Are you Insured for Loss of Cargo During Transport?

Posted By Florida Insurance Lawyer || 27-Feb-2014

If you are a motor carrier or trucking company in Florida, you understand how important it is to protect the cargo you are transporting for others from unforeseen damage or loss. If a trucking company suffers a loss of cargo during transport, it can cost that company dearly or even put it out of business. That is why it is of ultimate importance to make sure that the cargo entrusted to you is properly insured. In my experience, the three most common causes of cargo loss during transport are collision, theft and spoilage. The insurance which covers cargo during transport is typically called an inland marine policy. Inland marine insurance policies can vary greatly in both what they cover and what they do not cover. This is why it is so important that you not only obtain an inland marine policy, but that you also make sure the policy is appropriate for your business and will cover you before you undertake a duty to make sure someone's cargo gets to its destination safely, so that, if something does go wrong, you will be covered.

When obtaining coverage to indemnify you for cargo loss, it is absolutely crucial to ensure the application is filled out properly. If the application is incorrect, even if just an apparently minor mistake on your part or on the part of the agent, the error can cause your coverage to be voided or your claim to be excluded from coverage. Many applications for inland marine policies require a description of the type or kind of cargo you intend to transport. To protect yourself, make sure you include each and every type and kind of cargo you might be transporting. Your policy may cover only what you include. For example, if you represented in your insurance application that the only cargo you move is fresh produce, and your reefer engine fails while you are carrying a load of ice cream, your insurance company may deny the claim and refuse to pay for the spoiled ice cream. If, during the policy period, you have an opportunity to carry something new, it is important that you contact your agent and get written assurance that you are covered for the new type of cargo. You may have to pay an increased premium to cover the new cargo, but paying the increase is better than moving the cargo without coverage for it.

Also, many of these policies cover only the drivers and vehicles listed in a "schedule" attached to the policy. If your policy is such a policy, only the drivers and vehicles identified in the schedule are covered. In other words, if a loss occurs while the cargo is being hauled by a driver whose name is not contained within the schedule or the cargo is being carried in a vehicle not specifically included in the schedule, the cargo will not be covered. If you change the drivers you are employing or vehicles you are using to transport cargo, you need to have your agent make the appropriate changes to your policy. To ensure the change was properly affected, you should make sure that your change request has been documented and is in writing, and that you receive confirmation of the change in writing before you use the new driver or vehicle.

Of importance, many of these policies contain an "unattended vehicle" (or similarly worded) exclusion which is designed to limit coverage if the loss is caused by theft. Such exclusions might be as limited as excluding coverage for theft loss where the vehicle is left unlocked. Conversely, these exclusions can be such that it is impossible or impractical for you to meet the requirements you need to meet to qualify for coverage if cargo is stolen. For examples, the exclusion can require you to have an armed guard on or in the vehicle at the time of theft or even exclude theft losses if they occur within a certain distance from a city or county (including the city or county where the trucking company maintains its yard).

Many times, to evaluate how much these "unattended vehicle" exclusions might limit your coverage for cargo theft, you have to view the policy in light of your ordinary operations. If you maintain a yard in Miami and the policy excludes theft of cargo if the theft occurs within 50 miles of Miami, the policy probably is not a good choice for you. Likewise, if you have a fenced and gated yard, but no manned security, a policy requiring you to maintain an actual armed security guard would not be the most appropriate.

If you have a policy with an "unattended vehicle" or similar exclusion, the next important step is to make sure that your business operates in such a way that the cargo remains covered. For example, if the policy states it will only cover a cargo theft loss when the trailer is connected to the cab, your drivers should be instructed to always keep the two connected. Similarly, if the policy says that stolen cargo will only be covered if the cargo is stolen from a vehicle while it is within a fenced in yard with a locked gate, your drivers should be informed that they cannot simply leave the vehicle locked on a side street overnight and need to locate a yard which complies with the policy's security requirements or stay with the vehicle.