| TAKEN
FOR GRANTED For some reason, I am seeing a lot of activity in the area of cargo claims lately. We have discussed this coverage in the past, but I would like to take it up again. You might want to tear this page out and put it with your important papers for reference at a later date (like when you’re getting new insurance). Cargo, for the truckman, covers goods that you haul for others. If you, at times, haul your own goods, make sure that you discuss this fact with your agent. Owned goods may be excluded from you policy. Two basic types of cargo policies are available – Specified Perils and Broad Form. As you shop for coverages, ask the question, “What type of form is this policy written on?” Specified Perils is just what it says. It insures only those perils that are stated in the policy. The terminology in the policy is specific. It insures what it states and nothing else. There are seven outlined coverages. You may think that you have coverage, only to be denied a claim when that claim happens. Read each insured peril and make sure that you are satisfied with the coverage or that you are satisfied with the explanation from your agent. You usually see this policy form written through Lloyds of London, but not always. Broad Form coverage approaches the liability from another direction. It basically states that the company will pay for all losses, with the exception of a list of exclusions and conditions. As you would go through the Specified Perils policy looking for what is covered, you would go through the exclusions of a Broad Form policy looking for what is not covered. Mostly these exclusions apply to specific target items such as money, negotiable instruments, jewelry, art and liquor. It also excludes such areas of loss as mildew, rust, loss of market, and reefer breakdown, to name a few. Items that are excluded, if coverage is needed, can be bought back. The most common of these excluded coverages, which is bought back through an endorsement, is reefer breakdown. War, nuclear attack and terrorism are also exclusions. Terrorism can be included/excluded depending on the policy, and in most cases coverage could be purchased if you feel the need. As you have probably guessed, any enhancement to the policy costs extra so be prepared to pay. Earned Freight and Debris Removal are two important coverages that you should look for in your policy. In the event of a loss and goods are not delivered, if Earned Freight exists, you will be paid for the trip. In the event that your load is scattered over the countryside, Debris Removal will pay for the cleanup. Each one of these coverages will have a monetary cap on it. If you have a cargo loss, it’s too late to review your policy for coverages. If coverage exists, the claim is paid and if coverage does not exist you are left holding the bag. It usually is a big bag. Each policy is unique to itself, meaning that coverages and terminology differ, so take the time to understand what you have purchased. I have also seen a number of unpaid losses from unattended vehicles. Usually, the load is taken home for the weekend, left on the street, and when the driver returns on Monday morning the tractor, trailer and cargo are gone. The tractor and trailer are recovered, but the load is spread out over every swap meet in the state. Again, it is your responsibility to understand the policy. Theft is usually looked at as forced entry. Understand each line in the policy as it relates to theft. Each policy differs. If you haul containers, many policies exclude the container itself. Each trucking operation has its own needs – make sure that you have them all adequately covered. In the event of a loss and coverage is accepted by your insurance carrier, what are they going to pay? Well, your policy says that you have $100,000 in cargo limits and the total loss is $50,000. There shouldn’t be a problem. Many policies have Co-Pay Endorsements. What happens if this Co-Pay Endorsement is attached to your policy and you have the following claim? You are hauling a $200,000 load and your coverage is $100,000 and you experience a $50,000 loss. You are under insured by $100,000 or insured 50% to value, so the insurance company will pay only 50% of the loss or $25,000. You should be able to buy this endorsement out. If you are insuring to value, you should not experience any problems. Deductibles will always exist. I am seeing more split deductibles. As an example, a policy may have a $1,000 deductible for all losses other than theft, which may have a deductible of $2,000. Higher deductibles may be used as a tool to lower your insurance costs, but in doing so, you are putting yourself into the insurance business by taking a larger part of the risk, so you’d better be prepared. Cargo coverage is the most “taken for granted” coverage you purchase. It can make or break your trucking career. Take every step to protect yourself. If you have employee drivers or leased operators, make certain that you have an internal policy directed toward cargo coverage. If your leased operators carry their own coverages and name you as a Certified Holder and an Additional Insured, create a specific criterion for what will be accepted. Make sure that their coverage corresponds to your needs. And always be sure to request a copy of their policy and keep it on file. In
closing, the most important exclusion/condition that has to be understood
in insurance is: coverage does not cover stupidity. So be smart, and
don’t get burned. If you have comments or questions, I can be reached
through California Plus Insurance Service, Inc. in Modesto, CA by
calling toll free 1-800-699-7101. |