Broker Issues in Cargo Insurance

Most brokers go for a “contingency cargo liability" policy to induce shippers and truckers. These policies indicate that if the motor carrier or its cargo insurer is unable to pay a legal claim, the contingency insurer will cover it. One should not get confused, the contingency policy only insures the excess or above the commercial truck insurance and not the entire amount.
Even if brokers' contingency policies are aboveboard, shippers should not forget that brokers do not have an "insurable interest" in the insured property. A contingency policy holder must have an "insurable interest" in order to be lawfully issued insurance under most state insurance laws. This means that if a broker files a large claim with an insurer, the insurer can refuse to pay it on legal grounds.
To provide protection for shippers' cargo, brokers should sign a contract indicating that they are taking responsibility for the goods being transported. Then, they should buy a binding cargo liability policy. By taking these steps, brokers can rightfully pay claims to the shipper. Additionally, brokers should maintain an "errors and omissions" (E&O) policy, another form of cargo insurance that will cover them when they are found responsible for negligently selecting a carrier that damages the trucker’s property.