MOTOR TRUCK CARGO INSURANCE
MTC insurance we provide indemnity to the trucker for liability in respect of
physical loss or damage to the cargo in his care.
USA truckers acting as common carriers are liable for most types of loss or
damage. There are some exceptions, principally losses which are no fault of the
trucker, such as earthquakes or Acts of God. The liability of the trucker is
governed by his waybill conditions, or, for contract carriers, the terms of the
contract. The standard waybill is the "Uniform Straight Bill of Lading".
The Broad Form
15 motor truck cargo form has evolved over the years into an insurance document
which provides sufficient cargo liability cover for most trucking operations.
There are various facets to it which are self evident when the policy form is
read properly, but experience is showing that not all insurance practitioners
have absorbed some of the points where certain truckers need the benefit of
optional endorsements, or coverage is otherwise restricted.
It is the
underwriters' basic position that they prefer where possible to give the
necessary cover and then charge a premium for it. However, this cannot always
be the case, notably with respect to theft cover on some target interests,
where the exposures are simply too great. Surplus line insurers are by
definition selected against in the risks they are offered, which the
regulations require to have been declined by the admitted market. Thus the
Broad Form has been constructed in a way which starts with a restricted level
of cover, but which can then usually be widened by the inclusion of optional
endorsements. The main purpose of this document is to highlight the main areas
of restriction in cover within the basic wording, and to identify which optional
endorsements exist to widen the cover in the relevant areas.
provided is for physical loss or damage to the cargo only. There is no
contingent, consequential loss or business interruption cover. Cover applies in
and or on a truck, including loading and unloading. This means there is no
cover for cargo whilst not on a truck. The LTL endorsement (see below) provides
72 hours cover in such circumstances. Longer periods of cover can be obtained,
but the insured's exposure needs to be understood first. It may be that they
really need a warehouseman's liability policy.
provided under the policy is the limit less the deductible. For example, with a
$100,000 limit and a $5,000 deductible, the maximum payout in respect of any
one loss under the policy is $95,000.
15 has certain exclusions as regards types of cargo. The exclusions are cargoes
that we consider being at higher risk of loss or damage, or are likely to be
high values. Garments and electronics,
for instance, are "target" theft risks. Unfortunately theft from motor carriers
is rife, and we can not ignore this, as we would soon be out of business. Most
of the excluded commodities can be "bought back" into the policy coverage, by
use of the Target Interest Inclusion Endorsement, but often only for a low
theft limit and a high theft deductible.
The Broad 15
application form (and our electronic application form) specifically ask the
proposer to identify any of the target interests which are excluded by the
wording but which he expects to haul. This is one of the reasons why the
underwriters insist on using that application form (or other application forms
approved by them).
This takes away
cover for theft from trucks which are left unattended (defined as being within
10 yards of the truck), unless the truck is left in a secure area (see actual
wording of exclusion k for clarification). The Unattended Truck Endorsement is
designed to bring back cover for when the truck is left anywhere, but subject
to a maximum limit of $100,000 which may be less than the main truck limit.
exposure is often the subject of confusion, as it means different things to
different people. Under Broad Form 15, the cargo is covered on the truck
wherever the truck happens to be (subject to the qualification in respect of
theft described earlier). Thus if the truck is in a terminal the cargo on the
truck is covered. If the cargo is not on the truck then an endorsement such as
the LTL endorsement is needed – see below.
"truck" is defined in Broad Form 15 to include trailers whilst
singularly attached to power units insured for cargo liability under the
wording, or whilst temporarily detached for up to 72 hours PROVIDED THE
TRAILERS ARE LEFT IN A SECURE AREA (see actual definition for clarification of
"secure area"). Thus if a trucker leaves a loaded trailer detached from his
power unit at the roadside or in an open yard, the cargo is no longer on a
truck as defined under the policy wording, AND WOULD NOT BE COVERED.
of truck referred to above, includes trailers whilst SINGULARLY attached to a
power unit etc.. It does not include trailers attached in tandem (doubles) or
even triples. Where cover for cargo on doubles is required, this should be
specifically requested. Underwriters may charge an Additional Premium or apply
the deductible separately to each trailer, and achieve the cover by simply
deleting the word "singularly".
Exclusion m) is
an important exclusion which restricts acceptable drivers under the policy.
Drivers must be full time employees or owner operators under long term lease to
the insured trucking company. TRIP LEASING IS NOT COVERED. The Contingent
transit endorsement (see below) is designed to give cover for truck brokerage
exposures, and would cover trip leasing provided the terms of the endorsement
are complied with.
The In Full
Premium Endorsement is used to convert the policy form to a scheduled vehicle
basis, but it is important to note that until the VINs of the units to be
covered are identified to underwriters and endorsed on to the policy, THEY ARE
NOT COVERED. Underwriters will seldom agree to backdate the addition of new
units to a scheduled vehicle policy, and certainly not back date to a time
prior to the date the insured made the request for a unit to be added.
Duty to defend:
commonly asked is whether underwriters will automatically defend an insured in
the event of a cargo loss. There is no duty to defend clause under the policy.
The form covers most of the exposures an insured may encounter, but not all.
The underwriters would expect to defend the insured if the loss is covered by
the policy and is greater than the policy deductible, but always subject to the
are a selection of "Optional" endorsements in the policy wording. Here is a
brief description of each:
1)Refrigeration breakdown endorsement.
extends the policy to cover the liability of the trucker for damage to
temperature sensitive goods on his trucks, resulting from the malfunction or
breakdown of the refrigeration machinery.
coverage to apply, the reefer unit must be not more than 10 years old, and must
have been maintained in accordance with the manufacturer’s instructions. The 10
year age limit can be increased on application to underwriters, who will
normally require increased RB deductibles on applicable units.
policy wording covers cargo "in and or on a truck, including loading and
unloading". The riggers endorsement extends the policy to cover the
trucker's liability to goods that require movement by means of hoists or
cranes. So if, for instance, the trucker has a contract in which a piece of
machinery has to be positioned in a factory, he could purchase the riggers
endorsement to extend the policy to cover his liability to the machinery during
3)Contingent transit endorsement.
policy wording limits cover to cargo on trucks which are owned by the Assured,
or operated under long term lease to him. "Long term" is defined as
at least 30days. If the trucker is acting as a truck broker or "trip
leasing" some of his loads to other truckers, such loads would not be
covered. The contingent transit endorsement provides cover in these
circumstances, but only on a contingent basis, and only if the Assured has
checked the sub-contractors MTC policy and kept a copy on file.
4)Unattended truck endorsement.
policy wording limits cover for cargo on unattended trucks to when the truck is
in a fully enclosed compound which is locked or under constant supervision.
Unattended is defined as in, on or within ten yards of the truck. Underwriters
realise that in practice drivers leave trucks unattended for rest, comfort and
meal breaks. The unattended truck endorsement widens the coverage to trucks
parked anywhere which have all their openings closed and are locked.
Underwriters will normally grant the unattended truck endorsement for most
cargoes that are not excluded under the policy wording. No cover is given for
loads of target items (for instance garments and / or electronics) left
unattended - the likelihood of theft is far too great. Truckers hauling these
loads should either have "team" drivers, so there can always be at
least one driver with the truck at any time, or make arrangements to stop at
secure compounds along the route.
5)Earned freight endorsement.
tend to be paid for loads they deliver safely. If the load does not arrive at
its destination the trucker may not be paid for his expenses for that load. The
earned freight endorsement indemnifies the trucker for his inability to collect
his freight charge from his client in the event of the load being lost or
damaged as a result of an insured peril. The endorsement applies only to the
current load at the time of the loss. It does not provide coverage for earnings
of future loads which the trucker may not now be able to haul following damage
to his truck (i.e. downtime insurance).
6)Debris removal endorsement.
the cargo falls off the truck, it is usually necessary to have the cargo picked
up, either for on-carriage, salvage or disposal. The debris removal endorsement
provides cover for picking up and retrieving that cargo, but not the cost of
cleaning up the ground if the cargo has polluted it. Cover under the
endorsement is limited, usually to $1,000 where the sum insured is less than
$50,000 or $2,500 for bigger risks.
stands for "Less than Trailer Load", and describes the type of
operation that hauls partial loads for customers and consolidates small loads
into fewer, bigger loads. The consolidation aspect means that they have to have
terminal facilities, to be able to unload from some trucks and re-load into
other trucks. The L.T.L. endorsement provides cover for cargo which has been
unloaded from a truck into the terminal, for a duration of up to 72 hours.
underwrite this exposure it is essential to verify that the security at the
terminal is adequate, bearing in mind the values at risk and the type of cargo
likely to be involved.
8)In full premium endorsement.
policy wording requires the client to declare his gross receipts at the policy
expiry in order that his final premium figure can be calculated. With smaller
trucking operations it is more convenient for all parties if the premium is
calculated on the number of trucks, rather than on gross receipts. This
endorsement makes the necessary changes to enable that to happen.
endorsement limits the policy coverage to the named trucks, agreed by the
underwriters and identified in the policy. If the trucks change, the Insured
must receive Underwriters' agreement to change the covered trucks before
coverage can apply to any different vehicles.
9)Trailer interchange endorsement.
truckers have to haul loads in trailers which do not belong to them. These
trailers are leased to the trucker under a trailer interchange agreement. The
truckers are liable to the trailer owners for loss of or damage to the trailers
whilst in the trucker's custody and control. The trailer interchange
endorsement provides cover for the trucker for this liability. Cover under the
endorsement is limited to whilst the trailer is singularly attached to the
Insured's power unit, which must also be covered for MTC under the policy.
calculate the premium based on the number of days during the policy period that
the Insured will have a trailer on risk. A "day" is any calendar day
or any part of a calendar day that a covered truck has a T.I. trailer attached
to it. So, if the Insured has 3 trucks and each has a T.I. trailer attached,
that counts as 3 days.
T.I. trailer is only hauled for a few minutes, that still counts as a
"day". If one truck hauls more than one T.I. trailer on one day, that
is still only 1 day.
always useful to compare the number of tractors operated by the Insured with
the number of trailers he operates. If the two are roughly the same, it is a
good indication that he does not have too many Trailer Interchanges. If there
are significantly more tractors than trailers he must be hauling trailers
belonging to others, so may have a considerable T.I. exposure.
underwriting this exposure it is essential to find out approximately how many
T.I. days will be exposed during the policy period. Underwriters will normally
charge a separate M&D for this exposure, adjustable at expiry at a rate per