August 13, 2020
Auto Liability Coverages
There are several different types of coverages available in terms of types of coverages designed to cover Auto Liability on behalf of the freight broker. It is very important that Freight Brokers are adequately covered and understand how a policy responds to specific contractual language that a 3PL may agree to with a shipper or motor carrier.
Contingent Auto Liability
This type of 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)
There may be other conditions that must also be present or satisfied for the coverage to kick-in. The policies can be written on both an aggregate or a per occurrence basis. Defense may or may not be covered depending on how the form is written and whether defense is inside of or outside of the policy limits. There also may be no defense coverage if the trucking company is providing defense. It is best to understand your policy and ask questions before you bind coverage. Punitive and exemplary damages are typically excluded.
Coverage can often be written to limits of $15 million-$25 million before needing to get additional limits from an excess market.
Truck Broker or Third-Party Liability Insurance
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 can also be a packaged policy written along with General Liability in some instances.
The coverage is for the freight brokerage and is not to be considered excess coverage over the motor carrier or intended to cover the shipper in any capacity. Every policy can be written different so it is imperative that you understand how a policy might respond to particular language or contracts with motor carriers and shippers. It can also be written per occurrence or in the aggregate, but most commonly is per occurrence.
Defense can also be inside or outside the limit and will respond only if the freight brokerage is party and deemed liable. It will not assume responsibility for the liability of the motor carrier or the shipper’s actions. It is intended only to cover the freight broker. Punitive and exemplary damages may be excluded altogether or may excluded be on a state-to-state basis depending on the policy coverage.
Coverage is typically available for $1 million-$5 million before needing to get additional limits from an excess market.
Primary Auto Liability for Freight Brokers
There are a small number of carriers in the market with the ability to write on a primary basis. These forms can be very broad in their coverages, but can be very expensive and will typically only write lower limits making it necessary to buy excess coverage if a broker desires higher limits of coverage.