No assurance from insurance

Certification isn’t worth the paper it’s printed on

Q  As a broker, we tendered a load of beer to a newly authorized carrier that produced a certificate of insurance showing $100,000 in cargo coverage. The load never arrived, and we soon found out we were one of eight different brokers with stolen loads. The insurance company, notwithstanding a certificate of insurance, has declined to pay the claim, and the carrier cannot be found. What recourse do we have?

A  Little if any. As I have written previously, the certificate of insurance issued by an agent is a legally worthless document. It says only that at the time of issuance there was a policy, but it does not address coverage or disclose the loopholes. Typical exclusions in a cargo policy include theft and employee dishonesty, either of which could be used as a pretext for denying your claim. Increasingly, small carriers are obtaining specific vehicle cargo coverage that does not run to all equipment they use or operate. Shippers then will use this undisclosed exclusion as a basis for denying coverage.

All small carriers are hurt by the misdeeds of a few.

This sad state of affairs is exacerbated by proposed actions by the Federal Motor Carrier Safety Administration that do not acknowledge the need for cargo insurance verification in the spot marketplace. FMCSA recently sent the president a final proposal that would eliminate any requirement that a carrier post even a measly $5,000 cargo endorsement (Form BMC-34).

Henry Seaton - info@transportationlaw.net

Clearly, the problem you face is not an isolated incident. The absence of any effective assurance that a shipper’s or broker’s cargo claim will be properly adjusted and paid is one of the biggest impediments to effective use of small carriers. Yet the National Transportation Policy, which FMCSA is charged with promoting, requires the encouragement of an efficient privately owned motor carrier industry. Why, then, does it take such a laissez-faire attitude toward retaining and strengthening rules of commerce?

If a BMC-34 cannot be retained and increased to a realistic truckload minimum, then the industry should consider a private registry that would identify carriers and their insurers whose policies have no hidden exclusions or coverage issues and provide claimants with a direct cause of action.