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

Greetings.

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

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

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

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

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

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

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

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

So what do I see being covered, the following:

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

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


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

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

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

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

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


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