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Nashville, Tennessee, United States
You can reach me at ben@gtu-ins.com. Comments are welcome.

Monday

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 said 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.

Tuesday

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 apples and oranges relative to contingent cargo coverage.

For further information, please contact your underwriter.

Wednesday

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. Robinson Worldwide over a $23.8 million civil verdict against it, following a fatal traffic accident involving a carrier hired by the broker.


A spokesman for C.H. Robinson, North America’s largest freight broker, said last week the company would not
pursue additional appeals at the federal level.

The Illinois high court actually reached its decision in late September without explanation or comment as to why
the justices had decided to deny the company’s request, but news of the ruling is only now circulating through
freight industry circles.

The decision leaves in place an Illinois Appellate Court ruling from March that upheld the 2009 decision of a trial
court that found Robinson among those liable for a 2004 traffic accident in Will County, Ill., with two fatalities.

“We are obviously disappointed that the Illinois Supreme Court declined our petition for further review, as we
strongly believe that the Illinois Court of Appeals failed to follow well-established Illinois law regarding a party’s
responsibility for the negligence of an independent contractor with which it contracts,” said Ben Campbell, Robinson’s general counsel.

The appeals court “also improperly attempted to distinguish this case from multiple prior state and federal court
decisions in which precisely the same claim has been asserted against C.H. Robinson and summarily dismissed as a matter of law,” he added.

The case arose from an accident on Interstate 55 southwest of Chicago. Owner-operator DeAn Henry, leased to
motor carrier Toad L. Dragonfly Express, was hauling a load of potatoes owned by Robinson that was heading for
a warehouse operated by the broker. The truck was involved in a collision, killing two and injuring others.
An attorney representing the widow of one of the deceased said Robinson was held properly responsible.

“People who want to call themselves brokers can’t pull the strings behind the curtain and then say they’re not in
control,” said Timothy Cantlin, whose law firm represented the widow of one of those killed.

“When you look at the factors, Robinson was much more than just a broker. They were the dispatcher and
controlled everything until the accident occurred,” said Cantlin, adding that his client’s share of the verdict was
$8.5 million.

The three main parties named as defendants after the accident were owner-operator DeAn Henry, Dragonfly
Express — which since has closed — and Robinson, which had the deepest pockets of the three."

The key and operative word in this whole proceeding was "CONTROL" which negated the defense based upon the independent contactor status established in contract.

If your insureds are not buying truck broker liability to protect themselves and their shippers, that would seem to be very poor judgement indeed. We are seeing many brokers unwilling to change their business operations to confront the necessary best practices that mitigate risk.

Monday

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 disparagingly 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.

Tuesday

What Contingent Cargo Insurance Actually Is

Updated  Spring 2016

We often get asked what contingent cargo insurance actually is. While we think it is a relatively simple concept, I hear confusion to agents and their insureds that are not in the 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 / truck broker and their subcontractor/ trucker are legally liable for direct physical loss or damage to property of others in the due course of transit. That is pretty simple. It is important to understand though what  the coverage trigger is. It is the failure of both the negligent trucker or the negligent trucker's insurance policy to pay a valid and substantiated claim.

I have reviewed many forms through the years and candidly I think Lloyd's Beazley has defined it better than any other insurer.

Contingent Cargo coverage is triggered by the inability to collect from the subcontractor's/ truckers insurer. That inability should be based on 5 reasons:
1) Coverage was non-existent owing to avoidance, termination or expiration
2) Coverage was invalid
3) Coverage was insufficient in amount ( the need for more limits/ excess)
4) Coverage was inapplicable because the the carrier's motor truck cargo policy does not cover or excludes the loss ( difference in conditions)
5) Coverage is inapplicable due to the insolvency of the insurance company writing the motor truck cargo policy

That's pretty simple and succinct 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 3) and 4) 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/agreement and make sure that they have the following:

* adequate insurance limits for the load and coverage terms spelled out
* indemnification to the insured

Note recent marketplace trends have afforded truck brokers coverage for items that are not covered by the trucker's motor truck cargo policy in the first place. These coverages include:

a) Identity Theft
b) Carrier Acts of Dishonesty
c) Earned Freight of the Broker
d) Errors and Omissions resulting in loss of cargo ( misdelivery).

Current coverage needs stem for the purchase of difference-in-conditions, excess, identity theft, and dishonest acts.

We are now offering the ability to write primary cargo coverage where some carriers are requiring same. The shipping world is trying to push more liability ( beyond Carmack liability) on the backs of truck brokers.


We hope this helps you and offers a matter-of-fact way of looking at this important coverage.

Friday

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 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 define 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, proof that 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.

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. 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 not 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.

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....