MOTOR TRUCK CARGO INSURANCE

With MTC insurance we provide indemnity to the trucker for liability in respect of physical loss or damage to the cargo in his care.

Generally, 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.

Insuring Agreement:

The cover 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.

Deductible:

The indemnity 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.

Excluded interests:

Broad 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).

Unattended Truck Exclusion:

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.

Terminal Exposure:

Terminal 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.

Unattached trailers:

The word "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.

Doubles:

The definition 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".

Trip Leasing:

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.

Scheduled Vehicle policies:

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:

A question 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 policy limit.

There are a selection of "Optional" endorsements in the policy wording. Here is a brief description of each:

1)Refrigeration breakdown endorsement.

This 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.

For 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.

2)Riggers endorsement

The 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 this operation.

3)Contingent transit endorsement.

The 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.

The 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.

Truckers 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.

If 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.

7)L.T.L. endorsement.

LTL 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.

To 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.

The 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.

The 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.

Many 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.

Underwriters 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.

If a 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.

It is 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.

When 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 T.I. "day".