We are often asked what Contingent Cargo insurance actually is. As an underwriter of this coverage, I feel you get a better definition by actually looking at the insuring agreement and the property covered by a specific policy.
Contingent Cargo is designed to cover direct physical loss of property in vehicles or damage to property of others for which the insured (truck broker) and their subcontractor (trucker) are legally liable. That is pretty simple. However, it is important to understand the coverage trigger. The coverage trigger is the failure of both the negligent trucker and the negligent trucker's insurance policy to pay a valid and substantiated claim.
The inability to collect from the subcontractor's (trucker's) insurer can be based on 5 reasons:
1) Coverage was non-existent owed 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 carrier's Motor Truck Cargo policy did not cover or excluded 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 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.
A flaw in Motor Truck Cargo coverage is that many policies have commodity exclusions or terms and conditions that invite agent error and omissions (ex: unattended vehicle warranty). 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).
To be deemed “best practices”, we start with a review of a potential insured’s broker carrier contract/agreement to make sure that it requires the following:
* adequate insurance limits for the load
* adequate insurance limits for the load
* clearly defined coverage terms
* indemnification to the insured
Note recent marketplace trends have afforded Contingent Cargo 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).
The shipping world is trying to push more liability (beyond Carmack liability) onto the backs of the truck broker. While Contingent Cargo can cover difference-in-conditions, excess, identity theft, and dishonest acts, we now have the ability to write primary cargo coverage where some carriers are requiring same.
We hope this offers a matter-of-fact way of looking at this important coverage. If you have any questions or concerns, please feel free to comment below.
* indemnification to the insured
Note recent marketplace trends have afforded Contingent Cargo 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).
The shipping world is trying to push more liability (beyond Carmack liability) onto the backs of the truck broker. While Contingent Cargo can cover difference-in-conditions, excess, identity theft, and dishonest acts, we now have the ability to write primary cargo coverage where some carriers are requiring same.
We hope this offers a matter-of-fact way of looking at this important coverage. If you have any questions or concerns, please feel free to comment below.
