The coverage form is a hybrid auto liability and general liability policy. The insuring agreement is similar to the insuring agreement of an auto policy but adds the wording “arising out of your operations as a transportation broker” or “truck broker”.

The major difference between the contingent liability and the primary liability is that the primary policy doesn’t require the motor carriers insurance to be uncollectible. Therefore this form will respond to a property damage or bodily injury claim independent of the motor carriers insurance.

This coverage will also apply on an excess basis over the motor carriers collectible insurance if the broker is named.

Third-Party Liability Coverage — in general, any type of insurance covering the legal liability of one party to another party. For example, commercial general, business auto, and errors and omissions (E&O) liability policies all provide third-party liability coverage.

The coverage form is typically an auto liability coverage form that is endorsed to only apply on a contingent basis.

The coverage is contingent on:

1.) That the broker has received a certificate of insurance from the motor carrier, or a copy of the policy,  or a copy of the endorsement naming the broker as an additional insured.

2.) That at the time of the loss/accident the motor carrier’s insurance is uncollectible.

The contingent liability coverage does not normally apply on an excess basis over the motor carrier’s collectible insurance.

- Excludes loss from auto

- Excludes employee injury

- Excludes damage for property in care, custody or control of insured

Such coverage can extend to defense costs arising out of criminal and regulatory investigations/trials as well; in fact, often civil and criminal actions are brought against directors/officers simultaneously.

Several insurance carriers have introduced a coverage form that provides primary cargo for both the motor carrier and the broker (for common ownership). The form can also provide primary coverage for warehouse legal liability & freight forwarding.

This coverage form can allow for: 

1.)  Cargo to be valued at the selling price as opposed to the shippers financial interest.

2.)  Infidelity and dishonesty

3.)  Voluntary parting

4.)  Customer or contract specific limits

This coverage form is primary and therefore is not contingent upon the motor carriers insurance being uncollectible.

The coverage is contingent on: 

1.)  That the broker has received a certificate of insurance from the motor carrier, or a copy of the policy or a copy of the endorsement naming the broker as an additional insured. 

2.)  That at the time of the loss/accident the motor carrier’s insurance is uncollectible. 

The contingent cargo coverage does not normally apply on an excess basis over the motor carrier’s collectible insurance. 

Coverage for a specific loss is normally limited to the lesser of: 

1.)  The amount required by the contract between the broker and the motor carrier. 

2.)  The amount of the loss. 

This policy is an effective risk management solution that transfers the risk of loss or damage to goods from the cargo owner to the insurance company. What may not be so well known is that Shipper’s Interest Cargo Insurance can benefit transportation intermediaries as well. By procuring Shipper’s Interest Cargo Insurance for clients, transportation intermediaries add a level of protection against gaps in a carrier’s motor truck cargo policy and financial risks including those resulting from contractual liability claims. Procuring insurance on their clients’ behalf can also serve as a tool to enhance client relationships.

As a transportation intermediary, it is important to recognize that Shipper’s Interest Cargo policies are not boilerplate and they may differ significantly, especially in regard to limits, deductibles and exclusions. Certain perils such as improper packing, delay and inherent vice, may be excluded from coverage entirely. 

The coverage form is a miscellaneous professional liability policy that is endorsed for coverage to apply to a truck broker but to exclude the operations of a for hire trucker.

The policy generally responds to a financial loss to a third party that is the result of the insured’s wrongful act.  In the case of brokerage liability some carriers allow the policy to be endorsed to include coverage for bodily injury and property damage usually with some contingency (i.e.) the insured needs to have a general liability policy in force.

The excess insurance is a separate policy and does not trigger until the primary layer has been exhausted. Since the majority of claims are settled at a dollar amount much less than the primary limit, the excess policy is used much less frequently, often times only on a catastrophic basis, and thus costs less.

The freight broker surety bond requirement exists to help establish credibility and prevent fraud or failure to pay motor carriers or shippers in a timely manner.

A surety bond or surety is a promise by a surety or guarantor to pay one party (the obligee) a certain amount if a second party (the principal) fails to meet some obligation, such as fulfilling the terms of a contract.