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.