http://www.smithmoorelaw.com/Court-Affirms-Contingent-Cargo-Policy-Limiting-Coverage-to-the-Amount-Available-Under-Primary-Policy
The upshot of the case, which is a frequent claims issue and problem, is that Travelers did not cover the loss the way the insured, a truck broker, had expected. In fairness to Travelers, contingent cargo coverage assumes that there are primary limits that are equal to the value of the load. In this case, the truck broker insured was probably provided with a certificate of insurance that said nothing about there being a sub-limit for the copper commodity. As such the insured was left with a difference-in-limit claim or insufficient limits claim.
Clearly Travelers failure here is an industry failure- and if the insured truck broker obtained a certificate of insurance from an A -rated carrier, they would feel they have done their job to honor the terms and conditions for triggering a contingent cargo claim.
Note the failure of of the MTC insurer and the carrier to pay the claim are coverage triggers for a contingent cargo claim. So there must have been a communication problem with this claim as it does not appear that the insured ( and we assume their agent) was aware that an MTC insurance policy having a sub-limit was not going to trigger excess coverage in Travelers form.
So there are a couple of solutions that we offer that involve risk management and best practices perspective:
- Risk Management in the broker carrier agreement- The insured should have in their insurance section of their broker carrier agreement that insurance coverage should have no sub-limit for any commodity being hauled. While this is certainly not fail-safe, it does provide evidence that the insured did not sanction the carrier not having enough limits- which would certainly help in a subrogation case.
- Best Practices Operations when Handling Target commodities- Clearly when copper is being hauled, or any target commodity is being hauled, it is more important for the insured truck broker to go beyond just getting a certificate of insurance and ascertain coverage forms, whether there are sub-limit issues ( or unattended vehicle exclusions), and obtaining MTC carriers reputation for paying claims and losses.
Also, there are coverage solutions. With GTU we can provide in 5 different insurers difference in limits coverage for claims such as these. So clearly the coverage form discussed in this claim with Travelers is deficient for the insureds needs. That being said, most coverage forms require the insured to verify the coverage limit is equal to the value of the load. However, if they had a sub-limit situation like this, our coverage would provide coverage for the difference in the limit up to the limit of the policy. That is what the insured wants and needs and its a shame to see Travelers not covering this kind of loss ( we see others as well).
The main coverages that are sought by truck brokers on contingent policies are:
- Difference in conditions/ coverage excluded
- Difference in limits
- MTC insurer insolvent
- MTC policy cancelled/ coverage not applicable
We are able to offer coverage even for lack of response with one of our partner insurers. Also we offer a new Bridge coverage form to build limits beyond $100,000 MTC limits (which approximately 90% of carriers have) up to $250,000. We offer shippers/ interest and cargo insurance as well up $1,000,000.
We hope to see the industry do a better job covering contingent cargo claims in the future. And the agent and the buyer should read their policy forms and ask questions!
