Anthony Nunziata and Tom Moran | Roanoke Insurance Group
It probably comes as no surprise that shipper’s interest cargo insurance benefits cargo owners. 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 this 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. Additionally, procuring insurance on their clients’ behalf also serves as a tool to enhance client relationships.
In order to evaluate how a cargo insurance program can benefit your organization, it is important to understand a few basic principles.
Shipper’s interest cargo insurance is a “first party” insurance product; therefore the cargo owner is reimbursed for their covered losses directly by the insurance company.
When a loss to goods in transit occurs, a cargo owner has limited options to recover their financial interests. They can issue a claim against a shipper’s interest cargo insurance policy, the carrier who had possession of their goods at the time of loss, or the transportation intermediary who arranged the shipment. Of these three choices, filing a cargo insurance claim is by far the best option both for the cargo owner and for the transportation intermediary. Subject to specific exclusions, the shipper’s interest policy provides door-to-door coverage against all risks of physical loss or damage. In the event of a covered loss, the cargo owner is not required to prove carrier negligence and they will not issue a claim against you as the transportation intermediary. Shipper’s interest cargo insurance is a “first party” insurance product; therefore the cargo owner is reimbursed for their covered losses directly by the insurance company. Because the cargo owner does not have to prove negligence or take legal action, potential conflicts are avoided and the shipper’s relationship with the intermediary who provided the insurance is preserved.
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. Special insuring conditions may apply to certain commodities, such as household goods, servers on racks, and fragile items. Certain perils such as improper packing, delay and inherent vice, may be excluded from coverage entirely. Transportation intermediaries should consult a competent insurance broker to guarantee that the product purchased is appropriately structured and priced for the intended use.
Additionally, it is recommended that the intermediary require the cargo owner to accept or decline Shipper’s Interest Cargo Insurance in writing and proactively educate them regarding limits of liability, which may apply in the event that insurance is not purchased. Another point for the transportation intermediary to consider is that a certificate of Motor Truck Cargo (MTC) Insurance will frequently fail to accurately and comprehensively convey the terms of the underlying asset-based carrier’s coverage. The standard Acord Certificate of Insurance does not provide details regarding policy exclusions or deductibles which may significantly impact a cargo owner’s ability to collect on a claim. Additionally, coverage may be terminated without notification to the transportation intermediary subsequent to the issuance of the certificate.
Some unscrupulous carriers have even been known to present intermediaries with fraudulent certificates evidencing coverage that never existed. If unable to collect from the underlying asset-based carrier or the carrier’s motor truck cargo policy, a cargo owner who suffers a loss may even pursue a claim against the transportation intermediary. Even though this claim may not be supported by any prescribed statutory or contractual liability, the intermediary will need to engage legal counsel if a suit is filed and the client relationship is certain to be damaged. By providing the cargo owner with access to shipper’s interest cargo insurance, the transportation intermediary can avoid any potential liability resulting from the failure of the underlying carrier to answer a MTC insurance claim.
Shipper’s interest cargo insurance is the broadest form of coverage available to address cargo loss or damage in transit and costs a fraction of a percent of the cargo value. When purchased, it guarantees that the cargo owner will be made whole by the insurer for losses or damages that fall within the policy parameters. Taking advantage of the opportunity to procure this insurance for their cargo owner clients provides astute transportation intermediaries with a tool to enhance client relationships and avoid potential liability claims.
Anthony Nunziata is Account Manager and Tom Moran is Account Executive with Roanoke Insurance Group, based in Schaumburg, IL. Mr. Nunziata may be reached at firstname.lastname@example.org or (212) 412-9230. Mr. Moran may be reached at email@example.com or (847) 969-8232.