Requirements for Freight Broker Insurance
It is very important that you understand the requirements for freight broker insurance and the differences between the types of freight broker insurance coverages that are available for freight brokerages. There are several different types of liability coverage that can be purchased with respect to Auto Liability including Primary Auto Liability, Freight Broker Liability, and Contingent Auto Liability. It is important freight brokerages understand their exposure and additional risk that might have been accepted contractually. Freight broker insurance is almost mandatory.
Below is a List of Freight Broker Insurance Coverage to be Considered:
Contingent Auto Liability
This type of freight broker insurance is typically designed to cover the liability of a freight broker from an auto liability claim on a contingent basis. The motor carrier’s insurance is in place as the primary coverage and contingent auto liability is present to pick up a valid claim within the scope of the policy that a motor carrier’s policy does not cover or if the motor carrier’s insurer becomes insolvent (within the terms of the policy)
Truck Broker 3rd Party Liability
Truck Broker Liability insurance is typically a broader form of coverage than Contingent Auto Liability. There is also a variation of this form called Third-Party Liability insurance that is similar. Truck Broker Liability insurance is typically written to provide coverage for bodily injury and/or property damage arising from the freight broker’s operations as a transportation property broker. This freight broker insurance can also be a packaged policy written along with General Liability in some instances.
Error & Omissions ( E&O) Insurance
Errors & Omissions coverage is a must for freight brokers and freight forwarders alike. Freight broker insurance E&O or professional liability insurance is designed to respond to the legal liability on the part of a freight broker’s negligence. It is important to point out that E&O insurance does not directly insure against cargo loss or damage, bodily injury, or property damage, but can respond up to the limits of a policy for the freight broker’s negligence or error/omission in the normal course of doing business.
An example would be providing the motor carrier with the wrong information that eventually leads to a claim on a shipment. Extra costs incurred could be incurred that would not be covered under any form, but could be filed under E&O provided they are covered losses. Policies can be written with defense inside or outside the limit or on an aggregate or per occurrence base. This freight broker insurance protects your freight broker business.
Contingent Cargo Insurance
Motor Truck Cargo Insurance is a requirement for any freight broker and there are several different options available in the marketplace. For many years there was only one coverage option available (Contingent Cargo). Contingent Cargo is designed to cover the freight broker on a contingent basis for cargo damage or loss. This is a freight broker insurance shippers require.
This means that claims are typically filed first with the motor carrier in an attempt to recover. It is commonplace to see these claims denied based on exclusions that may be present in the motor carrier’s policy. There are many types of contingent cargo forms with various exclusion including “follow form” policies. This means that if the trucking company has a policy exclusion then so does the freight broker. It is very important that a freight broker understand what is actually covered if they utilize Contingent Cargo forms.
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