Contingent Cargo Insurance is a secondary insurance policy. Some may call it a “just in case” or a “backup” policy. It is there if the primary insurance on the freight is not covering the damage or loss.
During shipment, it is the carrier’s responsibility to make sure all are insured and safe. If damage or loss happens, the owner of the product will file a claim against the trucking company. Not all policies are the same and the broker may find themselves listed in the claim.
As a broker, you weren’t the one that parked the truck in a questionable alley and now it is gone. Or possibly the trucking company forgot to tell their insurance company that they bought a new truck and now you are finding out that it wasn’t insured at all. It may be true that you aren’t responsible, but ultimately your customer will probably be looking at you to fix it. They hired you to get their freight delivered safely and now it is not.
This is why most 3PL companies have Contingent Cargo insurance. It is a secondary policy that will pick up when the carrier’s insurance fails. It should cover any gaps or exceptions in a carrier’s policy.
When you purchase Contingent Cargo Insurance, do your research. This is an unregulated industry and policies vary drastically. Talk to an insurance agent that is aware of transportation law. It’s not unusual for a broker to have a different insurance agent for freight-related policies.
Make sure you have a company that will fight for your interest. With some carrier insurance companies, it seems that the first thing they do is to deny a claim without investigating it. You will need your insurance company to work on your behalf to get the carrier’s insurance company to truly look at the situation. It is likely they will find that the carrier was liable. Then they will need to pay the claim and it won’t come out of your policy.
Verify that the Contingent policy doesn’t have a clause for exclusions for “follow form” policies. That is an exclusion for anything that the carrier’s insurance had an exclusion. That could render your policy worthless and you paid a bunch of money for insurance that will never go into effect.
Contingent Cargo insurance is not cheap. Check that you are getting the best coverage for what you are paying. Some policies could cost thousands that are worthless when you need it. Bottom line is that a Contingent policy is there to protect your business. Make sure it is one that will do that.
This is #6 in our Series on Starting a Transporation Brokerage Business. Leave a comment or question below.