If you contract truckers to move freight and someone is injured or killed, are you covered?
Serious financial exposures confront domestic freight brokers, freight forwarders and their shipper clients when trucking operations they contract to move freight injure or cause fatalities.
The Right Policy is out there but do you have it in place?
Have you ever asked yourself the question, “I am a company with domestic freight broker authority and how do I protect myself from law suits if I get named in one because a Common Carrier or Contract Carrier I contracted to move freight causes an injury or fatality?”
You may have heard different arguments on how to cover this exposure. Of great concern to this writer is the fact some insured’s are under the mistaken impression that a “Non Owned and Hired Endorsement” added to a General Liability or Executive Auto policy is a means of covering this exposure.
You are mistaken if you feel this coverage will respond to the exposure facing domestic freight brokers and their shipper clients. This is a mistake that could be very costly as we have seen in the recent case Sperl Vs CH Robinson/Tyson Food Logistic involving a 23 million dollar judgment against this freight broker and shipper. (A post trial motion has been filed).
With this in mind, it is critical for the sustainability of any operation, that this exposure be addressed with the right coverage.
A close examination of the NOH Endorsement format makes it pretty clear this is NOT intended to address the exposures incurred when you contract 3rd party truckers to move freight for you.
The basis of premium rating and premium adjustment under a NOH endorsement states salaries of employees because the intent of the endorsement is to cover the Non Own & Hired exposures of an employee using their vehicles for company purposes, such as bank deposits. Ask any commercial underwriter what the intent of a NOH endorsement is and they will state that it is to cover the exposures of employees driving their own vehicles for company business or an executive on a business trip using a rented car for business purposes.
The right policy: Contingent Auto Liability policy for domestics freight brokers or domestic freight forwarders.
A specific policy format has been developed for domestic freight brokerage and freight forwarding operations. The policy has been referred to as Contingent Auto liability policy. The key feature to a policy that truly covers the exposure is specific reference within its format that it is intended to cover. Such copy states, “Companies with Freight Broker Authority or Domestic freight forwarding authority who contract trucking operations who are independent agents with Common Carrier Authority, Contract Carrier authority or Intra-state authority.”
Some policy formats in the marketplace clearly state the insurance carrier has a duty to defend. Having this clause reflected within the format is another critical element to the coverage a freight broker must have in place. The principal benefit is underwriters responding to legal costs should they be named in a law suit because a third party trucker caused an injury or fatality and the freight broker ends up being named in the law suit.
Very few insurance carriers are willing to write a Auto Liability policy for domestic freight brokerage operations and domestic freight forwarding.
You will find a very limited number of insurance companies willing to write the commercial auto exposure that faces a domestic freight broker or forwarding operation for the following reasons.
The normal paradigm for underwriters of commercial auto coverage is to review detailed information associated with the trucking operations. Most insurance carriers that write commercial auto require MVR’s, hard copy loss runs and vehicle ID numbers, all relating to the commercial auto exposure. Indeed this level of information is impossible for a domestic freight broker to provide as they could be working with thousands of common carriers each one with countless drivers and equipment lists.
Accordingly without such information, they won’t offer a quote. What you are left with are maybe six insurance carriers that openly acknowledge they are willing to take on the commercial auto exposures a domestic freight broker or freight forwarder incurs under their authority.
The shortage of insurance carriers willing to write the commercial auto exposures of domestic freight broker or freight forwarder may be one of the reasons the wrong type of coverage is being suggested by some insurance agents. These agents may not have an appointment with one of the few insurance carriers writing the class, leaving them to suggest alternatives that don’t really address the exposure.
Buyers beware, make certain if you are domestic freight broker or freight forwarder be certain your auto policies is intended to address the real exposure you face.
Domestic shippers beware, move freight only with domestic logistic operations that have the right coverage in place, if you don’t it could a very costly error.