The Significance of Contingent Cargo Insurance

Contingent Cargo Liability insurance is a secondary policy that freight brokers carry in order to cover some or all costs, not normally protected by a typical primary policy, that are involved with replacing, handling, storing, or disposal of cargo that is damaged, refused, or lost.  

Although there is no law requiring contingent cargo liability insurance, many carriers choose not to work with a broker who doesn't have it, because most often brokers forward claims to their carriers. If the carrier's insurance won't cover it, somebody still has to pay the expenses. As a broker without coverage for such an instance, your carriers can blame you for the loss even though you can't legally be held liable. Relationships between you and your carrier can suffer. 

Some benefits to having contingent cargo insurance are that it lets you compete with other brokers, since you don't have to worry about paying for lost shipments out of your own pocket, and if anything happens to a shipment, you can still get goods to consumers without too many undue delays.

There are two scenarios that may arise where you must have coverage. One is if you and a carrier sign a contract transferring liability to you. The other is when you choose a carrier who doesn't have proper carrier's insurance. Normally, this doesn't happen, but sometimes carriers unintentionally miss premium payments or they don't have a policy that covers as much as you would like them to. 

As you can see, the cost of carrying contingent cargo liability insurance is well worth the expense. Lost relations can be as devastating as lost shipments. This insurance helps to protect you from both.

The Bmc 84 Broker Bond may present some serious challenges to surety markets writing the bond

Many property brokers, freight forwarders and sureties are still trying to figure out all the fine details of the BMC-84 Surety Bond. Requirements of the bond were revised under the highway reauthorization law also known as MAP-21. The amount of the BMC-84 Surety Bond has been increased from $10,000 to $75,000. This new law mandates sureties to pay out claims in the following manner:

1. broker consents to payment
2. broker fails to respond following notice and the surety deems the claim as valid or
3. claim is unable to be resolved and is reduced to a judgement.

Sureties are now required to pay valid claims despite bond principal objections. Sureties must also respond to claims against the freight broker surety bond within 30 days. In addition, any action taken against a surety to recover a claim, entitles the prevailing party to recover attorney fees. However, it is not clear whether those costs can be collected along with the claim. Questions have also arisen concerning the possibility of the old BMC-84 freight broker's bond must be replaced with the new one. Some are asking if a rider or endorsement increasing the bond amount to $75,000 will comply with the new requirements. In answer, the FMSCA has announced that riders and endorsements will be accepted. One last big concern is the fact that there are still no clear cut guidelines outlining how a surety can be relieved of its liability even when the total amount of the bond had been paid out in claims.

With all these questions hanging in the air, sureties are anxiously hoping the new rules will be clarified soon

Freight Broker Insurance, do you need it?

There comes a time when a business owner can avoid  finger-pointing and a "who is ultimately responsible" type of situation if they are familiar with motor carrier safety rules, laws and even guidelines that can all be addressed with Freight Broker Insurance.  Business owners in this industry have a lot on their plates as they focus on operating their business.  Often they may not be fully aware of everything that can help protect them and the best interests of their operation.

 

Let's check out the "for instance" situation that was recently cited in the Transport Topics Issue of Trucking and Freight Transportation News - "Carriers that re-broker freight — again without separate broker authority and bond — usually are held to retain full liability as the carrier for the cargo (even though they did not transport it), but they will likely have no insurance protection for the actions of the brokered truck."  In cases like this often the business owners are not aware of what is necessary to protect them and their business in complicated and even ordinary situations.

 

This is why it is important to work with knowledgeable people who specialize in this type of industry.  First, you should consult with your insurance agent and possibly even check with your attorney. Together with your property and general liability package there are some other coverage options that you should consider.

 

It is recommended that brokers obtain vicarious auto liability insurance. That will enable your insurer to defend you if you are named in a lawsuit. Be aware that this type of coverage widely varies, so get an expert to help you review the terms and conditions to make sure it is right for you. Another option is contingent cargo coverage. This will help cover some of the gaps that might be contained in the policy that the carrier has in place. You can't be sure what exactly their policy covers, so it is a good idea to play it safe. This is also another type of insurance coverage that is not always the same in policies. You can easily find out more details if you simply contact us to learn more and get answer to your questions.

TIA Releases New Fair Labor Standards Act Framework at 35th Annual Conference

The Transportation Intermediaries Association (TIA) saw a record attendance at the 35th Annual conference held in April. Over 900 3PLs, brokers, forwarders, and suppliers attended the event, the most ever at a TIA convention, according to PerishableNews.com.

Participants received updates to the Carrier Safety Administration and MAP-21. In addition, a new Carrier Selection Framework was released. TIA members can access this new framework at the TIA website.

Conference participants also received the new Fair Labor Standards Act Framework. The working draft is accessible via the TIA website, as well. A brief discussion of this framework appears below.

The document sites two frequently occurring personnel-related issues as the foundation of the new Fair Labor Standards Act Framework:

1. the designation of workers as independent contractors versus employees; and
2. the classification of employees as exempt versus non-exempt.

Designation of workers as independent contractors versus employees is particularly common as it pertains to sales agents, transportation brokers, and similar positions. Businesses who are found to have improperly designated a worker as an independent contractor may be liable for large amounts of back pay, unpaid employment taxes, and penalties.

The issue of employee classification as exempt or non-exempt has occurred most commonly in relation to account managers or similar sales or support positions. Specifically, an employee must be properly classified as exempt from overtime and minimum wage requirements or "non-exempt" (requiring payment for hours worked over 40 per week, or over 8 hours per day in some states). Regulators assume most employees are non-exempt and should be paid overtime. Businesses found to have improperly classified an employee's exemption status face significant liability for back pay (unpaid overtime) and attorney fees.

The framework guides TIA members with greater detail through these commonly occurring personnel challenges. It serves as a resource in identifying potential challenges and making adjustments as necessary. However, members are urged to seek legal advice based on their specific situations and with adherence to any and all applicable laws. Requirements may differ by location of business, location of operations, and finer details of their business models.

35th Annual TIA Convention And MAP 21  

For the 8th Consecutive year GSIS was in attendance for the TIA Convention. We made many new friends and thank all those in attendance for an educational and entertaining week.

 

The past 12 months in the 3PL industry have, like the economy, had its ups and downs. Most notably the introduction of MAP 21 of the Highway Authorization Bill. Last July President Obama forever changed the logistics field with the introduction of Map 21 (moving ahead for progress in the 21st century act). Since its introduction, MAP 21 has been implemented by DOT, FTA, FMCSA and FHWA with one goal in mind: to develop a national strategic freight plan. Just renewed by congress in April, MAP 21 is running full steam ahead. we can revisit some key points pertinent to our field:

 

1. Electronic Logging Devices- the law requires DOT to establish regulations mandating electronic logging devices (EOBR’s) for motor carriers currently required to complete paper logs. The regulations must be in place within 1 year and carriers will have two years thereafter to adopt/install the devices.

2. Freight Policy- DOT is creating a national freight plan that includes an assessment of the condition and performance of the national freight network and identification of highway freight bottlenecks. This is intended to improve freight efficiency from 80% to 90% off of interstate systems and 95% for interstate systems.

3. Truck Size and Weight- the act does not include an increase in size and weight limits except for an increase in allowable weight for idling reduction devices from 400 pounds to 550 pounds. States are also allowed to issue 120 day oversize-overweight permits to trucks responding to disasters if a national emergency is declared.

4. Performance Standards- each state and urban area is required to establish minimum performance standards related to highway and bridge maintenance, congestion, system reliability, safety, freight efficiency, air quality and project delivery. Failure to do so will result in the transfer of federal funds from non logistic areas in order to compensate.

5. Broker Bond- MAP-21 increases the broker bond to $75,000 and applies it to freight forwarders. It also tightens requirements on bonding companies to respond to carrier claims.

6. Proficiency Testing- all new employees entering the motor carrier field now must complete the DOT safety testing within 12 months rather than the previous standard of 18 months.

7. Transport of Agricultural Commodities & Supplies-increases air mileage from 100 to 150 and eliminates “in the state” from regulation; making it an "interstate" issue.

8. HAZMAT- Hazardous Materials Safety Administration (PHMSA) is to update its accident and release recordkeeping and reporting requirements. PHMSA is also to assist DOT in creating mandatory standardized training for HAZ enforcement officials.

FMC Chairman Cordero Voices Commitment to Increase Exports and Reduce Regulatory Burdens

On April 16, Commissioner Mario Cordero, who replaced Commissioner Richard A. Lidinsky as Chairman of the U.S. Federal Maritime Commission (FMC) earlier in April, testified to Congress regarding the Fiscal Year 2014 FMC budget. In his presentation, Chairman Cordero outlined two primary ways the Commission could promote our nation's economic recovery:

(1) working to ensure the competitiveness of our Nation’s ports and  maritime transportation system to make sure that it efficiently  supports growing exports; and

 (2) providing maritime businesses regulatory relief so they and their  customers can hire more American workers.

Because more than 80% of international trade relies on ports, Chairman Cordero stated that the efficiency of our transportation system--including the OTI (Ocean Transportation Intermediary), ocean common carriers, and marine terminal operators--is key to relieving congestion at ports, decreasing delays, and lowering transportation costs.

Chairman Cordero also reiterated a commitment to continue assisting U.S. exporters in 2013. Agricultural exporters can look forward to a container shipping rate index for a few targeted export commodities such as grains, cotton, hay, and frozen meat. It is anticipated that with such an index exporters could plan and hedge their transportation costs.

Other new developments include a searchable database of NVOCC (Non Vessel Owned Common Carriers) on the FMC website. Small businesses that want to start exporting, as well as individuals shipping personal goods, can use the search tool to find nearby licensed and bonded freight forwarders.

Chairman Cordero and the FMC have committed to continued efforts to reduce regulatory burdens, thereby initiating cost savings and flexibility for the shipping industry and its customers. Progress was made in 2012. Chairman Cordero cited the following:

• changes to procedural rules to improve just, speedy, and inexpensive resolutions in administrative proceedings.
• revisions in tariff exemptions which eliminate record keeping requirements for negotiated rate arrangements offered by U.S.-based NVOCCs.
• initiation of dialogue on a proposed rule that would expand these tariff exemptions to foreign-based unlicensed NVOCCs.
• reviews of regulations concerning the licensing and oversight of OTI (Ocean Transportation Intermediaries), the process for review of filed agreements, and rules regarding service contract filings.

Chairman Cordero stated that the Commission will continue to solicit input from the shipping public and the regulated industry about how to streamline and improve its rules.

Asses Risk to Determine The Insurance Needs

Cargo Insurance

Geo-political hotspots and natural disasters have combined to sharpen the focus on risk management for both carriers and shippers. Efforts to ameliorate the effects of such potential causes of loss will undoubtedly grow more intense in 2013. Cargo insurance will be as vital a tool as ever in risk management.

Successful attempts to mitigate loss anywhere in the supply chain will add to the bottom line in important ways. Potential commercial losses can be quantified as a first step toward developing strategies to limit such losses.

Potential Scenarios

Supply chain strategists try to ponder every possible scenario that may arise. Success in this area may literally determine victory or loss. Likewise, the advantages of mapping out alternative supply chain scenarios can be substantial. Complex analysis can be required to try to anticipate the unpredictable.

Only a few years ago, most would have scoffed at the nightmarish losses generated by a Japanese tsunami or by pirates off the Somali coast. Then, these heretofore unimaginable threats turned all too real.

It may be very demanding to assess risks presented by threats as diverse as terrorism and computer systems failure. The potential impact of accidents and quality control issues must be fully understood as well. The potential for changing export restrictions is another area to concentrate on. The analytical expertise required crosses many disciplines.

Probability Assessment

This invariably leads to another key effort -- probability analysis. Extreme risks can be identified, but there are never enough resources to address every possibility all the time. That is where statistical probability needs to be considered to mitigate risk.

A successful enterprise will tackle these challenges by successfully managing risk across widely divergent areas. It is possible to quickly respond to supply chain disruptions when the unexpected occurs. Those whom adapt are also effective at stabilizing their bottom line.

For further insight into how successful risk management can help your enterprise, please contact us.

 

Protect Your Assets

As you know, a Freight Broker serves a vital role in the intricate machine that is freight movement. By connecting shippers and carriers who may not otherwise be able to find each other, you keep the industry humming.

Being a freght broker means investing large amounts of time learning the shipping industry inside and out. Then comes license costs, insurance, and surety bonds. This type of investment is too valuable to leave to any insurance. You must make wise choices. Not only are you expected to protect yourself, but you must look out for your shippers and customers as well.

Broker Shield Freight Insurance offers you a level of coverage that will protect you against unforseen cases that your Carrier's insurance company may not cover.

Broker Shield Insurance coverage provides you with all the protction you'll need. From contingent cargo, all-risk cargo, to third party auto liability and the standard Property & Casualty lines insurance we protect every facet of your business.

Our "value added" services set us apart from other insurance companies by including claims management and recovery services. We focus on making truckers responsible for any damage or theft, leaving your company to concentrate on moving freight. We conduct a contractual review of trading terms & conditions for both Shipper clients & Carrier agreements. We provide an evaluation of claims data and feedback, helping support your logistics chain. We have a training program that helps you understand the full scope of your exposures. We will also give you marketing materials that will help you to stand out amongst your competitors.

Don't risk your company's future with inadequate insurance, Contact us so we can help keep you moving.

A Brief Overview of the Carmack Amendment

The Interstate Commerce Act was established in 1887 to deal with the rise of the railroads and the growth of cross country travel and freight delivery. The intent was to regulate interstate transportation.

In 1906, the Carmack Amendment was added to the Interstate Commerce Act which was enacted by Congress to establish uniform federal guidelines for shipping across state lines. These guidelines were designed to reduce confusion surrounding a carrier's liability when there was damage to a shipper's interstate shipment.

The Carmack Amendment establishes the limits of liability for the carriers. The liability imposed is for the “actual loss or injury to the property”. There are no caps on liability the carrier assumes through the Carmack Amendment. Therefor, when the carrier takes possesion of the cargo they become 100% liable for the load.  

The carrier and the shipper sign a contract named a "bill of lading". The Carmack Amendment allows some carriers to limit their liability in this contract. The amount they assume for cargo damage can vary, but it's generally around $1 Per Lb.
The Carmack Amendment supersedes individual state laws and ensures that all parties are treated with one set of rules. This also means that any state law claims can be dismissed, as the Carmack Amendment takes precedence.

There is a protocol for filing claims under the Carmack Amendment. In order to bring a lawsuit, a written claim must be filed with the carrier within nine months of the date of the delivery of the property. If no delivery was made, then the claim needs to be filed within nine months after a reasonable time for delivery has passed.

Feel free to contact us with any questions or concerns you may have about the Carmack Amendment or other shipping related laws. It's our speciality and we're happy to help.

Do Freight Brokers Really Need Auto Insurance?

Freight Brokers wrestle with many questions when deciding cost management strategies. One of the biggest is whether or not they need Auto Insurance. The straight forward answer is absolutely. There are so many unpredictable, uncontrollable forces out there, (accidents, storms, hijackings, theft, vandalism) that it's impossible to avoid a lawsuit sooner or later, even if you have nothing to do with the incident. Just having your cargo there can put you at risk. If a truck gets into an accident, the first thing lawyers want to do is drag everybody they can into court. The average claim on an auto accident is about 2.6 million dollars. Without proper Auto Liability Insurance, such a claim can be devastating to a business. Liability costs for shipping skyrockets, severly impairing profitability.

There are many steps you can take to protect your assets and not face serious punitive damages as a result of death or injury from the movement of freight. One of the best steps is having someone with years of industry experience to review your current business model & current contracts in place. GSIS, Inc. is a leader in Risk Management education and Insurance Solutions. Our company is focused on educating our clients on risk management stratagies for the freight broker industry. We are always interested in spreading current news topics relating to the industry including major catastrophes and current laws that effect the Freight Broker/Transportation industry. Contact us at http://www.gsis.com

Here at Global Solutions Insurance Services Inc. we deal in the many forms of domestic and international trade insurance and our trained professionals help you choose a policy that fits your needs perfectly.

Avoiding a $26 Million Claim

Freight Broker Risk Management 101

You are a Domestic Freight Broker. You gave up your common carrier authority years ago. Now you enjoy the comfort of limited liability thanks to common law and don’t play by the Carmack Amendment. Right?

Many brokers believe that the separation of authorities will nullify the risk of being seriously affected by a lawsuit as a result of the movement of freight. However this is merely one step in a series of steps to help prevent being sued as anything other than a Freight Broker (which enjoys limited liability).

The other day I was reading an insurance policy wording and it was clearly set up to cover damages for a; Motor Carrier, Warehouseman, Freight Forwarder, Logistics ServiceProvider or Other Bailee.

A plaintiff’s attorney would read the policy wording and say “Eureka! We got them now. If they are a freight broker why would they buy coverage for a motor carrier, or freight forwarder? They are clearly holding themselves out to be something other than a freight broker. “

If an auto accident occurs injuring or killing a third party the average settlement is $2.6 Million. The average truck driver only carries $1 Million in liability coverage. What most attorneys do is drag everyone who had anything to do with the shipment into this case including a Freight Broker and those with the deepest pockets.

In recent court cases such as Travelers Insurance a/s/o Vera Bradley Designs v. Panalpina, Inc., 2010 WL 3894105 (N.D. IL. 2010). The courts have upheld the notion that even though you have sole freight broker authority, how you hold yourself out to be (i.e. the way you run your operations, contracts in place, broker/shipper/carrier relationships) plays a big role in how the courts will actually view your authority.  

There are many steps you can take to protect your assets and not face serious punitive damages as a result of death or injury from the movement of freight. One of the best steps is having someone with years of industry experience to review your current business model & current contracts in place. GSIS, Inc. is a leader in Risk Management education and Insurance Solutions. With tailor made products specifically designed for Freight Brokers you will not find yourself in this situation. When it comes to Freight Brokers, GSIS should be your first call & only call every time.   

Acting outside the box of a "Property Broker"

I recently read an article in which a Property Broker was successfully sued for an accident that resulted in the death of one man and other serious injuries. What had led up to the verdict is as follows:

 

A Carrier was involved in an accident with 3 cars, killing one person & seriously injuring others. The Carrier, like 90% of the carriers on the road only carried $1 Million in liability coverage. The lawyers on the case recognized that they needed to find a fatter pig to feed the hungry mouths of the injured victims and suffering family. They successfully found that pig when they recognized that the property broker that brokered this load was a major player in the industry. Also, through some more research in the SAFER site it was discovered that the carrier of the load had a terrible safety record (I.e. 238 safety violations, 3 accidents, 1 more fatality in 18 months prior).

 

Through even more investigation it was found that the Property Broker an additional DOT authority (Something that is common in the Third-Party Logistics world). At the time of the accident the Broker had common carrier authority. This exposed them to the Carmack Amendment in which they were exposed to potentially unlimited Liability.

Statistics:

 

Ø  5000 fatalities a year on average take place relating to common carrier accidents within the U.S.

Ø  120,000 injuries a year on average take place relating to common carrier accidents within the U.S.

Ø  Actuarial statistics support average settlement for fatality in U.S involving a common carrier is 2.6 million.

Ø  It’s estimated that 90% of companies with common carrier authority only have 1 million of auto liability coverage.

 

The Storm was perfect, the broker failed to do what is arguably one of the most important jobs of a property broker which is Vetting the Carriers it chooses to tender loads. Further, the broker left himself wide open for lawsuits under his authority of a common carrier.

 

This is a prime example of the importance of a proper Risk Management Plan. GSIS,inc. is dedicated to success of every business and person we touch. Each insured is offered Risk Management Consulting Services. Our goal as an insurance provider is not only to be there when the unthinkable happens but also, minimize the exposures before the unthinkable occurs.

 

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.

 Are you covered?

 
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.