Quick Guide to Trucking Insurance

The Preferred Risk

Common Characteristics of Preferred Truckers:

  • Shorter radius (no unlimited)
  • Same traffic patterns
  • Regular route common carriers
  • Agricultural commodities carriers
  • Contract carrier
  • Dry van freight (regional-west)
  • Flat bed carrier (western U.S.)
  • Reefer carrier (regional-west)
  • Less populated areas of the U.S.

Common Underwriting Information of Preferred Truckers:

  • Good (newer) equipment
  • Many years in business
  • Excellent driver qualifications
  • Good management attitude toward safety
  • Profitable operation
  • Better driver control
  • Low driver turnover
  • Fewer drug and alcohol related problems
  • Do not allow passengers
  • Reliable previous loss history
  • Satisfactory Safety Rating

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Types of Motor Carriers

For Hire Carrier A risk which is in the business of transporting processed goods, materials or commodities for another on a/or hire basis. Authority is a carrier’s rights, granted by either the Federal or State Government which allows a carrier to haul different types of goods or commodities.

  • I.C.C. Authority. Is issued by the Federal Government It allows carriers to transport processed or finished goods in designated areas. I.C.C. authority granted may be contract authority or common authority. A. carrier may have one or both of these types of authority.
    • Contract Authority. Allows an I.C.C. carrier to haul exclusively for one or a few specific shippers.
    • Common Authority. Allows an I.C.C. carrier to hold itself out to the public to haul regulated goods for hire. Common Authority maybe Regular Route or Irregular Route.
      • Regular Route allows a carrier to haul over the same route everyday as set forth in his I.C.C. authority
      • Irregular Route allows a carrier to haul over different routes in the area designated in his I.C.C. authority.
  • Exempt Carrier Authority issued by individual state governments. It allows carriers to transport certain commodities which are specifically exempt from economic regulation of the I.C.C. These items include but are not limited to unprocessed agricultural goods, livestock, poultry, fish, and rock.
  • Intrastate Carrier. Authority issued to haul within a state; Intrastate authority does not have to be the carriers base state, although often it is. Commodities hauled under the granted authority vary by carrier. They can range from items considered unprocessed, such as sand and gravel, or they authority may be granted to haul steel within the state between manufacturing plants.

Private Carrier. A private carrier hauls his owned goods only. He has no authority. His primary operation is other than contracting for carriage.

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Non-Trucking Use Insurance

Purpose of Non-Trucking Use Insurance:

The insurance is designed principally for the protection of the independent truckman when he is not under lease, dispatch, or working in the business of the lessee. This also extends to any business he may be performing. Thus, the insurance will cover him only for “non-trucking use.”

Dead-beading meant the owner/operator was hauling an empty trailer from one point to another, generally on behalf of the motor carrier. The term bobtail meant the same tractor was not hauling a trailer, i.e.: traveling with a bobbed tail.

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Reporting Policies – Fleet Accounts

Types of Fleet Accounts:

  • Value reporting policies (physical damage)


1,000,000 in value

  • Per unit policies (liability)


10 units

  • All others (liability)


1,000,000 in revenue/miles

Non-trucking Use – Fleet Accounts:

  • Premium Bases:
    • Per unit

The Purpose of the “Escrow Deposit” or “Letter of Credit” (LOC)

The purpose of the deposit is to help the agent maintain solvency.

Revenue policy effective 9/1. Insured has to wait until the entire month of Sept. is over until he knows how much revenue he has billed out of miles ran. Then, by the 20th of Oct., he needs to report to the agent what the revenue was for the month of Sept. So as you can see if on the 20th of October, the agent doesn’t get the revenue report and the check that is to come with it, the agent will be concerned. Now the agent will need to ask the company to send our cancellation for nonpayment and that extends the policy out at least another thirteen (13) days.

An audit could’ve also been ordered so there could be the possibility of additional premium being due because of it. If a primary liability or cargo policy does not renew and an audit was ordered, the deposit is routinely held until the audit is completed and the results are known.

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UM- Uninsured Motorist

Uninsured motorist is in effect m most states. They establish that a vehicle owner can obtain insurance under his or her own auto policy, to pay for injuries caused by another motorist who is either uninsured or underinsured and as a result is unable to pay. In most states, coverage is only for bodily injury, but some states do include property damage. Some states allow the coverage to be rejected if the insured signs a release.

Examples of uninsured motorists are:

1. A driver of a vehicle for which no liability insurance is provided at the time of the accident

2. A driver of a vehicle for which liability insurance is provided but with limits less than those required by state law

3. A hit and run driver

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UIM- Underinsured Motorist

This coverage allows injured persons to collect up to their underinsured motorists coverage limits of liability insurance when the liability limits of the negligent party’s auto liability insurance are exhausted and are not enough to pay the full amount of the damage.

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PIP- Personal Injury Protection

Some states have this so-called no fault auto insurance. They require motorists to purchase insurance that provides first-party benefits to injured persons without regard to fault or negligence.

The coverage’s within PIP are as follows:

1. Medical and rehabilitation expenses

2. Income loss benefit

3. Substitute services benefit

4. Death benefits

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Medical Payments Insurance

This coverage is available in most states and covers the reasonable and necessary medical and funeral expenses incurred by a person injured by an accident while entering into, riding in, or alighting from a covered auto. There is no coverage if the injury occurs in the course of employment and is covered under workers comp.

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Physical Damage

Specified Perils Coverage

  • Fire, lightning or explosion
  • Theft
  • Windstorm, hail or earthquake
  • Flood

Comprehensive Coverage

The company will pay for any loss to a covered auto or its equipment from any cause except:

  • The covered auto’s collision with another object or
  • The covered auto’s overturn

Collision Coverage

The company will pay for loss to a covered auto or its equipment under collision caused by:

  • The covered auto’s collision with another object or
  • The covered auto’s overturn

Clarification to Actual Cash Value

This means any physical damage loss is paid on what the vehicle is worth at the time of the loss.

There are three options to choose from while settling a claim.

1. The actual cash value of the damaged or stolen property as of the time of the loss:

2. The cost of repairing or replacing the damaged or stolen property with other property of likekind and quality;

3. The amount show in the schedule of autos or shown as limit of insurance elsewhere in the policy.

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Bailee or Trailer Interchange

Bailee may also be termed Hired Auto Physical Damage.

Coverage applies to physical damage on loaned , leased, rented or borrowed autos on a blanket basis

Trailer Interchange CA4938

Coverage- use only when there is a written intermodal agreement, requiring the assumption of physical damage coverage for the use of other trailers or when the insured’s trailers need to be covered when in someone else’s possession.

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Primary Liability

Primary liability coverage protects the trucker for exposures he has for all vehicles owned by him, or operating under his authority, dispatch and control for which he is legally liable. The liability policy consists of coverage for bodily injury (BI) and property damage (PD). Most primary policies are written on a combined single limit basis (CSL).

BI (Bodily Injury). Provides payment to a claimant for bodily injury for which the insured is legally liable.
PD (Property Damage). Provides payment to a claimant for property damages for which the insured is legally liable.

Some of the more obvious commodities limits are:

  • Limit: 750,000
    • Exempt commodities:
      • Livestock
      • Grain
      • Produce
      • Rock/gravel
    • Regulated non-hazardous:
      • Dry goods
      • Processed food products
  • Limit: 1,000,000
    • Gasoline
    • Batteries
    • Paint
    • Fertilizer
    • Printers Ink
  • Limit: 5,000,000
    • Propane
    • Anhydrous Ammonia

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MCS- 90 and BMC-90

BMC 90 Endorsement is a requirement of the I.C.C. The MCS-90 is a requirement of the Department of Transportation.

The Department of Transportation is responsible for establishing financial responsibility requirements for all motor carriers which come under the 1980 “Act”. This includes certain types of exempt carriers, private carriers and intrastate carriers.

MCS-90 Endorsement is required on the following carriers:

a. Common, contract and exempt carriers engaged in interstate commerce.

b. All Carriers- common, contract, exempt and private in interstate, foreign and intrastate commerce- when transporting certain hazardous substances. The Schedule of Limits Chard on the endorsement shows specific application.

Understanding the MCS-90

Of all the coverage’s that present insurance companies with problems and agents with E &O problems, the MCS-90 must rank dose to number one. The endorsement does such things as provide a different definition of accident than the Truckers Policy and it comes up with a “new coverage” entitled Environmental Restoration. This provides coverage for tangible loss, damage or destruction. It also has a “hooker” in there that includes the cost of removal and the cost of necessary measures taken to minimize damage.

These provisions of the policy do not change with the attachment of the MCS-90 form. The MCS-90 does provide a form of surety or financial guarantee saying that the loss will be paid by the insurance company or the insured. If the insurance company has to pay, “the insured agrees to reimburse the company for any payment made by the company on account of an accident, claim , or suit involving a breach of the terms of the policy, and for any payment that the company would not have been obligated to make under the provisions of the policy except for the agreements contained in this endorsement.”

Cab Cards

Cab Cards are issued to all risks with primary liability coverage. The cab cards intent is basically that of being a “proof of insurance card”.

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Truckers carrier cargo insurance to compensate a shipper or consignee for loss of damage to property which the trucker is transporting for them. Common carriers are required by the I.C.C. to carry cargo. They have broader responsibilities. Contract carriers are responsible to the degree that they accept in their contract. Private carriers carry their own goods so they must decide if they wish to purchase coverage to protect their own financial interest.

Specified Perils Coverage

This coverage fore covers all sums the insured must pay because of “loss to “covered property” while in the insured’s custody or control in the ordinary course of transit for which the insured is legally liable as a “trucker” under a Uniform Bill of Lading or Shipping Receipt caused directly by the COVERED PERILS OF:

a. Fire, Lightning and Explosion;

b. Accidental Collision of the Auto with anything else;

c. Overturning of the Auto;

d. Collapse of bridges or culverts;

e. Flood, meaning rising of streams or navigable waters;

f. Perils of the seas, lakes, rivers or inland waters while on ferries;

g. Cyclone, Tornado or Windstorm, excluding loss or damage caused by hail, Rain, Sleet or Snow, whether driven by wind or not;

h. Theft of an entire shopping package, excluding all pilferage.

Broad Form Coverage

Under this coverage form the company will pay all sums the insured must pay because of “loss” to “covered property” while in the insured’s custody or control in the ordinary course of transit for which the insured is legally liable as a “trucker” under a Uniform Bill of Lading or Shipping Receipt subject to the exclusions on the policy.

Bill of Lading

The BOL is simply a shipping receipt. it states who the trucker is, who the shipper is, and who the consignee is. It may contain details about the load on it regarding what temperature the load should remain at, when the delivery needs to be completed, what the load count is an other factors. When the trucker pick ups a for hire load, he will receive a BOL and sign off on it that he has accepted the load

Released Bill of Lading

On occasion a trucker may accept a load which has a cargo limit much higher than the trucker currently maintains. The shipper may release the trucker from having to obtain this higher cargo limit. For Example: Your trucker maintains a cargo limit of $250,000. He is going to haul a submarine for the U.S. government which has a value of $4,000,000. The government will insure the cargo for the haul above the $250,000 limit


Some cargo polices contain a co-insurance clause; i.e. Northland

This is a policy condition which states all cargo must be insured by us for its total value at the time of the loss, or you will incur a penalty. Basically all this means is that if you are hauling a $100,000 load, it should be insured for $100,000 when you get in an accident. If you aren’t your will incur a penalty. An example will clarify this for you:

Cargo Loss Example

$100,000 Limit

$1,000 Deductible

Loss #1

Loss #2

Cargo Value



Cargo Loss



Clean Up Debris



Salvage Recovered



Salvage Recover Expense



Beware of penalties if co-insurance applies!

Common Claim Controversies Where Cargo’s Concerned:

  • Reefer Breakdown- Maintenance & Warranty Issues
  • Wetness
  • Removal Expense

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General Liability

Reasons to buy general liability

  • Customers on the insured’s premises
  • Salespeople on the customer’s premises- what they say and do.
  • Loading and unloading before it is picked up and after it is unloaded and while mechanically moved by a forklift Loading and unloading by a hand truck or a tractor/trailer attached boom/winch is covered under the auto form.
  • Erroneous delivery of products, including liquids. Exclusion g., the ISO auto exclusion, implies that because the tanker delivered the product, then left, the auto exclusion doesn’t allow misdelivery claims. The proximate cause of the loss was tanker misdelivery. We have changed ISO policy language to make sure misdelivery coverage is provided on liquids and dry products, just as it is on the auto policy.
  • Takes in outside repair or performs owner/operator repair. Helps a disabled trucker fix his brakes, gratis, and they fail later.
  • Sells an extra tire or parts to another trucker – defense costs.
  • Bodily injury resulting from using self defense to protect persons or property.
  • Attractive nuisance on business property.
  • Guard dog, any size, used to protect business property
  • Furnishes free beer at the Christmas party or after a safety meeting. Employee drives home drunk and hits a school bus.
  • Contractual liability – leases, key stop, intermodal, etc.
  • Libel and slander exposures. Writing or saying something injurious, i.e.: remarks made about an employee during a credit reference check. For coverage to apply to the person originating the comments, the information cant knowingly be false or in willful violation of the law.
  • The insured mows his grass outside of the truck terminal. The lawn mower throws up a rock at a passing car. The car is damaged.

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Business Auto Policy

Business Auto (BA) are autos of the insured that are used in a non-revenue generating capacity and in the business name. These vehicles can be of the pickup, car, or van variety. The vehicles can also be used by the named insured as a vehicle to drive to work, drive to pick up parts, really anything that the insured can do as long as it does not generate a revenue in a for-hire capacity.

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Garagekeepers provides physical damage coverage for vehicles, which you do not own, that are in your care, custody or control. This is simply a bailor/bailee situation.

  • Garagekeepers applies on a legal liability basis unless one of the Direct Coverage Options is checked off on the endorsement.
  • Direct Coverage Options apply without regard to the insured legal liability for a loss to a covered auto.
  • A Maximum Value Must be Declared. One must determine how many units the insured would be responsible for and decide the maximum value of the exposure.
  • Garagekeepers is for physical damage to vehicles.

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Downtime Coverage

Downtime refers to the time an auto is not running and producing revenue because it has been involved in an accident.

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Employee Benefits Program Liability Coverage

The insurance applies for negligent acts, errors or omissions that are committed in the “administration” of the insured’s “employee benefit programs” during the policy period. Realistically the coverage is intended for defense and possibly payout because of:

  • Failure to advise options that were available
  • Interpreting employee benefits
  • Giving counsel on existing or future benefits
  • Mishandling of records
  • Terminating participation in a plan
  • Not protecting a spouse’s interest

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Inland Marine Coverage

Commercially, Inland Marine coverage can be used to cover a wide variety of exposures. In the trucking industry examples of what you may typically find this form covering the following types of items:

  • Tools
  • Fork lifts
  • Personal effects of drivers in tractors
  • Generators
  • Satellite Dishes on premises or mounted on tractors

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Property Coverage

Property insurance is written to provide protection for both tangible and intangible property. Tangible property includes real and personal property. Examples of real property would be buildings, outdoor fences and outdoor signs. Personal property examples would be office desks, auto parts, and mechanic tools. Intangible property would include loss of business income, loss of use, and additional expenses incurred to get your business operating after a loss.

Property insurance can be written on a named peril basis or all risk basis. The basic difference between the two policies is that the standard policy only covers specified perils listed in the coverage form. On the special form policy, it covers any peril not specifically excluded in the coverage form.

The broad form policy covers all of the named perils under the standard policy, but also includes coverage for more specified perils. Coverage is still limited to named perils in the policy. The perils of earthquake and flood are specifically excluded in all property policies. Pollution is also specifically excluded.

Typical Property Exposures for Truckers:

They include office, truck wash, truck maintenance/private storage buildings and public warehouse/freight terminals.

Truck maintenance includes minor repair work with no major engine overhauls, body shop work, or spray painting. Private storage buildings include the storage of excess auto parts, tires, tarps, chains, tractors or trailers. Public warehouse would include any warehouses open to the general public. Freight terminal will include any building used to store commodities being hauled by the insured. This includes the storage of commodities for one hour, one day or one week. No rental income producing property can be eligible for property coverage. Also included are accounts receivables, exterior and interior glass, outdoor signs, money and securities, valuable papers, mechanic tools, employee dishonesty, personal property of others, real property of others, and computer optional coverages. Personal property of others coverage is used to provide coverage for personal property that is not owned by the insured, but is in his or her care, custody, and control. This optional coverage is commonly referred to as Warehouseman’s Legal Liability. Under a trucking exposure, this coverage is used to cover commodities stored in a warehouse or freight terminal.

Commonly, trucking risks will have several types of mobile equipment needing insurance protection. This would include any forklifts, lawn mowers, pallet jacks, power truck wash machines, front end loaders, and farm tractors used to remove snow. Coverage can be provided by endorsing an inland marine floater form tot he property policy. The key to the coverage is that each piece of mobile equipment must be scheduled on the floater.

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Umbrella/Excess Coverage

Insureds run the risk of having a loss that will exhaust the insurance coverage they may have. This is especially true with the transportation industry. The insured needs to purchase catastrophic insurance coverage to protect against unknown catastrophic loss that could deplete their financial assets

The insured has an option between two types of catastrophic coverages which are an excess liability policy and an umbrella liability policy. the main difference between the two coverage forms is how the coverage is applied.

Under the excess liability policy, the coverage will follow form the underlying contract. It will provide exactly the same coverage as the underlying contract. The excess policy will not provide outside coverage not provided in the underlying contract.

The umbrella liability policy provides coverage to meet two basic functions. First, it will provide excess coverage. Coverage will take over when the limits of the underlying contract are inadequate to pay any judgment against the insured. The coverage is still subject to all the terms and conditions of schedule of underlying contracts.

Secondly, umbrella policies provide more comprehensive coverage than what is available under the underlying contract. The umbrella policy will provide drop-down coverage for exposures not covered by the underlying contract. If the umbrella policy provides drop-down coverage, a self -insured retention limit is applied to this coverage.

There is no standard umbrella or excess liability policy.

Some of the common exclusions found in umbrella policies would be pollution, uninsured and underinsured, care, custody and control, real and personal property, owned aircraft, owned watercraft, and workers compensation benefits.

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Workers Compensation

Workers Compensation insurance was developed to provide insurance protection for employees who were injured while completing their job duties. Under English common law, the employer has five obligations.

1. All employers are obligated to provide a reasonably safe place for the employee to work in.

2. All employers are obligated to provide reasonably safe tools.

3. All employers are obligated to provide reasonably sane and sober fellow employees.

4. All employers are obligated to set up safety rules and enforce them.

5. All employers are obligated to inform the worker of any dangers inherent in the work which the employee could not be expected to know about.

Under the workers compensation laws, absolute liability was imposed on the employer to pay for any injury suffered by an employee, as long as the injury arises out of the course of employment.

The goals of the workers compensation laws are to avoid litigation, lessen the expenses of the injured party, and provide for a speedy and efficient way of compensating injured employees.

If the injury occurs during the course of employment, the employer is liable. Once the employee has received indemnity for an injury, he or she has now given up his or her rights to sue the employer. The workers compensation laws state the amount of benefits available to the insured employee. The amount of benefits available is based on the type of injury, age of the employee, and the severity of the injury. Thirdly, compensation under workers compensation is paid in periodic payments instead of lump sums. In most cases, the compensation is to replace loss of income from the inability to perform job duties.

Workers compensation insurance is required to be carried by all employers who fall under the laws of workers compensation. The employer cannot pass this cost on to his employees in the form of payroll deductions. The employer must pay the premiums as a cost of doing business.

Each state has a number of employee requirements which establishes when an employer is responsible to follow the workers compensation laws.

All injuries are covered as long as they are deemed as part of the course of employment. The workers compensation laws include the payment of the following benefits. This also includes any occupational disease, as long as it arises out of and in the course of employment.

1. Medical and hospital

2. Temporary/permanent total/partial disability

3. Healing period

4. Death and funeral expense

5. Rehabilitation

Workers compensation insurance is to pay any statutory benefits for employees injured and also protect the employer from financial losses related to those benefits.

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Brokers and Freight Forwarders


In theory, a broker does not have any liability to a shipper for damage done to cargo, or to the general public for damage that might be caused by the actual carrier of the shipment. Because of this, there are certain experts in the brokerage liability field who contend that they should not have any insurance to cover this “non- exposure”. Their theory is that by carrying insurance, they are admitting that they do have liability.

In the real world, brokers are held to be liable in certain instances. Both to the shipper, or owner of the commodity, and also to the general public.

A broker is a middle man between a shipper and a carrier for the purpose of arranging transportation for a particular load. Brokers who broker non-exempt loads must be licensed by the I.C.C., to operate legally. Brokers who broker exempt loads are not regulated by the I.C.C.

The actual carrier is liable for any damage done to the cargo and any bodily injury or property damage from an accident that the carrier caused. However, there are situations and/or theories under which liability may also be imposed on the broker as well as the carrier and there are some instances where a broker’s liability is broader than the carriers. These situations/theories will be discussed in the following section.

Situations/Theories of Broker Liability:

1. Manner of broker operations. Sometimes, a shipper may be led to believe that a broker will be the carrier for a particular load by the way a broker conducts his operations. One situation under which a shipper’s mistaken belief may arise is when a broker, who is also a carrier, conducts both operations under the same name. If the shipper’s belief is reasonable, it may have a cause of action against the broker for cargo damage, as well as against the actual carrier. Whatever the circumstances may be, the apparent key is that a broker cannot hold itself out ass a carrier and still retain its immunity from cargo liability. This “holding out” may be implied as well as explicit.

2. Bills of Lading. Sometimes the broker is listed on the Bill of Lading as the carrier. A Bill of Lading is basically a contract between a shipper and carrier for transporting goods. In addition, the Bill of Lading may affect bodily injury and property damage liability, the rights and liabilities of parties for damage done to the cargo. A problem, therefore, arises for a broker when it is named as the carrier on a Bill of Lading. Lading as a carrier, the broker runs the risk of having full carrier liability imposed upon it. Ordinarily, the shipper prepares the Bill of Lading.

3. Vicarious Liability. Under vicarious liability, the liability of a carrier may be imposed upon a broker because of the relationship the broker and carrier had in transporting the load. Although vicarious liability between broker and carrier has not really caught on yet with the courts, it is a way in which courts can “find the deep pocket” in order to compensate an injured plaintiff.

4. Broker Negligence. A broker may simply be held negligent for some act or omission that may result in the imposition of liability on the broker. Possible examples of broker negligence would include the hiring of a carrier that does not have the required insurance protection or a carrier that is unsafe or unreliable.

Qualifications of a broker:
A licensed broker must be a person who is:

1. Fit and willing and able

2. File an application along with a $250.00 fee

3. Post a $10,000 surety bond or show the equivalent in financial responsibility.

4. Establish servicing agents in separate states.

A Broker’s abilities and responsibilities
The broker can do anything a shipper can do. He can use regulated or exempt carriers, or freight forwarders, consolidate and distribute freight, bill carriers and negotiate rates.

Freight Forwarders

The Definition of a Freight Forwarder
Freight Forwarder is defined in the Interstate Commerce Act In order to quality as a freight forwarder, each clement of the definition must be strictly complied with. The definition requires the freight forward to:

1. Hold itself out to the general public to provide transportation of property for compensation;

2. Assemble and consolidate shipments (or provide therefore) and perform or provide for break-bulk and distribution operations of shipments in the ordinary course of its business;

3. Assume responsibility for transportation from receipt to delivery in the ordinary course of its business; and

4. Use carriers subject to I.C.C. jurisdiction for any part of the transportation in the ordinary course of its business.

Generally, a freight forwarder does not own or operate its own vehicles to transport property except for local pick up and delivery. Historically, the freight forward business has been described as follows:

Forwarders utilize common carriers by rail and motor truck to transport goods owned by others. They solicit and obtain many small shipments, from various points within an area, and cause them to be carried in less than truck-load or carload lots to a concentration center with the area. There they are assembled by the forwarder for further transportation in truck-load or carload lots. Although the forwarder gives owners of individual small shipments his own contract corresponding in form to through bills of lading and assumes responsibility for safe through carriage, the forwarder customarily arranges for the pickup, assembly and transportation of the shipments by carriers for hire. And the forwarders, not the owners of the goods, select the carriers and route the shipments. Upon arrival of a truck-load or carload of the assembled small shipments at a distribution center, the bulk shipment is broken up, the forwarder separates and takes possession of the original small shipments and arranges, where necessary, their further carriage to their various final destinations in the area served by the particular distribution point. In this final carriage of the small shipment to its ultimate destination, the forwarder again utilizes carriers for hire to move these less than truck-load or carload lots. Thus, forwarders may use the service of carriers to assemble shipments of less than truck-load or carload lots at their concentration center, to transport the assembled truck-load or carloads to a distribution center and to carry the broken up small shipments beyond their break-bulk distribution center.

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Coverage Symbols for Truckers Policies


Any “Auto”


Owned Autos Only

Only the “autos” you own (and for Liability Coverage any “trailers” you don’t own while connected to a power unity you own). This includes those “autos you acquire ownership of after the policy begins


Owned Commercial Autos

Only those trucks, tractors and trailers you own (an for liability coverage for any trailers you don’t own while connected to a power unit you own). This includes those trucks, tractors and trailers you acquired ownership of after the policy begins.


Owned Autos Subject to No-Fault

Only those autos you own that are required to have no-fault benefits in the state where they are licensed or principally garaged. This includes those autos you acquire ownership of after the policy begins provided they are subject to the no-fault law in the state where they are licensed or principally garaged.


Owned “Autos” Subject To A Compulsory Uninsured Motorists Law

Only those “autos” you own that, because of the law in the state where they are licensed or principally garaged, are required to have and cannot reject Uninsured Motorists Coverage. This includes those “autos” you acquire ownership of after the policy begins provided they are subject to the same state uninsured motorists requirement.


Specifically Described “Autos”

Only those “autos” described in Item Three of the Declarations for which a premium charge is shown (and for Liability Coverage any “trailers” you don’t own while attached to any power unit described in Item Three).


Hired “Autos” Only

Only those “autos” you lease, hire, rent or borrow. This does not include any “private passenger type auto” you lease, hire, rent or borrow from any member of your household, liability company), or agents or members of their households.


“Trailers” In Your Possession Under A Written Trailer Or Equipment Interchange Agreement

Only those “trailers” you do not own while in your possession under a written “trailer” or equipment interchange agreement in which you assume liability for “loss” to the “trailers” while in your possession.


Your “Trailers” In The Possession Of Anyone Else Under A Written Trailer Interchange Agreement

Only those “trailers” you own or hire while in the possession of anyone else under a written “trailer” interchange agreement. When Symbol “49″ is entered next to a Physical Damage Coverage in Item Two of the Declarations, the Physical Damage Coverage exclusion relating to “loss” to a “trailer” in the possession of anyone else does not apply to that coverage.


Non-owned “Autos” Only

Only those “autos” you do not own, lease, hire, rent or borrow that are used in connection with your business. This includes “private passenger type autos” owned by your “employees”, partners (if you are a partnership), members (if you are a limited liability company), or members of their households but only while used in your business or your personal affairs.

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Types of Leases

Types of Leases:

a. Railroad Contracts- the railroads traditionally “take all and give nothing.” Intermodal means different modes of transportation, i.e.: air, rail, ship- terms are similar to an interchange agreement.

b. Key Stop Agreements- these agreements allow the trucker to be on the terminal property after hours to load product either with the use of a key or card for access. It is important for the trucker to know what he has signed as he could become legally obligated for more liability than he has coverage and it exposes the insured to additional exposure/expense on his own.

c. Trip Leases- a 29 day lease or less where the Lessor leases equipment and driver to the Lessee for one trip; generally the agreement will want the Lessor to carry the Primary Liability.

d. Permanent Lease- is a 30 day or more lease.

e. Equipment Lease- this is more popular now as more equipment is being leased rather than purchased.

f. Bills of Lading are a key factor and largely determine who is responsible in a situation. Carriers named on the bill generally have primary liability to shipper and the public.

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Safety Department

The Purpose of Surveys

Used in assessing the safety environment of motor carriers (both interstate and intra state). The survey results indicate the present-time status (or “snapshot) of the company. However, through periodic review and surveys over a period of time, it may be possible to determine existing or developing trends within the company’s system. This information gives underwriters insight into the scope and effectiveness of the carrier’s corporate systems, its attitudes and policies on risk management, its philosophies and commitment to safety, as well as its performance on regulatory compliance.

Company Information: Basic information regarding the company.

Management: In this section, we look for stability in top and upper management Concerns are expressed when there is a turnover in management, especially in the operations and safety department It is hoped that the safety representative can find out why people left their positions. It is also important that the safety representative understand the “chain of command.” It provides a better understanding of top management’s commitment to safety and the best way to influence change. For example, if the safety director answers to operations, operations then becomes the final word. It is hoped that the safety director answers to the President or CEO. Visualize a scale; safety on one side, operations on the other side, and the owner in the middle finding a balance. It is important to remember that with a smaller insured, the structure may not be as departmentalized and one person may serve in a variety of capacities.

Operations Information: Gross revenues can be correlated to mileage information and it causes concern when revenues are less than $1.00 per mile. When companies are struggling financially, they may cut expenditures in maintenance and safety areas. In gross revenue policies, this also may be a cross reference. Underwriters will check against reported revenue and reported mileage. Another checkpoint is dividing mileage by total units. It is extremely difficult for a unit to average over 120,000 miles per year with a single driver and remain in compliance with regulations. Driver fatigue becomes a real concern as well. Underwriters need to be made aware of changes or additions in operation authorities.

Federal Safety Rating: All motor carrier personnel must be familiar with the Federal Motor Carrier Safety Regulations (FACER). If transporting hazardous materials or hazardous waste, personnel also must be familiar with 49 CAR 170-177. It is essential that “Satisfactory” safety ratings from regulatory agencies are obtained and maintained. “Conditional” or “Unsatisfactory” safety ratings expose the insured to the imposition of fines and increases their liability risk exposure should a serious accident occur. Federal safety ratings, if recent, are also a help for the safety representative.

If the audit was a compliance visit, the Department of Transportation (DOT) checked their compliance level with Federal Motor Carrier Safety Regulations (FACER). A safety audit reviews their overall safety and it is a good idea to obtain a copy of the audit It is also recommended that a copy of the safety rating be obtained. There may have been a satisfactory safety rating issued but deficiencies may still be listed that the motor carrier needs to improve on. Carriers also may have received a satisfactory rating and paid civil forfeiture fines.

States Operated: Fleet mileage information by state is obtained and entered on the survey. The computer figures percentage of miles traveled in each state. These percentages indicate the main routes traveled by the carrier. For example, carriers domiciled in the Midwest that have high percentages of miles in the western states must travel across the mountains. In the winter, this can be extremely risky.

Equipment Information: Radical changes in the addition of equipment may lead to growing pains as staff is unable to “keep up” with the additional growth. Downsizing may indicate financial instability due to a variety of reasons. Changes in the carrier’s operations also may be indicated when other types of trailers are added. For example, a reefer operation that now has flatbed type trailers may flag concerns. Is adequate training provided? Is specialty equipment required?

Special interest is also required where carriers have tank type trailers, doubles or triples. These types of operations require greater levels of driver training.

Commodity Information: This area is self-explanatory. It generally is noted when there are types of cargo that certain risk that may need to be rated approximately. Likewise, those carriers who haul full loads of king crab or computers present additional exposures such as high theft, spoilage, special handling techniques, etc.

Hazardous Materials: If the carrier hauls hazardous materials, this section is completed. This area expands the underwriter’s knowledge regarding what is hauled, what training is provided to the drivers, and if there are appropriate emergency response procedures in place.

Leasing Information: Although trip leasing has generally decreased since deregulation, the practice still exists. Simply stated, trip leasing is a “loading of authority to haul a regulated cargo/commodity.” For the duration of the trip, the leasee operates under the control of the lessor. For this permission, the lessee pays a percentage of the revenue to the lessor. Trip leasing broadens our exposure because the carrier has little control over trip leased equipment, driver or maintenance. Because of the additional exposure, we need to be aware of it. It is also important to find out if the carrier has brokerage authority.

Inspection/Maintenance: It is important that equipment be well maintained by competent maintenance personnel with solid documentation on file of work done. Great West recommends that, for those fleets who have owner- operator (O/O) units, the carrier maintain monthly maintenance information furnished by O/O. Better yet, some carriers require the O/O unit to pass a monthly inspection by the motor carrier’s mechanics before dispatching. This ensures that the owner-operators maintain their equipment to the carrier’s standards. Question 10 is a federal regulation stating that once a year, the equipment is subject to a detailed and thorough inspection by a certified inspector. Question 11 is important because of garage keepers liability. If the carrier’s shop people work on non- owned equipment, there are liability and physical damage exposures that will require additional coverage’s.

Safety Department: Information is obtained that will give an overview of the safety director and their staff. We are interested in the expertise of the safety director and their department Again, stability is preferred in this department We try to get a feel for the communication between safety and top management. Is management interested in safety or just providing lip service? Good communication is a must to maintain good safety policies and procedures.

Safety Qualifications: The carrier should have driver qualification standards in writing that will assure the driver has the maturity, experience and ability to operate the equipment safely. Great West Casualty Company (GUCCI) recommends that drivers should be at least 23 years old with 2 years tractor/trailer experience.

The driving record of an applicant driver is extremely important The qualification standards must be strict and should be at least, if not more stringent than the recommended minimums encouraged by GUCCI. They are:

  • No serious traffic violations in the past three years. These are defined as reckless/careless driving; driving while intoxicated or under the influence of drugs; hit and run, leaving the scene, failure to report an accident; excessive speeding (16 MPH or more over the posted speed limit or exceeding 71 MPH).
  • No current license suspensions/revocations. A work permit is not acceptable.
  • No more than five moving violations within the past three years nor more than three moving violations within the past 12 months.
  • No recordable/preventable accidents in last three years.
  • Must meet all the requirements of the FACER Part 391.
  • The applicant must have a valid CAL (state of residency) with the necessary endorsements.

The driver application form is a questionnaire to develop the necessary information to verify the driver’s qualifications. This includes drivers for owner-operators and applicants for a company driving position. All areas of the application should be completed in detail.

The terminology “self employed” for experience should be verified. Gaps in the employment history during the past three years should be explained. The violation and accident history must compare to information on the MR. and information furnished by past employers. If not, it is a false application and must be rejected.

Carriers must verify past employment for at least three years. Each previous employer must be contacted by telephone or in writing for verification of employment All past employment checks must be documented in writing for retention in the driver qualification (DO) file. If the information is not verifiable, then the applicant should not be qualified.

The applicant must have a special examination to ensure he/she is physically qualified. Determination cannot be made on a medical examiners certificate alone. GUCCI recommends that the carrier require and maintain the long form physical completed by the physician.

The applicant considered for a company driver, driver for an owner-operator, or owner-operator position should be given a road test The tester should ensure the applicant has defensive driving skills and can use the parts and accessories (of vehicle) necessary for safe operation. A road test certificate from another carrier should not be accepted.

Drug Testing: A drug testing program must be in place that complies with the FACER. Motor carrier personnel must assure that all aspects of the program including specimen collection procedures, laboratory utilized and record keeping requirements complies with FACER 391, Subpart H. The motor carrier also must have a company policy in place that outlines the company drug testing program.

This entire area defines proper driver screening and qualifying. Any deviation may indicate not enough time and effort is spent dedicated to proper screening of drivers. A golden rule in the trucking business is “You hire your problems.” Proper screening will minimize future problems.

Accident Information: The carrier should have up-to-date files for each accident As of March 4, 1993, the carrier no longer needs to report accidents that meet certain criteria to the DOT but must maintain an accident register and record all losses that result in: (1) the death of a person, (2) bodily injury to a person who, as a result of the accident, immediately receives medical treatment away from the scene or (3) one or more of the vehicles incur disabling damage which requires it to be towed away from the scene.

The accident frequencies are figured thus: the number of accidents multiplied by 1,000,000 and divided by the total mileage for the same time frame. This will give the number of accidents per million miles traveled. Some motor carriers have extremely accurate record keeping systems. Because these carriers count bent tire rims, a dent in the trailer, a scratch in the tractor as a loss, their overall frequency may be high. Considerations are given also for those carriers who do not have more than a million miles a year. Those frequencies are skewed and do not portray an accurate picture of the true frequencies. Generally, these frequencies are developed: An all loss frequency, a frequency for recordable (accident register) losses and the preventable recordable losses.

All incidents/accidents should be reviewed by company personnel to determine preventability. For example, did the driver take every reasonable action to avoid the accident and drive defensively? This may require the carrier to review the driver’s version of the accident, law enforcement reports, or insurance adjuster information. The carrier should have written standards regarding discipline for drivers who repeat preventable accidents. There also should be incentives in place to reward drivers for accident free performance. The incentives may be in various forms.

Driver Control: Question 1 refers to a “slip seat operation.” This means that drivers may drive a different vehicle every day or every trip. One school of thought is that a driver who remains with the same vehicle day after day may be more aware of a mechanical problem sooner than the driver who drives different vehicles. The driver takes “ownership” of that vehicle and may take better care of it.

Drivers should be required to call the operations department daily. These call-ins are important for communication, not only to include anticipated delivery times, but it helps make the driver feel not so isolated from the company.

The carrier should have policies or procedures in place that address the driver with multiple moving violations. It may be that a driver who receives numerous moving violations is being pushed by the company to make delivery times. It may mean that the equipment allows the driver to exceed the speed limit This gives another insight to carriers “real” philosophy on safety versus operations. One could interpret the lack of discipline regarding moving violations as an unwritten approval of the behavior.

Most companies have realized that lowering speed on equipment will raise fuel mileage that translates into cost savings. This can be done by the installation of fuel governors, recording devices, or setting the R.P.M. on the engine that will control the driver’s ability to speed.

It is a general rule that the carrier who controls driver turnover controls losses. When the driver turnover increases, it is vitally important to find out all the reasons why and attempt to change the trend. The safety representative will know what others are doing to minimize turnover, which ones work and which ones have not produced results. Then, in generic terms, ideas and suggestions are offered for the carrier’s consideration and implementation.

Driver Pay Incentives: This area also may give insight to carrier’s inability to keep drivers. Again, the safety representative may know what the area is commanding in terms of pay and benefits and can share this with the carrier. A good carrier will already know this information and have adjusted the pay and benefit package accordingly. Good drivers command good pay and benefits. Those carriers who do not meet the driver’s expectations can see their retention levels drop to unacceptable figures. Again, a company philosophy can be determined on how it addresses this area. We look for incentives to reinforce good performance. For example, does the carrier give bonuses for additional miles versus accident free driving? There should always be positive reinforcement for accident free driving. Great West Casualty makes available to our insureds, at no cost to the carrier, a viable safety recognition program to augment the carrier’s existing safety program.

Passengers: It has always been Great West Casualty’s posture that carriers have a “no passengers allowed” policy. It should always be discouraged and the additional liability exposures explained to the carrier. However, under limited circumstances, GUCCI has insureds that have passenger programs and are willing to assume the risk. A recommendation is then made that the carrier have solid controls in place. It should be presented to the drivers as an incentive and that this privilege must be earned. We recommend that the driver should be continuously employed for a pre-determined time (+6 months) accident free and violation free. He/she may then take a family member passenger who is at least 16 years old during the summer months only (example April 1 through September 30) and for only one trip. The safety representative will explore this area thoroughly should the carrier have a rider program and make recommendations if the appropriate controls are not in place.

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Pollution Exposure


The 1987 ISO policy did two key things to “contain the exposure”:

1. Broadened liability coverage provisions to include “covered pollution cost or expense.” The expense coverage extended must result from a covered BI or PD loss. This also had the effect of containing loss and expense within the policy limit.

2. Changed the pollution exclusion to clarify under what circumstances Auto CI & PS coverage would be provided. ISO exclusion 11a excluded BU, PD and cleanup of pollution;

a. being transported by the insured.

b. in the course of transit on behalf of the insured.

c. being in or on the covered auto.

Auto coverage is modified by the Motor Carrier Act endorsement0 MCS90.

General Liability:

There are four areas generally held to provide BI & PD coverage by exception to exclusion (f) of the CGL:

  • Loss caused by a product, off site, after the insured has given up possession.
  • Completed Operation.
  • An operation in progress if the insured or subcontractor did not bring the pollutant on site.
  • Smoke or fumes from a hostile fire.

However, even if BI or PD is covered for the loss, any government directed cleanup of pollution is not.


Outright polluting is excluded. Pollution caused by a covered cause of loss would be cleaned up and removed up to the $10,000 limit provided by the policy.


Cargo covers loss to the covered goods.


Exclusion F of our Umbrella comes to us from our reinsurer. It is as complete an exclusion as they could make. This is a major E&O issue for our agents selling Umbrellas as opposed to simply raising Auto & GL limits. Our reinsurer has made a few exceptions to the exclusion for dry van haulers with little hazardous material exposure. The exclusion exception is to the extent that coverage is provided by specific endorsement for motor carrier policies of insurance for public liability under Section 29 and 30 of the Motor Carrier Act of 1980 (the MCS98). Effectively, this only allows for in-transit auto losses.

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