Freight Forwarder Coverage Needs
Freight forwarders have special coverage needs because they are acting as a common carrier for a shipper, which makes them subject to the Carmack Amendment. Forwarders are required to provide motor carrier filings, to register with the FMCSA for a freight forwarder number, and to supply the FMCSA with evidence of liability and cargo filings.
Auto liability or cargo coverage for freight forwarder concerns-contingent coverage. The hauling carrier is required to furnish the forwarder with a copy of their policy, and additional insured endorsement, or a certificate of insurance; and will respond if:
- At the time of a covered loss, the coverage required by the freight forwarder agreement is not collectible.
- The limit of insurance payable by these forms is reuced by all sums paid by or on behalf of the hauling carrier. This is what makes this a contingent form, paying only if the hauling carrier does not. Notice that with this coverage you must only require insurance evidence from the hauling carrier.
Truckers-Named Freight Forwarder as Insured (including cargo). This "additional insured endorsement" is attached to our policy. You need to have a written forwarder agreement with the freight forwarder. Our endorsement will then provide primary liability and cargo coverage for the forwarder, including contractual liability and a provision for a notice of policy cancellation or reduced limits.
Second Level Coverage. This endorsement is attached to provide the broker coverage in excess of what is required by the trucker in their contractor agreement with the broker. For instance, if the agreement between the broker and the truck requires the trucker to maintain $1 million of liability coverage, but the broker wants $2 million of coverage for himself/herself, we would use this endorsement to provide that additional coverage.
Because a forwarder is required to have liability and cargo filings with the FMCSA, Classic Truck Insurance makes those filings for you and will issue a MCS 90, if appropriate. Most forwarders issue a sub-bill of lading to the hauling carrier to transfer some responsibility to them as the carrier, However, even though there is a forwarder contract transferring responsibility to them, a contingent exposure still exists for the forwarder. An example would be selecting a hauling carrier who had an unsatisfactory FMCSA rating or one who hired questionable drivers. Other examples would be having a certificate on file for the hauling carriers cargo policy, which excludes coverage for certain types of commodities or excludes off-temperature losses. You may have a contract in place, but can the hauling carrier afford to pay a loss if their insurance does not cover it?
From what we have seen, freight forwarders tend to set up seperate legal entities for these operations. The reasons and range from a need fro a different set of books to protecting the assets of affiliated truck operations by separation. Be sure to ask us about:
- Insuring an owned auto titled in the forwarder business name.
- Hired and Non-Owned Auto Liability. Some examples of exposures would be an auto rental on a business trip or an employee using their car on forwarder business.
- Commercial General Liability coverage for office exposure, off-premises sales calls, and independent contractors operating on your behalf.
- Workers Compensation coverage officers, office staff, and other employees of the forwarder entity.