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.