.com/AdvIssues/Litigation/2009%20Forum%20Documents/Trends%20in%20Damage%20Awards/CH%20Robinson%20for%20ATA.pdf
So if an insurance agent or truck broker tells you that they believe it is not worth the expense to have insurance coverage, we believe this article and these legal precedents will prove to the contrary. Aside from insurance, it is important to employ best practices in carrier selection.
At the end of the day, an insurance agent and insurance company have to prove both their viability and relevance to the end customer. We suggest you prove yourself here.
Posted 29th December 2010 by Benji
As relates to truck brokers, the insurance coverages being offered today in the marketplace vary from truck broker liability ( viewed as the best coverage available today) to hired and non-owned to contingent auto liability. The bottom line is that there is a growing trend on behalf of plaintiff's attorneys to show both malfeasance and tort liability in truck brokers'operations- specifically as it relates to carrier selection.
Case # 1 Shramm versus Foster (Maryland )-2004
This is the case that changed everything. Prior to this case being tried there was no known legal precedent establishing and confirming liability on behalf of the broker.
In Schramm, C. H. Robinson (CHR) was a 3PL specializing in brokering the shipment of goods. CHR did not own or maintain equipment but matched shippers with motor carriers who did own and operate equipment. Robinson had brokerage contracts whereby truckers ( carriers) agreed to haul loads on behalf of shippers. CHR's promotion material provided that CHR was the one point of contact in its services to shippers. The promotional material also asserted that CHR only worked with motor carriers with adequate insurance. Finally their "promotional" material stated that they had excess liability to pay for damages in the event of exhaustion of a carriers insurance limits. As you will see, their advertising and marketing materials ended up hampering their defense in this case.
The trucker that CHR hired was an authorized motor carrier. This carrier unfortunately ran an intersection and hit a pickup truck and caused severe injury with irreparable neurological damage. The driver had been driving over the maximum hours allowed by law..
CHR's defense successfully confirmed with the court that CHR was not liable for damages under the Motor Carrier Act or for Federal Motor Safety Violations. CHR also successfully averted liability under negligence/ respondeat superior that Robinson was an agent of the driver. ( there was no written agreement between the driver, the trucker and CHR- basically confirming the agreement that the trucking company and driver were independent of CHR ). That is the good news that came out of this case.
The bad news is that the court found CHR liable for negligent hiring of an independent contractor. The reason for this is that CHR did not use reasonable care in their selection of a carrier. What is too bad is that even though Safestat had a threshold at the time that a score of 75 or below was satisfactory, the trucker CHR hired had a score of 74!
In the Schramm case, CHR only lost the negligent hiring aspect of the case- but that was enough to start the precedent of broker liability.
See more complete information on this case based on the link below:
http://www.sfl-legal.com/Recent%2005/SchrammvFoster.htm
Whereas Schramm is the decision that changed the game, there are other legal precedents where tort liability was established against the truck broker. In these cases, this involved defendent C. H. Robinson ( the nations largest truck broker). Likewise, I would be stunned if CHR is still doing business ( i. e. carrier selection and risk management) the same way today as they were prior to these claims, judgements, and loss payments.
Case # 2- Jones versus D'Souza ( Virginia)-2007
This case involves another unfortunate death claim where CH Robinson brokered a load to a trucking company whose driver crossed the median and hit another tractor trailer.
Like Schramm was able to successfully defend their claim that they were not:
•Negligent per se
•Violated conditions relative to the Motor Carrier Act
C. H. Robinson lost however specifically the negligent nuances of negligent hiring and negligent entrustment. What is interesting is that even though the negligent trucker was deemed to be an independent contractor supported by a contractural arrangement of same with a motor carrier, the court still deemed that the trucker should not have been hired nor should CH Robinson have entrusted the load to such a potentially high risk trucker. By the way the trucker had a conditional DOT.
See link below for a more eloquent analysis of this case:
http://www.forwarderlaw.com/library/view.php?article_id=474
Case # 3- Sperl versus Henry (Illinois) -2009
This case got a lot of peoples attention. Two reasons:
1.It again involved C. H. Robinson
2.The jury verdict against CH Robinson was $24,000,000 ( almost)
The case involved another death claim. This time the tractor trailer involved rear-ended a number of private passenger cars involving injury and death. And to add insult to that injury, the trucker hired by Robinson had previously been fined for falsifying hours of service log books and had a lapsed drivers license. Unlike the Jones v. Souza case, the jury failed to rule in any favor to CH Robinson. Basically the jury found that C.H. Robinson was vicariously liable and had been involved in negligent hiring.
So what theories were proved here
•Vicarious liability. C. H. Robinson was held liable for the acts of a third party as if C. H. Robinson was driving and operating the truck. There need not be any direct relationship between the parties, and their mere involvement in certain, often hazardous, transactions render them liable.
•Negligent hiring of a subcontractor. C. H Robinson failed to ascertain that the carrier was properly qualified to undertake the move.The lapsed state of the driver's license most certainly was a factor in establishing liability.
Another link that offers a better perspective:
http://www.truckline.com/AdvIssues/Litigation/2009%20Forum%20Documents/Trends%20in%20Damage%20Awards/CH%20Robinson%20for%20ATA.pdf
So if an insurance agent or truck broker tells you that they believe it is not worth the expense to have insurance coverage, we believe this article and these legal precedents will prove to the contrary. Aside from insurance, it is important to employ best practices in carrier selection.
At the end of the day, an insurance agent and insurance company have to prove both their viability and relevance to the end customer. We suggest you prove yourself here.
Posted 29th December 2010 by Benji
Freight Forwarder Versus Truck Broker- Know the Difference and Why it's Important
A freight forwarder is a common carrier under the law and with the Federal Motor Carrier Safety Administration (FMCSA). A freight forwarder has the same auto and cargo insurance and claims responsibility as that of a motor carrier.
A broker is not a carrier. Brokers arrange transportation with a carrier, either on behalf of the shipper or behalf of the carrier. Under the law, brokers are not statutorily responsible for loss or damage and cannot issue their own bills of lading with their name in the carrier field.
Freight forwarders handle losses directly. Conversely, Truck brokers typically forward freight claims onto the trucker who turns it into their insurance carrier for handling.
As you might guess, freight forwarder insurance is generally more expensive than insurance for truck brokers.
The truck broker has no liability under statute for loss; however, they often pick up a potential liability exposure when they execute a contract with a shipper.
How do you tell which is which? A freight forwarder is licensed with a FF# and a truck broker is licensed with an MC#.
Now you know....
A broker is not a carrier. Brokers arrange transportation with a carrier, either on behalf of the shipper or behalf of the carrier. Under the law, brokers are not statutorily responsible for loss or damage and cannot issue their own bills of lading with their name in the carrier field.
Freight forwarders handle losses directly. Conversely, Truck brokers typically forward freight claims onto the trucker who turns it into their insurance carrier for handling.
As you might guess, freight forwarder insurance is generally more expensive than insurance for truck brokers.
The truck broker has no liability under statute for loss; however, they often pick up a potential liability exposure when they execute a contract with a shipper.
How do you tell which is which? A freight forwarder is licensed with a FF# and a truck broker is licensed with an MC#.
Now you know....
Lloyds Contingent Auto Liability (CAL) versus Markel Truck Broker Liability (TBL)
We are asked nearly everyday to describe the differences between contingent auto liability and truck broker liability. It's a fair request but it is important to look at the history of coverage for truck brokers.
Heretofore, at this time last year, there was only contingent auto liability with one exception, the Chartis program of primary truck broker liability. That program evolved out of the need to insure truck brokers on a primary basis- as many agents in the insurance marketplace felt the conventional CAL programs ( like Lloyds) did not cover much. The problem with the Chartis program is that it was only designed for the largest truck brokers and the minimum premium was too large for the average sized truck broker to consider.
That changed with the Markel program which was designed for all truck brokers. At the same time, shipper's demands on truckers and trucker brokers also changed. Shippers have gotten much more educated relative to coverages and they want a truck broker to have several things:
•to have primary coverage
•to add the shipper as an additional insured
•to defend the insured ( and the shipper if named as an additional insured) irrespective if the trucker's coverage defended or not
•to waive subrogration
Is the Lloyds' CAL program worthless as the marketplace thinks it is? Absolutely not.
Is Lloyds' CAL coverage as good as Markel's TBL coverage? Absolutely not.
Let's look at some of the differences:
Lloyds' CAL " Pays of behalf of the insured damages resulting from auto liability that may arise on a contingent basis"
Markel TBL- " We will pay those sums an insured becomes legally obligated to pay because of bodily injury or property damage resulting from the ownership, maintenance and use including loading and unloading of an auto and arising out of the the insureds operations as a transportation broker.
Discussion: Note the TBL does not mention being contingent as therefore primary coverage ( a very big deal) and is in essence a hybrid policy( GL & Auto) covering a truck brokers liability arising out of a auto claim on behalf of a trucker the insured brokers to. The TBL's wording comes straight out of an ISO commercial auto policy.
Big Differences:
There are specific conditions that could negate coverage for an insured under the Lloyds CAL policy that are not present in the Markel TBL policy
•Certificate of Insurance ( COI) or Verbal Checklist- this is a condition of coverage under the CAL and without same there is no coverage. The Markel TBL has no such condition so if the insured accidentally misses one and there is a loss, there would be coverage. ( I need to say that Markel asks the question if the insured gets a COI on each trucker in the application process.)
•Double Brokered Loads- any occurence sustained by a motor carrier whom the insured has entrusted shipment is covered. Unfortunately if a trucker double brokers the load, there is no coverage because the trucker has entrusted shipment to only one trucker usually. Note Markel has no such exclusion in the TBL
•Defense/ Duty to Defend- Both programs have a duty to defend except the Lloyds CAL will not defiend if there is other valid insurance. So a truck broker could be sued and not defended if the truckers coverage is providing defense. A big deal.
•Commodites Excluded- explosives, gas, acid , liquified petroleum. There are no such exclusions under the TBL.
•Errors & Omissions are excluded under the CAL. The TBL does exclude professional services. Note we are seeing more and more requests for stand-alone E & O Coverage.
•Punitive and Exemplary Damages- Excluded under the CAL and not under the TBL
•Annual Aggregate- Lloyds CAL has an annual aggregate which is the most they will pay during a policy period. The TBL is like an auto policy and per claim.
•Valid and Collectable Insurance- there is no coverage under the CAL if there is valid and collectable insurance which means in most cases if the truckers certificate is valid and in force there would be no coverage. The Markel TBL has no such exclusion
Other issues:
Coverage Tidbits- The Markel TBL has broader supplementary payments than the Lloyds CAL. The TBL does exclude expected or intended injury, mobile equipment and racing. We see none of these issues material to coverage differentiation.
Agent's duty- We all are in the business of trying to sell the best coverage to protect insureds. In the past when there was only CAL coverage, there was not a choice. It makes sense to offer TBL coverage if a prospective insured meets risk acceptability and best practices standards.
Providing COI's to the truck broker's customers and shippers- Since the TBL is a hybrid GL/Auto policy it makes sense when issuing a certificate to put under the " other" section at the bottom and put TBL. Note there are a great deal of shippers who are not aware this coverage is now available. When they hear it is available, they demand it. It also helps truck brokers meet risk acceptability standards with new shippers.
Posted 23rd December 2010 by Benji
0 Add a comment
Truck Broker Insurance NetworkWe are trying to create a working dialogue as to risk management issues involving truck brokers and truck broker insurance Magazine
ClassicFlipcardMagazineMosaicSidebarSnapshotTimeslideFeb
9
Frequently Asked Questions Revenue- the rating basis for most contingent cargo and truck broker liability policies is revenue. So we get asked what revenue do they actually use to determine the revenue. Is it the gross or the net.
Contingent Cargo
Is Hijacking terrorism?- while it could be, hijacking would be considered theft in most policies and covered.
Truck Broker Liability and Contingent Auto Liability
Seperate entity for Trucking Operation versus Truck Brokerage Operation:
The hardest part about underwriting brokerage operations in the same name as the trucking operation with their common and/or contract authority is the stacking of limits issue. One of the challenges even though most all policies have other insurance provisions the trucking policy ( usually written on the motor carrier form).Feb
1
Hanover Contingent Cargo Best Practices for Broker Carrier Agreements Hanover has the best coverage in the marketplace- but like so many insurers they want their insureds to exhibit best practices so that losses can be averted and so they can keep their premiums low. Part of those best practices is having the truck broker require better cargo coverage from their carriers.Feb
1
Markel Broker Carrier Contract Best Practices for HazMat More and more of our agents recognize the name of the game is for the truck broker to transfer as much insured risk down the supply chain as possible. That means two things:
1) Having a better broker carrier contract
2) Certifying te particulars of the broker carrier contract in an insurance certificate.
Markel is looking for truck brokers that exhibit best practices or are willing to exhibit best practices.Dec
5
If Truckers (Carriers) are having more Fatalities, What Does That Mean For The Truck Broker? It's an 18% jump in trucking fatalities in one year. Imagine how that translates to the higher incidence of injury claims. Candidly, that is not good news for truck brokers either as the loss cost per load has just risen.
In a press release issued Friday, the Truck Safety Coalition says truck crash fatalities rose to nearly 4000 in 2010, from 3,380 casualties in 2009.Nov
22
Contingent Cargo Coverage Form Comparison- Hanover versus Essex Both Hanover and Essex are leading carriers in the contingent cargo space . Hanover is known as the industry leader with the premier policy forms but they will not write every account. That being said, Essex has more limited coverage but will write the tough stuff. We like both carriers and feel they both have a place in the market.Nov
16
Dragonfly/Sperl Decision now Final- The Legal Precedent Game Changer for Truck Brokers and Freight Intermediaries And you thought the whole need for contingent auto and more importantly truck broker liability was bogus....
First there was Schramm; then there was Sperl. Both cases tapped C. H. Robinson for significant amounts.
The case mentioned that follows is known as the Dragonfly/ Sperl Decision and appeared in Transport Topics.
"The Illinois Supreme Court has denied an appeal request from C.H.Oct
24
Contingent Cargo Coverage Comparison- Lloyds Roanoke versus Hanover Frequently I am asked to do a coverage comparison on policies due to the technical nature of the business. While any coverage comparison should include a disclaimer that spells out any review is subject to the terms and conditions of the actual policy in force, it is interesting to see the wide array of coverages being sold and the lack of uniformity in the marketplace.Jun
21
What Contingent Cargo Insurance Actually Is We often get asked what contingent cargo insurance actually is. While we think it is pretty simple, it is not really easy for those that are not in that space every day.
As an underwriter of this coverage, I feel you get specificity and a better definition by actually looking at the insuring agreement and property covered by a specific policy.Apr
8
Truck Broker Best Practices For Insurance Why should a truck broker care to exhibit insurance best practices in the first place? Well, the answer is easy frankly and dovetails the reason they bought insurance coverage in the first place- risk management, sales and ultimately profitability.Apr
8
Why Truck Brokers Need Insurance Not unlike trucking companies, truck brokers, although not operating as an asset based carrier, need insurance too.
Why?
Even tough they are not liable through federal statute, truck brokers deal with both shippers (their customers) and trucking companies ( their vendors). Typically the truck broker have to sign a broker-shipper agreement which makes them legally responsible for the auto liability and motor truck cargo exposures as they arrange shipments on behalf of the shipper.Mar
18
Freight Forwarder Versus Truck Broker- Know the Difference and Why it's Important A freight forwarder is a common carrier under the law and with the Federal Motor Carrier Safety Administration (FMCSA). A freight forwarder has the same auto and cargo insurance and claims responsibility as that of a motor carrier.
A broker is not a carrier. Brokers arrange transportation with a carrier, either on behalf of the shipper or behalf of the carrier.Dec
29
Truck Broker Liability Legal Precedents What is peculiar about insurance sometimes is that sometimes there needs to be communicated where the losses could happen- ergo the legal precedents. It is important to understand that broker liability is a developing area, not a mature area of the law. This exercise and narrative below will simply prove the need for coverage.Dec
23
Lloyds Contingent Auto Liability (CAL) versus Markel Truck Broker Liability (TBL) We are asked nearly everyday to describe the differences between contingent auto liability and truck broker liability. It's a fair request but it is important to look at the history of coverage for truck brokers.
Heretofore, at this time last year, there was only contingent auto liability with one exception, the Chartis program of primary truck broker liability.Dec
20
What Shippers and Brokers Need to Know to Manage Their Liability Exposure and The Effects of CSA 2010 I watched a fantastic webinar put on by American Shipper in November that pointed to ( although they did not specifically mention) two presently underinsured or uninsured exposures- broker liability and contingent auto liability and why coverage is needed today. ( As in right now!)
Both coverages are not understood and frankly not part of the mainstream trucking insurance marketplace.
Heretofore, at this time last year, there was only contingent auto liability with one exception, the Chartis program of primary truck broker liability. That program evolved out of the need to insure truck brokers on a primary basis- as many agents in the insurance marketplace felt the conventional CAL programs ( like Lloyds) did not cover much. The problem with the Chartis program is that it was only designed for the largest truck brokers and the minimum premium was too large for the average sized truck broker to consider.
That changed with the Markel program which was designed for all truck brokers. At the same time, shipper's demands on truckers and trucker brokers also changed. Shippers have gotten much more educated relative to coverages and they want a truck broker to have several things:
•to have primary coverage
•to add the shipper as an additional insured
•to defend the insured ( and the shipper if named as an additional insured) irrespective if the trucker's coverage defended or not
•to waive subrogration
Is the Lloyds' CAL program worthless as the marketplace thinks it is? Absolutely not.
Is Lloyds' CAL coverage as good as Markel's TBL coverage? Absolutely not.
Let's look at some of the differences:
Lloyds' CAL " Pays of behalf of the insured damages resulting from auto liability that may arise on a contingent basis"
Markel TBL- " We will pay those sums an insured becomes legally obligated to pay because of bodily injury or property damage resulting from the ownership, maintenance and use including loading and unloading of an auto and arising out of the the insureds operations as a transportation broker.
Discussion: Note the TBL does not mention being contingent as therefore primary coverage ( a very big deal) and is in essence a hybrid policy( GL & Auto) covering a truck brokers liability arising out of a auto claim on behalf of a trucker the insured brokers to. The TBL's wording comes straight out of an ISO commercial auto policy.
Big Differences:
There are specific conditions that could negate coverage for an insured under the Lloyds CAL policy that are not present in the Markel TBL policy
•Certificate of Insurance ( COI) or Verbal Checklist- this is a condition of coverage under the CAL and without same there is no coverage. The Markel TBL has no such condition so if the insured accidentally misses one and there is a loss, there would be coverage. ( I need to say that Markel asks the question if the insured gets a COI on each trucker in the application process.)
•Double Brokered Loads- any occurence sustained by a motor carrier whom the insured has entrusted shipment is covered. Unfortunately if a trucker double brokers the load, there is no coverage because the trucker has entrusted shipment to only one trucker usually. Note Markel has no such exclusion in the TBL
•Defense/ Duty to Defend- Both programs have a duty to defend except the Lloyds CAL will not defiend if there is other valid insurance. So a truck broker could be sued and not defended if the truckers coverage is providing defense. A big deal.
•Commodites Excluded- explosives, gas, acid , liquified petroleum. There are no such exclusions under the TBL.
•Errors & Omissions are excluded under the CAL. The TBL does exclude professional services. Note we are seeing more and more requests for stand-alone E & O Coverage.
•Punitive and Exemplary Damages- Excluded under the CAL and not under the TBL
•Annual Aggregate- Lloyds CAL has an annual aggregate which is the most they will pay during a policy period. The TBL is like an auto policy and per claim.
•Valid and Collectable Insurance- there is no coverage under the CAL if there is valid and collectable insurance which means in most cases if the truckers certificate is valid and in force there would be no coverage. The Markel TBL has no such exclusion
Other issues:
Coverage Tidbits- The Markel TBL has broader supplementary payments than the Lloyds CAL. The TBL does exclude expected or intended injury, mobile equipment and racing. We see none of these issues material to coverage differentiation.
Agent's duty- We all are in the business of trying to sell the best coverage to protect insureds. In the past when there was only CAL coverage, there was not a choice. It makes sense to offer TBL coverage if a prospective insured meets risk acceptability and best practices standards.
Providing COI's to the truck broker's customers and shippers- Since the TBL is a hybrid GL/Auto policy it makes sense when issuing a certificate to put under the " other" section at the bottom and put TBL. Note there are a great deal of shippers who are not aware this coverage is now available. When they hear it is available, they demand it. It also helps truck brokers meet risk acceptability standards with new shippers.
Posted 23rd December 2010 by Benji
0 Add a comment
Truck Broker Insurance NetworkWe are trying to create a working dialogue as to risk management issues involving truck brokers and truck broker insurance Magazine
ClassicFlipcardMagazineMosaicSidebarSnapshotTimeslideFeb
9
Frequently Asked Questions Revenue- the rating basis for most contingent cargo and truck broker liability policies is revenue. So we get asked what revenue do they actually use to determine the revenue. Is it the gross or the net.
Contingent Cargo
Is Hijacking terrorism?- while it could be, hijacking would be considered theft in most policies and covered.
Truck Broker Liability and Contingent Auto Liability
Seperate entity for Trucking Operation versus Truck Brokerage Operation:
The hardest part about underwriting brokerage operations in the same name as the trucking operation with their common and/or contract authority is the stacking of limits issue. One of the challenges even though most all policies have other insurance provisions the trucking policy ( usually written on the motor carrier form).Feb
1
Hanover Contingent Cargo Best Practices for Broker Carrier Agreements Hanover has the best coverage in the marketplace- but like so many insurers they want their insureds to exhibit best practices so that losses can be averted and so they can keep their premiums low. Part of those best practices is having the truck broker require better cargo coverage from their carriers.Feb
1
Markel Broker Carrier Contract Best Practices for HazMat More and more of our agents recognize the name of the game is for the truck broker to transfer as much insured risk down the supply chain as possible. That means two things:
1) Having a better broker carrier contract
2) Certifying te particulars of the broker carrier contract in an insurance certificate.
Markel is looking for truck brokers that exhibit best practices or are willing to exhibit best practices.Dec
5
If Truckers (Carriers) are having more Fatalities, What Does That Mean For The Truck Broker? It's an 18% jump in trucking fatalities in one year. Imagine how that translates to the higher incidence of injury claims. Candidly, that is not good news for truck brokers either as the loss cost per load has just risen.
In a press release issued Friday, the Truck Safety Coalition says truck crash fatalities rose to nearly 4000 in 2010, from 3,380 casualties in 2009.Nov
22
Contingent Cargo Coverage Form Comparison- Hanover versus Essex Both Hanover and Essex are leading carriers in the contingent cargo space . Hanover is known as the industry leader with the premier policy forms but they will not write every account. That being said, Essex has more limited coverage but will write the tough stuff. We like both carriers and feel they both have a place in the market.Nov
16
Dragonfly/Sperl Decision now Final- The Legal Precedent Game Changer for Truck Brokers and Freight Intermediaries And you thought the whole need for contingent auto and more importantly truck broker liability was bogus....
First there was Schramm; then there was Sperl. Both cases tapped C. H. Robinson for significant amounts.
The case mentioned that follows is known as the Dragonfly/ Sperl Decision and appeared in Transport Topics.
"The Illinois Supreme Court has denied an appeal request from C.H.Oct
24
Contingent Cargo Coverage Comparison- Lloyds Roanoke versus Hanover Frequently I am asked to do a coverage comparison on policies due to the technical nature of the business. While any coverage comparison should include a disclaimer that spells out any review is subject to the terms and conditions of the actual policy in force, it is interesting to see the wide array of coverages being sold and the lack of uniformity in the marketplace.Jun
21
What Contingent Cargo Insurance Actually Is We often get asked what contingent cargo insurance actually is. While we think it is pretty simple, it is not really easy for those that are not in that space every day.
As an underwriter of this coverage, I feel you get specificity and a better definition by actually looking at the insuring agreement and property covered by a specific policy.Apr
8
Truck Broker Best Practices For Insurance Why should a truck broker care to exhibit insurance best practices in the first place? Well, the answer is easy frankly and dovetails the reason they bought insurance coverage in the first place- risk management, sales and ultimately profitability.Apr
8
Why Truck Brokers Need Insurance Not unlike trucking companies, truck brokers, although not operating as an asset based carrier, need insurance too.
Why?
Even tough they are not liable through federal statute, truck brokers deal with both shippers (their customers) and trucking companies ( their vendors). Typically the truck broker have to sign a broker-shipper agreement which makes them legally responsible for the auto liability and motor truck cargo exposures as they arrange shipments on behalf of the shipper.Mar
18
Freight Forwarder Versus Truck Broker- Know the Difference and Why it's Important A freight forwarder is a common carrier under the law and with the Federal Motor Carrier Safety Administration (FMCSA). A freight forwarder has the same auto and cargo insurance and claims responsibility as that of a motor carrier.
A broker is not a carrier. Brokers arrange transportation with a carrier, either on behalf of the shipper or behalf of the carrier.Dec
29
Truck Broker Liability Legal Precedents What is peculiar about insurance sometimes is that sometimes there needs to be communicated where the losses could happen- ergo the legal precedents. It is important to understand that broker liability is a developing area, not a mature area of the law. This exercise and narrative below will simply prove the need for coverage.Dec
23
Lloyds Contingent Auto Liability (CAL) versus Markel Truck Broker Liability (TBL) We are asked nearly everyday to describe the differences between contingent auto liability and truck broker liability. It's a fair request but it is important to look at the history of coverage for truck brokers.
Heretofore, at this time last year, there was only contingent auto liability with one exception, the Chartis program of primary truck broker liability.Dec
20
What Shippers and Brokers Need to Know to Manage Their Liability Exposure and The Effects of CSA 2010 I watched a fantastic webinar put on by American Shipper in November that pointed to ( although they did not specifically mention) two presently underinsured or uninsured exposures- broker liability and contingent auto liability and why coverage is needed today. ( As in right now!)
Both coverages are not understood and frankly not part of the mainstream trucking insurance marketplace.
What Shippers and Brokers Need to Know to Manage Their Liability Exposure and The Effects of CSA 2010
I watched a fantastic webinar put on by American Shipper in November that pointed to ( although they did not specifically mention) two presently underinsured or uninsured exposures- broker liability and contingent auto liability and why coverage is needed today. ( As in right now!)
Both coverages are not understood and frankly not part of the mainstream trucking insurance marketplace. With the current economy, many truck sales professionals are setting up brokerage authority or expanding brokerage sales-as trucking capacity is still tight in many areas. Even today's truckers, who are at an all-time high with respect to operating efficiencies, have found they do not either have the equipment or drivers to keep up with their shippers' needs or demands- and that is poor business. So they are setting up and expanding their brokerage operations both within and autonomous to their existing operating authority.
CSA 2010 will make capacity even tighter as crappy trucking operations and crappy drivers will not have long to fix it. And that spells bad news to the brokerage community- who even with best practices will find their operations exposed.
Some information I learned from the webinar corroborates the need for coverage. The Transportation Intermediaries Association understands that brokers need and will be required to have broker liability ( primary coverage) or contingent auto coverage ( secondary coverage). Why?
Truckers who continue to hire or retain unfit drivers will face litigation for negligent hiring and retention. Note a now famous court decision against the nation's largest brokerage operation C. H. Robinson further necessitates the need for coverage ( the Schramm decision).
Attorney Clay Porter, a true pro in the truck broker/ insurance arena has described the truck liability "vortex" well where there is a constant duty to supervise and retain records amongst other things from a best practices context.
Broker/ Shipper Liability can today be summarized by 6 exposures
* Respondeat Superior- the employer ( the truck broker) is responsible for the employee( the carrier). Even though the broker in all cases acts as an independent contractor, the courts are becoming sensitive to this bringing vicarious liability whereby one party is responsible for the actions of others
* Negligent Entrustment- causing injury due to instrumentality( a poor driver operating a extra heavy tractor)
* Claims under the Motor Carrier Act
* Claims that a Broker acted as a Motor Carrier
* Aiding and Abetting
* Negligent Hiring
While I want to emphasize I am no lawyer, it is pretty clear to me the biggest exposure to a broker is negligent hiring- and that a best practices approach needs to be delivered to the truck brokerage community- along with appropriate insurance ( yes we provide same so this may seem a tad self-serving which is not my intention).
Federal laws also necessitate coverage. Which ones?
+49 USC 14704- Rights and Remedies of Persons injured by carriers or brokers- Both the carrier or broker is liable for damages sustained by a person as an act or omission of that carrier or broker in violation of this part
+49 CFR 387.307- Broker surety bond or trust fund- the broker is liable to payments to shippers or motor carriers if the broker fails to carry out its contracts or agreements for supplying of transportation by authorized motor carriers.
Shippers are going to make their brokers have insurance. Attorney Porter says that the indemnity agreements that brokers and truckers are being forced to sign do not hold up in 23 states, meaning shippers will require insurance, waivers of subrogation, and additional insured requirements across the board.
One of the failures of the industry is that there is a fine line between liability exposure either on a primary or contingent basis versus a professional liability exposure ( yes we insure that too). Clearly its early days from a professional liability perspective and few shippers are requiring same of their brokers and virtually none of their truckers. You will see those products as well.
While I have not commented much about CSA 2010, suffice it to say that these factors in a large loss or claim will have impact on the broker that hired them:
^Unsafe Driving
^Fatigued Driving
^Poor Driver Fitness
^Drug and Alcohol Use
^Poor Vehicle Maintenance
^Cargo Securement
^Higher than Average Crash Indicator
These are primarilly no brainers for a plaintiff's attorney to go to war against a trucker or broker but the crash indicator of a trucker is not something available to the broker or general public as I understand it at this stage in time.
You can bet the truck insurance agents will be hit with insurance requests, waiver of subrogation requests, hold harmless contracts, and additional insured requests. And today, no one knows what to do with the exposure when there is more than one broker involved in the transaction.
Keep in touch on this and Happy Holidays.
Ben
Posted 20th December 2010 by Benji
0 Add a comment
Truck Broker Insurance NetworkWe are trying to create a working dialogue as to risk management issues involving truck brokers and truck broker insurance Magazine
ClassicFlipcardMagazineMosaicSidebarSnapshotTimeslideFeb
9
Frequently Asked Questions Revenue- the rating basis for most contingent cargo and truck broker liability policies is revenue. So we get asked what revenue do they actually use to determine the revenue. Is it the gross or the net.
Contingent Cargo
Is Hijacking terrorism?- while it could be, hijacking would be considered theft in most policies and covered.
Truck Broker Liability and Contingent Auto Liability
Seperate entity for Trucking Operation versus Truck Brokerage Operation:
The hardest part about underwriting brokerage operations in the same name as the trucking operation with their common and/or contract authority is the stacking of limits issue. One of the challenges even though most all policies have other insurance provisions the trucking policy ( usually written on the motor carrier form).Feb
1
Hanover Contingent Cargo Best Practices for Broker Carrier Agreements Hanover has the best coverage in the marketplace- but like so many insurers they want their insureds to exhibit best practices so that losses can be averted and so they can keep their premiums low. Part of those best practices is having the truck broker require better cargo coverage from their carriers.Feb
1
Markel Broker Carrier Contract Best Practices for HazMat More and more of our agents recognize the name of the game is for the truck broker to transfer as much insured risk down the supply chain as possible. That means two things:
1) Having a better broker carrier contract
2) Certifying te particulars of the broker carrier contract in an insurance certificate.
Markel is looking for truck brokers that exhibit best practices or are willing to exhibit best practices.Dec
5
If Truckers (Carriers) are having more Fatalities, What Does That Mean For The Truck Broker? It's an 18% jump in trucking fatalities in one year. Imagine how that translates to the higher incidence of injury claims. Candidly, that is not good news for truck brokers either as the loss cost per load has just risen.
In a press release issued Friday, the Truck Safety Coalition says truck crash fatalities rose to nearly 4000 in 2010, from 3,380 casualties in 2009.Nov
22
Contingent Cargo Coverage Form Comparison- Hanover versus Essex Both Hanover and Essex are leading carriers in the contingent cargo space . Hanover is known as the industry leader with the premier policy forms but they will not write every account. That being said, Essex has more limited coverage but will write the tough stuff. We like both carriers and feel they both have a place in the market.Nov
16
Dragonfly/Sperl Decision now Final- The Legal Precedent Game Changer for Truck Brokers and Freight Intermediaries And you thought the whole need for contingent auto and more importantly truck broker liability was bogus....
First there was Schramm; then there was Sperl. Both cases tapped C. H. Robinson for significant amounts.
The case mentioned that follows is known as the Dragonfly/ Sperl Decision and appeared in Transport Topics.
"The Illinois Supreme Court has denied an appeal request from C.H.Oct
24
Contingent Cargo Coverage Comparison- Lloyds Roanoke versus Hanover Frequently I am asked to do a coverage comparison on policies due to the technical nature of the business. While any coverage comparison should include a disclaimer that spells out any review is subject to the terms and conditions of the actual policy in force, it is interesting to see the wide array of coverages being sold and the lack of uniformity in the marketplace.Jun
21
What Contingent Cargo Insurance Actually Is We often get asked what contingent cargo insurance actually is. While we think it is pretty simple, it is not really easy for those that are not in that space every day.
As an underwriter of this coverage, I feel you get specificity and a better definition by actually looking at the insuring agreement and property covered by a specific policy.Apr
8
Truck Broker Best Practices For Insurance Why should a truck broker care to exhibit insurance best practices in the first place? Well, the answer is easy frankly and dovetails the reason they bought insurance coverage in the first place- risk management, sales and ultimately profitability.Apr
8
Why Truck Brokers Need Insurance Not unlike trucking companies, truck brokers, although not operating as an asset based carrier, need insurance too.
Why?
Even tough they are not liable through federal statute, truck brokers deal with both shippers (their customers) and trucking companies ( their vendors). Typically the truck broker have to sign a broker-shipper agreement which makes them legally responsible for the auto liability and motor truck cargo exposures as they arrange shipments on behalf of the shipper.Mar
18
Freight Forwarder Versus Truck Broker- Know the Difference and Why it's Important A freight forwarder is a common carrier under the law and with the Federal Motor Carrier Safety Administration (FMCSA). A freight forwarder has the same auto and cargo insurance and claims responsibility as that of a motor carrier.
A broker is not a carrier. Brokers arrange transportation with a carrier, either on behalf of the shipper or behalf of the carrier.Dec
29
Truck Broker Liability Legal Precedents What is peculiar about insurance sometimes is that sometimes there needs to be communicated where the losses could happen- ergo the legal precedents. It is important to understand that broker liability is a developing area, not a mature area of the law. This exercise and narrative below will simply prove the need for coverage.Dec
23
Lloyds Contingent Auto Liability (CAL) versus Markel Truck Broker Liability (TBL) We are asked nearly everyday to describe the differences between contingent auto liability and truck broker liability. It's a fair request but it is important to look at the history of coverage for truck brokers.
Heretofore, at this time last year, there was only contingent auto liability with one exception, the Chartis program of primary truck broker liability.Dec
20
What Shippers and Brokers Need to Know to Manage Their Liability Exposure and The Effects of CSA 2010 I watched a fantastic webinar put on by American Shipper in November that pointed to ( although they did not specifically mention) two presently underinsured or uninsured exposures- broker liability and contingent auto liability and why coverage is needed today. ( As in right now!)
Both coverages are not understood and frankly not part of the mainstream trucking insurance marketplace.
Both coverages are not understood and frankly not part of the mainstream trucking insurance marketplace. With the current economy, many truck sales professionals are setting up brokerage authority or expanding brokerage sales-as trucking capacity is still tight in many areas. Even today's truckers, who are at an all-time high with respect to operating efficiencies, have found they do not either have the equipment or drivers to keep up with their shippers' needs or demands- and that is poor business. So they are setting up and expanding their brokerage operations both within and autonomous to their existing operating authority.
CSA 2010 will make capacity even tighter as crappy trucking operations and crappy drivers will not have long to fix it. And that spells bad news to the brokerage community- who even with best practices will find their operations exposed.
Some information I learned from the webinar corroborates the need for coverage. The Transportation Intermediaries Association understands that brokers need and will be required to have broker liability ( primary coverage) or contingent auto coverage ( secondary coverage). Why?
Truckers who continue to hire or retain unfit drivers will face litigation for negligent hiring and retention. Note a now famous court decision against the nation's largest brokerage operation C. H. Robinson further necessitates the need for coverage ( the Schramm decision).
Attorney Clay Porter, a true pro in the truck broker/ insurance arena has described the truck liability "vortex" well where there is a constant duty to supervise and retain records amongst other things from a best practices context.
Broker/ Shipper Liability can today be summarized by 6 exposures
* Respondeat Superior- the employer ( the truck broker) is responsible for the employee( the carrier). Even though the broker in all cases acts as an independent contractor, the courts are becoming sensitive to this bringing vicarious liability whereby one party is responsible for the actions of others
* Negligent Entrustment- causing injury due to instrumentality( a poor driver operating a extra heavy tractor)
* Claims under the Motor Carrier Act
* Claims that a Broker acted as a Motor Carrier
* Aiding and Abetting
* Negligent Hiring
While I want to emphasize I am no lawyer, it is pretty clear to me the biggest exposure to a broker is negligent hiring- and that a best practices approach needs to be delivered to the truck brokerage community- along with appropriate insurance ( yes we provide same so this may seem a tad self-serving which is not my intention).
Federal laws also necessitate coverage. Which ones?
+49 USC 14704- Rights and Remedies of Persons injured by carriers or brokers- Both the carrier or broker is liable for damages sustained by a person as an act or omission of that carrier or broker in violation of this part
+49 CFR 387.307- Broker surety bond or trust fund- the broker is liable to payments to shippers or motor carriers if the broker fails to carry out its contracts or agreements for supplying of transportation by authorized motor carriers.
Shippers are going to make their brokers have insurance. Attorney Porter says that the indemnity agreements that brokers and truckers are being forced to sign do not hold up in 23 states, meaning shippers will require insurance, waivers of subrogation, and additional insured requirements across the board.
One of the failures of the industry is that there is a fine line between liability exposure either on a primary or contingent basis versus a professional liability exposure ( yes we insure that too). Clearly its early days from a professional liability perspective and few shippers are requiring same of their brokers and virtually none of their truckers. You will see those products as well.
While I have not commented much about CSA 2010, suffice it to say that these factors in a large loss or claim will have impact on the broker that hired them:
^Unsafe Driving
^Fatigued Driving
^Poor Driver Fitness
^Drug and Alcohol Use
^Poor Vehicle Maintenance
^Cargo Securement
^Higher than Average Crash Indicator
These are primarilly no brainers for a plaintiff's attorney to go to war against a trucker or broker but the crash indicator of a trucker is not something available to the broker or general public as I understand it at this stage in time.
You can bet the truck insurance agents will be hit with insurance requests, waiver of subrogation requests, hold harmless contracts, and additional insured requests. And today, no one knows what to do with the exposure when there is more than one broker involved in the transaction.
Keep in touch on this and Happy Holidays.
Ben
Posted 20th December 2010 by Benji
0 Add a comment
Truck Broker Insurance NetworkWe are trying to create a working dialogue as to risk management issues involving truck brokers and truck broker insurance Magazine
ClassicFlipcardMagazineMosaicSidebarSnapshotTimeslideFeb
9
Frequently Asked Questions Revenue- the rating basis for most contingent cargo and truck broker liability policies is revenue. So we get asked what revenue do they actually use to determine the revenue. Is it the gross or the net.
Contingent Cargo
Is Hijacking terrorism?- while it could be, hijacking would be considered theft in most policies and covered.
Truck Broker Liability and Contingent Auto Liability
Seperate entity for Trucking Operation versus Truck Brokerage Operation:
The hardest part about underwriting brokerage operations in the same name as the trucking operation with their common and/or contract authority is the stacking of limits issue. One of the challenges even though most all policies have other insurance provisions the trucking policy ( usually written on the motor carrier form).Feb
1
Hanover Contingent Cargo Best Practices for Broker Carrier Agreements Hanover has the best coverage in the marketplace- but like so many insurers they want their insureds to exhibit best practices so that losses can be averted and so they can keep their premiums low. Part of those best practices is having the truck broker require better cargo coverage from their carriers.Feb
1
Markel Broker Carrier Contract Best Practices for HazMat More and more of our agents recognize the name of the game is for the truck broker to transfer as much insured risk down the supply chain as possible. That means two things:
1) Having a better broker carrier contract
2) Certifying te particulars of the broker carrier contract in an insurance certificate.
Markel is looking for truck brokers that exhibit best practices or are willing to exhibit best practices.Dec
5
If Truckers (Carriers) are having more Fatalities, What Does That Mean For The Truck Broker? It's an 18% jump in trucking fatalities in one year. Imagine how that translates to the higher incidence of injury claims. Candidly, that is not good news for truck brokers either as the loss cost per load has just risen.
In a press release issued Friday, the Truck Safety Coalition says truck crash fatalities rose to nearly 4000 in 2010, from 3,380 casualties in 2009.Nov
22
Contingent Cargo Coverage Form Comparison- Hanover versus Essex Both Hanover and Essex are leading carriers in the contingent cargo space . Hanover is known as the industry leader with the premier policy forms but they will not write every account. That being said, Essex has more limited coverage but will write the tough stuff. We like both carriers and feel they both have a place in the market.Nov
16
Dragonfly/Sperl Decision now Final- The Legal Precedent Game Changer for Truck Brokers and Freight Intermediaries And you thought the whole need for contingent auto and more importantly truck broker liability was bogus....
First there was Schramm; then there was Sperl. Both cases tapped C. H. Robinson for significant amounts.
The case mentioned that follows is known as the Dragonfly/ Sperl Decision and appeared in Transport Topics.
"The Illinois Supreme Court has denied an appeal request from C.H.Oct
24
Contingent Cargo Coverage Comparison- Lloyds Roanoke versus Hanover Frequently I am asked to do a coverage comparison on policies due to the technical nature of the business. While any coverage comparison should include a disclaimer that spells out any review is subject to the terms and conditions of the actual policy in force, it is interesting to see the wide array of coverages being sold and the lack of uniformity in the marketplace.Jun
21
What Contingent Cargo Insurance Actually Is We often get asked what contingent cargo insurance actually is. While we think it is pretty simple, it is not really easy for those that are not in that space every day.
As an underwriter of this coverage, I feel you get specificity and a better definition by actually looking at the insuring agreement and property covered by a specific policy.Apr
8
Truck Broker Best Practices For Insurance Why should a truck broker care to exhibit insurance best practices in the first place? Well, the answer is easy frankly and dovetails the reason they bought insurance coverage in the first place- risk management, sales and ultimately profitability.Apr
8
Why Truck Brokers Need Insurance Not unlike trucking companies, truck brokers, although not operating as an asset based carrier, need insurance too.
Why?
Even tough they are not liable through federal statute, truck brokers deal with both shippers (their customers) and trucking companies ( their vendors). Typically the truck broker have to sign a broker-shipper agreement which makes them legally responsible for the auto liability and motor truck cargo exposures as they arrange shipments on behalf of the shipper.Mar
18
Freight Forwarder Versus Truck Broker- Know the Difference and Why it's Important A freight forwarder is a common carrier under the law and with the Federal Motor Carrier Safety Administration (FMCSA). A freight forwarder has the same auto and cargo insurance and claims responsibility as that of a motor carrier.
A broker is not a carrier. Brokers arrange transportation with a carrier, either on behalf of the shipper or behalf of the carrier.Dec
29
Truck Broker Liability Legal Precedents What is peculiar about insurance sometimes is that sometimes there needs to be communicated where the losses could happen- ergo the legal precedents. It is important to understand that broker liability is a developing area, not a mature area of the law. This exercise and narrative below will simply prove the need for coverage.Dec
23
Lloyds Contingent Auto Liability (CAL) versus Markel Truck Broker Liability (TBL) We are asked nearly everyday to describe the differences between contingent auto liability and truck broker liability. It's a fair request but it is important to look at the history of coverage for truck brokers.
Heretofore, at this time last year, there was only contingent auto liability with one exception, the Chartis program of primary truck broker liability.Dec
20
What Shippers and Brokers Need to Know to Manage Their Liability Exposure and The Effects of CSA 2010 I watched a fantastic webinar put on by American Shipper in November that pointed to ( although they did not specifically mention) two presently underinsured or uninsured exposures- broker liability and contingent auto liability and why coverage is needed today. ( As in right now!)
Both coverages are not understood and frankly not part of the mainstream trucking insurance marketplace.
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