AAIS Motor Truck Cargo Legal Liability Coverage Forms

AAIS MOTOR TRUCK CARGO LEGAL LIABILITY COVERAGE FORMS ANALYSIS

(February 2024)

 

Introduction

Eligibility

Policy Construction

Schedules of Coverages

IM 7455–Schedule of Coverages–Motor Truck Cargo Legal Liability Coverage–Reporting Form

IM 7450–Motor Truck Cargo Legal Liability Coverage–Reporting Form Analysis

   Introduction

   Agreement

   Coverage

   Property Covered

   Property Not Covered

   Coverage Extensions

   Supplemental Coverages

   Perils Covered

   Perils Excluded

   What Must Be Done in Case of Loss

   Valuation

   How Much We Pay

   Loss Payment

   Reporting Conditions

   Other Conditions

   Definitions

IM 7456–Schedule of Coverages–Motor Truck Cargo Legal Liability Coverage

IM 7451–Motor Truck Cargo Legal Liability Coverage Form Analysis

IM 7457–Schedule of Coverages–Contingent Cargo Coverage

IM 7453–Contingent Cargo Coverage Form Analysis

Endorsements and Schedules

Regulatory Commission Requirements

Underwriting Considerations

INTRODUCTION

Motor truck cargo legal liability coverage forms insure the liability that common or contract carrier trucking concerns have for property of others the trucker hauls or transports. Coverage on a particular shipment begins when the insured trucker takes possession of the property being shipped at its point of origin. It includes necessary stops incidental to the shipment, such as for meals and rest, and ends when the shipment arrives at the intended destination where the designated party accepts it.

The American Association of Insurance Services (AAIS) provides two basic coverage forms. One is broader than the other and contains built-in reporting conditions. Both insure motor carriers and cover all shipments of described cargo by truck or other types of motor vehicle. Both cover property at scheduled terminals, and each includes some built-in additional coverages.

AAIS also provides a coverage form that provides contingent cargo coverage that protects the named insured for the legal liability that it may incur due to the actions of its subcontractors.

If a cargo owner wants coverage for property on its own vehicle or on the vehicles of another party, the Transportation Coverage Form should be used instead of the Motor Truck Cargo Forms.

Related Article: AAIS Transportation Coverage Forms

ELIGIBILITY

Any common or contract carrier trucking concern that hauls cargo or property of others for remuneration or a charge is eligible. Transportation brokers are covered similarly under the Contingent Cargo Coverage Form.

POLICY CONSTRUCTION

AAIS Motor Truck Cargo Legal Liability coverage requires at least these four forms:

Related Article: CL 0100–AAIS Commercial Lines Common Policy Conditions

SCHEDULES OF COVERAGES

IM 7455–SCHEDULE OF COVERAGES–MOTOR TRUCK CARGO LEGAL LIABILITY COVERAGE–REPORTING FORM (01 12 changes)

This Schedule of Coverages is used with IM 7450–Motor Truck Cargo Legal Liability Coverage–Reporting Form. IM 7455 contains the following information:

Policy Number (01 12 addition)

The 01 12 edition added a space to enter the policy number.

Covered Property

Property covered must be described in the space provided.

Coverage Limits

This is the most paid for loss that involves any one vehicle.

This is the most paid in a single occurrence.

Note: This may or may not involve multiple vehicles and/or terminals.

The 01 12 edition added quotation marks around the word Limit (“Limit”) in several places because Limit is a defined word.

Terminal Limits

The terminal number(s), addresses, or descriptions, and limits are entered in the spaces provided. IM 7484–Additional Terminals Schedule–Motor Truck Cargo is used to list additional terminals.

Coverage Extensions

The limits on the Schedule of Coverages for the following coverages apply to all covered locations:

The limit is $10,000 unless a different limit is entered.

No entry is required.

The limit is $1,000 unless a different limit is entered.

Supplemental Coverages

Each of these coverages provides additional limits of coverage or additional coverage. Required entries vary by type of coverage.

The limit is $5,000 unless a different limit is entered.

The limit is $5,000 unless a different limit is entered.

The limit is $5,000 unless a different limit is entered.

The limit is $5,000 unless a different limit is entered.

The limit is $100,000 unless a different limit is entered.

The limit is $5,000 unless a different limit is entered.

The limit is $5,000 unless a different limit is entered.

The limit is $5,000 unless a different limit is entered.

The limit is $10,000 unless a different limit is entered.

The limit is $1,000 unless a different limit is entered.

Deductible

One deductible applying to all covered losses is entered in the space provided.

Reporting Conditions

If the premium charge for the coverage provided is based on reports of value, any additional premium owed to the insurance company is due on the date on the billing invoice.

Additional Information (01 12 change)

This section of the schedule of coverages lists endorsements and forms included when the policy is issued.

The previous edition referred to this section as Optional Coverages and Endorsements.

IM 7450–MOTOR TRUCK CARGO LEGAL LIABILITY COVERAGE–REPORTING FORM COVERAGE FORM ANALYSIS

Note: This analysis is of the 01/07 edition. Changes from the previous edition are in bold print.

Introduction

Definitions are an important part of the coverage form. You and your are defined as the party or parties that are named on the declarations as the insured. We, us, and our are defined as the insurance company that provides coverage. These are not the only defined terms. The other terms can be found in the definitions section at the end of the coverage form (01 07 change).

Agreement

The insurance company agrees to provide the coverage described in the coverage form and the schedule of coverages, while the named insured agrees to pay the premium. Both agreements are subject to all of the coverage form's terms plus additional conditions found on the CL 100 and endorsements.

Coverage

It is important to point out this is legal liability coverage, not first party coverage. Therefore, the property being covered does not belong to the named insured. Only covered property in the named insured‘s care, custody, and control is covered. Nevertheless, this coverage does not extend to all property but only property the named insured is legally obligated for as a common or contract carrier based on a bill of lading or similar shipping document.

A named insured may face costs, expenses, fees, fines, penalties, or damages because of how it violated laws and regulations due to proper claims handling. This coverage form does not pay for those.

 

Example: Farquahr Freight Lines received a loss notice from a customer and promptly misplaced it. The customer called Farquahr repeatedly and was told that the claim had been sent to the insurance company. Farquahr discovered the misplaced notice months later and sent it to the insurance company. By this time, the customer was angry about the delay and contacted the Public Safety Commission, which fined Farquahr. While the insurance company settled the claim with the customer, Farquahr had to contend with the fine, since it was levied because Farquahr was careless and mishandled the claim notice.

Property Covered

Only property of others is covered, and it is subject to exclusions and limitations found later in this coverage form. The property is covered only while in or at the following:

1. Property in Vehicles

Property of others is covered for direct physical loss from a covered peril but only while the property is in transit or being loaded or unloaded. The property must be described in the schedule of coverages to be covered. There is no coverage unless the property is considered in transit and is either in or on a vehicle. Loading and unloading are part of transit and are covered only when the property is situated in the area adjacent to the vehicle. Coverage ends either 72 hours after the property arrives at the intended destination or the time stated in the shipping document, whichever is less.

2. Property in Terminals

Property of others is covered for direct physical loss from a covered peril while at a terminal location listed on the schedule of coverages or within 100 feet of the listed location. It is important to note this coverage applies only to property considered in transit even though it is at the terminal. Only property described on the schedule of coverages is covered. Coverage ends 30 days after the property arrives at the terminal or the maximum amount of time listed on the shipping document, whichever is less.

Example: Hot Deals requested Jerry’s Motor Carrier to pick up cargo from its warehouse and deliver it to Just Ordered 3,000 miles away. Jerry’s picks up the cargo. Just Ordered refuses the order. Hot Deals requests that Jerry’s place the items in a terminal until a decision is made on the return. While Hot Deals ponders its next step, the property is no longer covered under Jerry’s Motor Truck Cargo coverage form.

Property Not Covered

Ten specific types of property are not covered.

1. Art

Paintings, statuary, and other items considered objects of art are not covered.

2. Contraband

Property that is illegal to possess is not covered. Property that is legal to possess but being used as part of an illegal trade or being transported illegally is also not covered.

Example: Anything Goes Trucking is hired to transport marijuana from one community in Colorado to another. Under federal guidelines, this could be considered contraband, but under Colorado guidelines, it is legal and could be covered. This could be a controversy. If Anything Goes Trucking is diverted, for any reason, into Nebraska, where marijuana remains illegal, any damage to the marijuana during that diversion is not covered.

3. Jewelry, Stones, and Metals

Jewelry of every type and description, precious and semi-precious stones, gold, silver, platinum, and other precious metals and alloys are not covered.

4. Live Animals

Live animals are not covered property.

There is an important exception. When a specified cause of loss causes the death of an animal or injures an animal so that it must be killed, coverage does apply.

Note: This is an unusual Property Not Covered item. Live animals remain not covered. This exception is about a live animal becoming a dead animal. The dead animal is only covered if the death is due to a specified cause of loss. One further complication is added that if injuries, due to a specified peril, occur to a live animal that necessitates its death, once killed, that dead animal is also covered property. However, there are no answers as to the meaning of a death that is made necessary or as to who must make that decision.

5. Money and Securities

A number of types of property are not covered under this item. Accounts, bills, currency, food stamps, evidences of debt, and lottery tickets not held for sale, in addition to money, notes, or securities are all not covered.

6. Other Carriers

Covered property in which the named insured has waived or impaired its subrogation rights against another carrier that is in possession of that property is not covered.

Note: It is very important to note that the named insured is never permitted to waive its subrogation rights.

Example: Fredo, Inc. requested that Jasmine, Inc. collect Fredo’s covered property in a local terminal and deliver it to another terminal. Jasmine, Inc. is concerned because the type of property is not listed on its motor truck liability coverage form. Fredo agrees to waive all rights of subrogation against Jasmine because there are no other options. That property must leave the one terminal immediately. Fredo has no available drivers.

Jasmine collides with another vehicle, and the cargo is destroyed. Jasmine’s carrier will not cover the loss. Fredo presents the claim to his carrier, and the claim is declined because subrogation rights have been waived. Fredo is responsible for the entire loss because he also has no subrogation rights against Jasmine.

7. Property That Has Been Delivered

Property of others is no longer covered after it is delivered to its intended destination and 72 hours have expired.

8. Property at a Terminal

Property of others is not covered after it has been at a terminal for more than 30 days.

9. Storage

This is a motor truck cargo policy, not warehouse legal liability, so property being stored with the named insured for which it issued warehouse receipts or other written storage contracts is not covered.

10. Trailer, Container, or Conveyance

This coverage is for the cargo of others inside the named insured’s vehicle. There is no coverage for any trailer, carrying conveyance or intermodal container. There is also no coverage for equipment or supplies that are part of such items. There is an exception for property of others described on the schedule of coverages as trailers, containers, conveyance or equipment or supplies when this property is considered covered property.

Note: An intermodal container is a reusable, transportable cargo container or enclosure of rigid construction and usually rectangular. It is fitted with devices to secure it to a container chassis vehicle and other devices that facilitate its handling, particularly in its transfer from one mode of transportation to another. They are designed for easy filling and emptying and are intended to contain one or more articles of cargo or bulk commodities for transportation by rail, highway, water, or air.

Coverage Extensions

Provisions That Apply To Coverage Extensions

There are three coverage extensions. The limit for each is either the limit on the schedule of coverages or the default limit for the item included in the coverage form. These coverages are part of the applicable limit for covered property and not in addition to it unless otherwise indicated. These limits are not added to or combined with limits for any other coverage extension or supplemental coverage and are not subject to any coinsurance provisions that apply elsewhere in the coverage form.

1. Debris Removal

When a covered peril damages or destroys covered property, the cost to remove any created debris is covered under this extension.

Debris removal does not include any costs for removing, restoring, or replacing polluted land or water, or extracting pollutants.

There are two parts to the Limit section. The first is restricting any debris removal payment to no more than 25% of the amount paid for the actual direct physical loss. The second part is that when the debris removal and the physical damage loss are added together, no more than the limit of insurance is paid.

An additional $10,000 (or a higher amount entered on the schedule of coverages) is available if the debris removal expense is more than 25% of the loss amount or if the combined cost of loss and debris removal is more than the limit of insurance for the covered property.

e. The named insured must report debris removal expenses to the insurance company within 180 days of the loss date for this coverage extension to apply.

2. Defense Costs

Note: This coverage form is providing third party coverage for the benefit of the named insured. Because of this, the insurance company takes control of the loss and negotiates with the third party that sustained damage. This section explains how the insurance company and the named insured must work together on any such claim.

The insurance company decides when to defend suits brought against the named insured that result from covered loss or damage to covered property. This is not the decision of the named insured. This means that the insurance company is in control of the investigation and how suits or claims are handled.

Once the insurance company has paid out its limits based on a judgment or written settlement, the insurance company is no longer under an obligation to defend the named insured.

The named insured’s only involvement in the claim is to act within the written approval of the insurance company.

Once the insurance company agrees to defend a suit, it also agrees to pay seven specific expenses related to it. These expenses are not part of the limit of insurance, and no deductible applies to any of them:

3. Fraud and Deceit

When covered property is willingly given to another person, even by trick or device, coverage is excluded. This extension provides a limited amount of coverage for such a situation. When the named insured, its agents, consignees, or customers) allows covered property to be stolen in any of the following circumstances, and it is stolen, a limited amount of coverage is provided:

The most paid in a single occurrence is $1,000, but the limit can be increased.

Supplemental Coverages

Provisions That Apply To Supplemental Coverages

There are ten supplemental coverages. Each has its own default limit that can be increased. If there is no limit for a supplemental coverage, coverage is provided up to the full limit for the applicable covered property. Limits entered for any supplemental coverage are separate from and not part of the applicable limit for covered property.

The limit available for coverage described under a supplemental coverage is the only limit available for it. It is not the total of the limit for a supplemental coverage and the limit for covered property. The limits are not added to or combined with limits for any other supplemental coverage or coverage extension and are not subject to any coinsurance provisions that apply elsewhere in the coverage form.

1. Contract Penalty

The insurance company pays up to $5,000 for the costs of contractual penalties the named insured must pay because it cannot deliver covered property of others according to the terms of a shipping document. The cause of the delivery issue must be direct physical loss by a covered peril to the property.

The maximum paid in a 12-month policy period is $50,000.

2. Expediting Expenses

This coverage applies to the named insured's expenses paid to hasten repairs to a vehicle that transports covered property or the expenses needed to arrange for another way to deliver the property. Examples of such expenses are additional labor or overtime costs, additional fuel costs, and freight charges.

Coverage applies only when a vehicle cannot complete its delivery of property because that vehicle was damaged or lost due to a covered peril.

Payment is only made if the expenses are actually incurred, they were reasonable, and they were required to achieve the delivery of the covered property.

The most paid in a single occurrence is $5,000.

Example: Jason was taking hogs to a processing plant when he swerved to avoid a deer and struck the side of a bridge. The tractor was damaged, but the trailer carrying the hogs was not. Jason knew he needed to deliver those hogs quickly, so he called a nearby competitor, Jamila, who was willing to take over the trip. The cost to hire Jamila was $1,500 and was paid by this coverage because it was reasonable, necessary and incurred.

3. Freight Charges

Freight charges that are owed to the named insured but that the customer refuses to pay because a covered peril damages or destroys the property being transported are covered. The most paid in a single occurrence is $5,000.

 

Example: Marbella is transporting maple syrup from Maine to South Carolina for Sticky Folks when a collision occurs, resulting in a massive syrup mess on the interstate. The cargo is a total loss, and Sticky Folks refuses to pay the freight charge because the delivery was unsuccessful. The insurance company would pay only the freight charge amount up to the point of the collision.

4. Moving Equipment

Direct physical loss by a covered peril to moving equipment the named insured uses to handle and ship covered property is covered for up to $5,000 per occurrence. Such moving equipment includes dollies, tarps, chains, and hand trucks. Vehicles, trailers, or other conveyances are not considered moving equipment.

5. Newly Acquired Terminals

When the named insured acquires a terminal during the policy period coverage applies to covered property at that terminal but only if the named insured already has a terminal(s) listed on the schedule of coverages.

Coverage at that newly acquired terminal ceases 60 days after acquisition until the acquired terminal is reported to the insurance company or the policy expires, whichever occurs first.

The most paid in a single occurrence is $100,000. This is not free coverage because additional premium is due from the date the terminal is acquired.

6. Off-Board Electronics

The named insured's off-board electronic equipment and similar property of others that is in its care, custody, or control is covered while on owned or operated premises and also while the electronics are in transit between such premises.

On-board electronic equipment and entertainment equipment are excluded, as is off-board equipment that belongs to others and is being transported under a shipping document.

The most paid in a single occurrence is $5,000.

Off-board electronic equipment is equipment, related software, antennas, and accessories that are used to communicate with or to track vehicles as they transport covered property.

7. On-Board Electronics

The named insured's on-board electronic equipment is covered while in vehicles that transport covered property. Similar property of others in its care, custody, or control is also covered. Off-board electronic equipment and entertainment equipment are excluded, as is on-board equipment that belongs to others and is being transported under a shipping document.

The most paid in a single occurrence is $5,000.

On-board electronic equipment is equipment, related software, antennas, and accessories permanently installed in a vehicle used to communicate, monitor, weigh, track, and/or navigate the vehicle. The equipment must be housed in a unit permanently installed in the vehicle and operate from the vehicle's electrical system.

8. On-Board Expendable Supplies

The named insured's expendable supplies are covered but only while they are in vehicles that are transporting covered property. Similar property of others that the named insured is transporting under a shipping document is not covered.

The most paid in a single occurrence is $5,000.

Note: The term “on-board expendable supplies” is defined as oil, grease, fuel, and similar supplies.

Example: Aaron is transporting cans of motor oil when a bird flies into his windshield; the truck swerves, Aaron loses control, and flips his load. The cargo of fuel oil is covered as part of the covered property loss. Aaron’s fuel oil, supplies, and fuel lost in the incident are covered under this supplement.

9. Pollutant Cleanup and Removal

a. The insurance company pays the named insured's expenses to extract pollutants from land or water if a covered peril that occurred during the policy period caused the pollutants to be released or discharged.

b. This is immediate coverage, so any expenses to extract pollutants are only paid when reported to the insurance company within 180 days of the date of loss.

c. Costs related to testing, evaluating, observing, or recording pollutants are excluded except for those costs that are part of the extraction process.

d. The most paid at any one location is $10,000 for all such expenses a covered peril that occurs at that location during each separate 12-month policy period causes. This limit can be increased.

10. Rewards

When a covered arson, theft, or vandalism loss occurs, a reward for information that leads to the conviction of the party or parties who caused the loss can be offered. The payment limit of $1,000 is based on the occurrence, not the number of persons who provide information.

Perils Covered

Coverage applies to risks of direct physical loss unless the loss is limited or caused by an excluded peril.

Perils Excluded

1. Primary Exclusions

The first group of exclusions is essentially absolute. Subject to specific exceptions, loss or damage by each is totally excluded, regardless of any other cause or event that contributes to a loss, either concurrently or in any other sequence. The insurance company does not pay for any direct or indirect loss or damage caused by or that results from any of these events.

a. Civil Authority

There is no coverage for loss that results from an order any civil or government authority issues. These orders may include seizure, confiscation, destruction, or quarantine of property, but this exclusion is not limited to only these. The only exception is when a civil authority destroys property as a means of controlling a fire, which causes the loss or damage. This exception only applies if the fire results from a covered peril.

b. Nuclear Hazard

The insurance company does not cover loss or damage caused by or that results from any nuclear reaction, radiation, or contamination. This is absolute and applies whether or not the nuclear incident was controlled, and by whatever means caused. Any loss the nuclear hazard causes is not treated as a loss that fire, explosion, or smoke causes. The only exception is when a fire results from the nuclear fire, direct loss or damage from that fire is covered but the damage from the nuclear hazard remains excluded.

c. War and Military Action

The insurance company does not pay for loss or damage caused by any act of war. Undeclared and civil war or warlike action by a military force is all considered war. All actions taken to hinder or defend against an actual or expected attack by any government or sovereign authority that uses military personnel or other agents are also considered war and excluded. In addition, acts of insurrection, rebellion, revolution, or unlawful seizure of power and any action any government authority takes to prevent or defend against any such acts are excluded. If any action within the terms of this exclusion involves nuclear reaction, radiation, or contamination, this exclusion applies in place of the nuclear hazard exclusion.

Note: This means that the exception for resulting fire under the nuclear hazard is not covered when it results from war.

2. Secondary Exclusions

The second group of exclusions applies to loss or damage caused by or resulting from any of the following loss events. Some of these exclusions have exceptions, conditions, or limitations that should be noted and reviewed carefully. The insurance company does not pay for any loss or damage caused by or that results from any of these events.

a. Contamination or Deterioration

Loss or damage that is caused by contamination or deterioration is excluded. This applies to corrosion, decay, fungus, mildew, mold, rot, and rust. It also applies to any quality, fault, or weakness in covered property that causes it to damage or destroy itself. However, this exclusion is not limited to only these described causes.

This exclusion is unusual in that it applies only to four Supplemental Coverages: 4. Moving Equipment, 6. Off-board Electronics, 7. On-board Electronics, and 8. On-board Expendable Supplies.

b. Criminal, Fraudulent, Dishonest, or Illegal Acts

Coverage does not apply to loss caused by, or results from criminal, fraudulent, dishonest, or illegal acts that any of the following commit alone or in collusion with another:

Coverage applies if employees destroy property. It does not apply if employees steal.

c. Loss of Use

There is no coverage for loss caused by or resulting from delay, loss of use, or loss of market.

d. Mechanical Breakdown

Loss caused by or that results from any mechanical or electrical breakdown or malfunction is excluded.

This exclusion is unusual because it applies only to four Supplemental Coverages: 4. Moving Equipment, 6. Off-board Electronics, 7. On-board Electronics, and 8. On-board Expendable Supplies.

e. Missing Property

Unexplained or mysterious disappearance of covered property is excluded when there is no physical evidence to suggest what happened to it, and the only proof that a loss occurred is based on an audit or physical inventory.

This exclusion is unusual because it applies only to four Supplemental Coverages: 4. Moving Equipment, 6. Off-board Electronics, 7. On-board Electronics, and 8. On-board Expendable Supplies.

f. Pollutants

There is no coverage for loss caused by or resulting from any release, discharge, seepage, migration, dispersal, or escape of pollutants. There are three exceptions:

g. Spoilage

Coverage does not apply to perishable stock when the loss is caused by or results from spoilage. If spoilage results in a specified peril, the insurance company covers the loss or damage that specified peril causes.

Example: Red label adhesives are being shipped. The temperature in the cargo trailer exceeds 90 degrees, the fumes combust, and an explosion occurs. The damage to the adhesives is excluded, but the damage caused due to the explosion is covered.

h. Voluntary Parting

There is no coverage for loss or damage to covered property when voluntarily given to others, even if the surrender was due to a fraudulent scheme, trick, or false pretense. The good news is that Coverage Extensions 3. Fraud or Deceit provides limited coverage.

i. Wear and Tear

Loss caused by wear, tear, marring, or scratching is excluded.

This exclusion is unusual because it applies only to four Supplemental Coverages: 4. Moving Equipment, 6. Off-board Electronics, 7. On-board Electronics, and 8. On-board Expendable Supplies.

What Must Be Done In Case Of Loss

1. Notice

The named insured must promptly notify the insurance company or its agent of a loss. The notice must include a description of the property lost or damaged. If a criminal act caused the loss, the appropriate law enforcement agency must be notified. The insurance company has the right to require that any notice to it be in writing.

2. You Must Protect Property

During and after a loss, the named insured must take all reasonable steps to protect covered property from further loss. The insurance company pays reasonable costs the named insured incurs to do so if the named insured maintains accurate records to substantiate the costs. Paying these costs is not in addition to the policy limits. There is no coverage for any repairs or emergency measures performed on property not already damaged by a covered peril.

Note: It is important to realize that any such costs incurred will reduce the amount available to pay the actual loss.

3. Proof of Loss

The named insured must complete and return the insurance company's prescribed proof of loss forms within 60 days after the company requests it. The information provided must include the time, place, and circumstances involved with the loss and information on any other insurance coverage that may apply. It must also include the named insured’s interest and the interest of others with respect to the property involved, including lienholders, loss payees, and mortgagees. Any changes in title to the property during the policy period must be disclosed, in addition to providing any other reasonable information the company may require to adjust and settle the loss.

4. Examination

Examination under oath may be required in matters that relate to the loss. The insurance company may request these examinations more than once, but such requests must be reasonable. If multiple persons are examined, the company has the right to examine each individual separately.

5. Records

The named insured must produce any records related to the loss. The insurance company must be allowed to make copies and take extracts of them as often as it reasonably requests. Records include tax returns and bank microfilms of all related cancelled checks, but records are not limited to just these.

6. Damaged Property

Damaged and undamaged property must be made available for the insurance company's inspection as often as reasonably necessary. It must also be allowed to take samples of the property to the extent necessary to adjust and settle the loss.

7. Volunteer Payments

The named insured may not voluntarily make payments, assume obligations, pay or offer rewards, or incur other expenses without the insurance company's express approval. If it does, it does so at its own expense. The only exceptions are those costs incurred to protect property, as item 2. above describes.

8. Abandonment

The named insured may not abandon damaged property to the insurance company without its written consent.

 

Example: A driver for Rapid Run Trucking takes a turn too fast for conditions. The truck flips over, rolls down an embankment, and lands in an area inaccessible to motor vehicles. A helicopter is needed to rescue the driver. The owner offers it to the insurance company because the cost to retrieve the cargo is more than its value, but the company refuses. Local authorities demand that the debris be removed, and Rapid Run bears the entire cost to do so.

9. Cooperation

The named insured must cooperate with the insurance company and perform all acts this coverage form requires.

Valuation

1. Property of Others

The value of property of others is its actual cash value at the time of loss or damage. Actual cash value is replacement cost new minus depreciation.

Often property is transported under a released bill of lading that sets the value at less than the actual cash value. When this occurs, the insurance company pays no more than what has been agreed upon with the bill of lading.

The value, though, will include the cost of labor, materials, and services the named insured either furnishes or arranges to be furnished.

The reduced amount valuation may be set by law and not by the bill of lading, but this valuation applies similarly.

2. Equipment and Supplies

The value of equipment and supplies is their actual cash value at the time of loss. Actual cash value is replacement cost minus depreciation. This applies only to moving equipment, off-board electronic equipment, on-board electronic equipment, and on-board expendable supplies as described above. These items are not cargo and not property of others.

3. Pair or Set

The value of a loss that involves damage to or loss of one part of a pair or set is based on a reasonable proportion of the value of the entire pair or set. Loss of one part of a pair or set is not considered a total loss.

Note: This recognizes that the value of the whole is greater than the value of individual parts but that the remaining parts still have value as separates.

4. Loss to Parts

The value of a lost or damaged part of property that consists of several parts is the cost to repair or replace only the lost or damaged part.

How Much We Pay

1. Insurable Interest

The insurance company does not pay more than the named insured's insurable interest in the covered property at the time of loss.

Note: This condition is difficult to apply when property of others is the only covered property. The named insured has very little, if any, insurable interest in property of others. A condition that states that the loss is subject to the property owner’s insurable interest would be more helpful.

2. Deductible

The insurance company pays only the amount of loss that exceeds the deductible amount on the schedule of coverages.

There are times when the insurance company will pay all or a portion of the deductible amount to expedite a claim or suit. When this happens, the named insured is expected to reimburse the insurance company for any such amounts owed to it.

3. Loss Settlement Terms

Subject to the other items in this section, the insurance company pays the least of the following:

The catastrophe limit on the schedule of coverages is the most the insurance company pays regardless of the number of vehicles, terminal locations, or combination of vehicles and terminal locations.

 

Example: The Regional Players catastrophe limit is $5,000,000 and has remained unchanged for ten years. During that time, Regional has grown to include five terminals and a fleet of 50 trucks. A massive flash flood takes the city by surprise. Cargo in all terminals and 40 of the trucks are destroyed. The terminal and per truck limits were sufficient to cover the loss, but the $5,000,000 catastrophe loss resulted in Regional receiving a payment of less than 60% of its actual loss.

A vehicle inside a terminal building or within 100 feet of that terminal is subject to the terminal limit and NOT the vehicle limit. This terminal limit is not combined with the vehicle limit.

4. Insurance under More Than One Coverage

Two or more coverages in the coverage form may apply to the same loss. In that case, the insurance company does not pay more than the value of the actual claim, loss, or damage sustained.

5. Insurance under More Than One Policy

a. Proportional Share

The named insured may have other coverage subject to the same terms as this coverage form. In that case, this coverage form pays only its share of the covered loss. That share is the proportion that its limit of insurance bears to the limits of insurance of all insurance that covers on the same basis.

b. Excess Amount

There may be other coverage available to pay for the loss other than as described in 5. a. above. In that case, this coverage form pays on an excess basis. It pays only the amount of covered loss that exceeds the amount due from the other coverage, whether collectible or not. Any payment is subject to the limit of insurance that applies.

Loss Payment

1. Loss Payment Options

a. Our Options

The insurance company has the following four loss payment options if a covered loss occurs.

b. Notice of Our Intent to Rebuild, Repair, or Replace

The insurance company has an obligation to notify the named insured of its intent to rebuild, repair, or replace no later than 30 days after it receives a properly completed proof of loss.

2. Your Losses

a. Adjustment and Payment of Loss

The insurance company adjusts all losses with and pays the named insured unless another loss payee named in the policy is involved.

b. Conditions for Payment of Loss

The insurance company pays a covered loss within 30 days after it receives a properly prepared proof of loss and the amount of loss is established. The amount of loss is determined through a written agreement between the company and the named insured or after an appraisal award is filed with the company.

3. Property of Others

a. Adjustment and Payment of Loss to Property of Others

The insurance company has the option to adjust and pay losses involving property of others, with either the named insured acting on behalf of the property owner or directly with the property owner.

b. We Do Not Have To Pay You If We Pay the Owner

The insurance company is not obligated to pay the named insured when it pays the property owner. In addition, if the property owner sues the named insured, the company has the option to defend the named insured in that suit.

Reporting Conditions

1. Reports

a. Within 30 days of the end of the reporting period that is shown on the selected schedule of coverages, the named insured must report to the insurance company one of the following:

b. If a policy is cancelled early, the information above is to be provided through the period the policy was in effect, and the insured is to pay any additional premium due.

2. Premium Computation and Adjustment

A final premium is determined by multiplying the reported exposure basis by the reporting rate on the schedule of coverages.

a. Annual Adjustment Period

If the adjustment period selected is annual, the premium calculated above is compared to the deposit. If that premium exceeds the deposit, the named insured pays the insurance company the difference. If it is less, the insurance company refunds the difference to the named insured. If the calculated premium is less than the minimum premium, the minimum premium applies.

b. Other Adjustment Period

If the adjustment period is other than annual, the calculated premium is subtracted from the deposit until it is exhausted. Once the premium is used up, all further reports will require payment of the calculated premium. At expiration, if the calculated premiums are still less than the deposit, the calculated premium is compared to the minimum premium. If the minimum premium exceeds the calculated premium, the insurance company returns the difference between the minimum premium and the deposit to the named insured. If the calculated premium is higher than the minimum premium, the difference between the deposit premium and the calculated premium is returned to the named insured.

3. Provisions That Affect How Much We Pay

a. Failure to Submit Reports

If reports are not submitted on time or at all, the most the insurance company pays is 90% of the limit.

b. Reported Values are less than the Full Value

If the last report submitted before a loss reflects values that are less than the actual values, the insurance company pays only part of the loss. The penalty ratio is developed by dividing the exposures reported by the actual exposure amount. The penalty ratio developed is multiplied by the amount of loss to determine the lower amount of loss paid.

c. We Will Not Pay More than the Limit

The insurance company does not pay more than the limit on the schedule of coverages.

Other Conditions

1. Appraisal

The insurance company and the insured may not always agree on the value of a covered claim. This condition provides one method to resolve disputed claims.

Either party can request an appraisal to determine the value of a disputed claim. Once requested, the parties have 20 days to obtain their own independent and competent appraisers and give their appraiser's name to the other party. The two appraisers then have 15 days to select a competent impartial umpire. If they cannot agree on an umpire within that time period, either can request that a judge in the court of record in the state where the property is located appoint one.

The appraisers then determine the claim’s value. They submit any differences to the umpire. Once any two of the three parties agree, the amount of loss is set.

Each party pays its own appraiser. Both parties share the umpire’s cost and other expenses equally.

2. Bankruptcy of an Insured

The insurance company's obligations under this coverage are not affected by the bankruptcy or insolvency of any insured.

3. Benefit to Others

The insurance provided does not directly or indirectly benefit any party with custody of the named insured's property.

4. Conformity with Statute

Any condition in this coverage form that conflicts with any applicable law is amended to conform to that law.

5. Estates

Note: This condition only applies if the named insured is an individual.

a. Your Death

If the named insured dies, the person who has custody of the named insured's property is an insured until a qualified legal representative is appointed. The named insured’s legal representative becomes an insured once appointed. Both are insureds, but only with respect to the property this coverage form insures.

b. Policy Period is not Extended

This coverage does not extend past the policy’s expiration date.

6. Misrepresentation, Concealment, or Fraud

This coverage is void if any insured at any time willfully concealed or misrepresented a material fact that relates to the insurance provided, the property covered, or its interest in the property. It is also void if fraud or false swearing by any insured took place concerning the insurance provided or the property covered.

Note: The named insured must deal with the insurance company honestly. Its rights of recovery may be voided if it intentionally misrepresents or conceals a material fact or information. This means the insurance is treated as simply having never existed versus denying a particular claim.

7. Policy Period

Only covered losses that occur during the policy period are paid.

Note: This can be problematic when vehicles and terminals are located across time zones because the policy period starts and ends at 12:01 AM Standard Time at the mailing address, NOT where the loss occurs.

 

Example: Charles’ policy runs from July 1, 2022 – July 1, 2023, and the mailing address on the policy is in North Carolina. A loss occurs in Seattle at 11:00 PM on June 30. The policy does not cover this loss because it is 3:00 AM on July 1 in North Carolina.

8. Recoveries

Paying the loss does not end the obligations of the named insured and the insurance company toward one another. Additional provisions apply if the insurance company pays a loss and the lost or damaged property is subsequently recovered, or the parties responsible for the loss pay for it.

Either party that recovers property or payment must inform the other. Recovery expenses that either party incurred are reimbursed first. If the named insured keeps the recovered property, it must refund the amount of the claim the insurance company paid unless the company agrees to a different amount. If the claim paid is less than the agreed loss due to applying a deductible or another limitation, any recovery is prorated between the named insured and the insurance company based on the company's respective interest in the loss.

9. Restoration of Limits

Payment of a claim does not reduce the limit available for future claims except as Supplemental Coverages–Contract Penalty states.

Note: Supplemental Coverages–Pollutant Cleanup and Removal is also subject to an aggregate, but that is not mentioned as an exception to this condition.

10. Subrogation

The insurance company acquires the named insured's rights of recovery from third parties after it pays a loss. The named insured must help the insurance company secure those rights. The company is not obligated to pay a loss if the named insured hinders or impairs the company's rights of subrogation. However, the named insured can agree in writing to waive recovery rights from others before a loss occurs.

Note: This must be read alongside the Not Covered Property Other Carrier item that eliminates coverage for property with other carriers if the named insured waived its recovery rights against that other carrier or made them unenforceable. This applies if the waiver happens before or after a loss.

11. Suit against Us

The insurance company cannot be sued by anyone for any coverage until all the terms of the coverage form are met. Suits must be brought within two years after the named insured first knew about a loss. If a state law invalidates this condition, any suit brought must comply with the provisions of that law and begin within the shortest period of time allowed by law.

Note: It is normal for a basic coverage form to be modified by mandatory state-specific endorsements that address issues related to that specific state.

12. Territorial Limits

Covered property must be located in the United States, its territories and possessions, Canada, or Puerto Rico for coverage to apply.

13. Your Reimbursement to Us

A mandatory regulatory endorsement may require that the insurance company make payments beyond provisions in the coverage form. When such an outside the coverage form payment is made, the named insured must reimburse the insurance company for the non-covered amounts it paid. The reimbursement payment must be made within 30 days of the insurance company notifying the named insured of the amount due.

 

Example: The state Public Service Commission (PUC) makes Ajax Insurance Company responsible for $50,000 in damages for a covered loss, but the coverage form limit is only $30,000. Ajax must pay $50,000 to the claimant and then bill Tom's Tanker Transport for the excess $20,000 payment the PUC regulation requires.

Definitions (01 07 Changes)

Defined terms are used throughout the coverage form. Restricting their meaning to their definition is how all parties have a clearer understanding of the intended coverage. Fifteen terms are defined:

Note: The definitions for Earth movement, Flood, and Sinkhole collapse in the previous edition are not in this edition. The definitions for you, your, we, us, and our are moved to the Introduction (01 07 change).

1. Limit

This is the amount of coverage that applies to the insured property.

2. Off-board electronic equipment

Electronic equipment the named insured uses to communicate with and track vehicles while they are on the road. Related software, antennas, and accessories are considered part of off-board electronic equipment.

3. On-board electronic equipment

Permanently installed electronic equipment that is used to do any of the following:

This equipment must be installed in a vehicle. Related software, antennas, and accessories are considered part of on-board electronic equipment.

Permanently installed equipment must operate using electrical power from the vehicle’s electrical system. The equipment can be removable, provided the units that house the equipment are permanently installed in the vehicle.

4. On-board expendable supplies

Fuel, oil, lubricants, and other similar expendable supplies.

5. Perishable stock

Property that must be stored or maintained under specific controlled conditions to prevent spoilage. If the controlled conditions change, the perishable stock will suffer loss or damage.

Note: Common controlled conditions include heating, refrigeration, and humidity control but are not limited to just these.

6. Pollutant

This is a broad and expansive term. It is solids, liquids, thermal or radioactive contaminants, and irritants. It includes, but is not limited to, acids, alkalis, chemicals, fumes, smoke, soot, vapor, and waste. Waste includes materials intended for recycling, reclamation, and reconditioning, as well as for disposal. Visible and invisible electrical or magnetic emissions and sound emissions are also considered pollutants.

7. Schedule of coverages

This is any page labeled as such that contains coverage information, including declarations or supplemental declarations.

8. Specified perils

The named perils of fire, lightning, windstorm, hail, collision, overturn or derailment (upset) of a transporting vehicle, collapse of a bridge or culvert, and theft.

Note: This is a much smaller list of perils than is provided in most of the other inland marine coverage forms.

9. Spoilage

A negative change in the physical condition of perishable stock. Thawing, freezing, warming, and solidification are some of the types of spoilage, but the definition is not limited to only these.

10. Suit

This is a judicial proceeding. It includes arbitration proceedings. The purpose of the proceeding must be to determine liability related to direct physical loss to covered property of others while in the named insured's possession.

11. Terms

These are all policy provisions, limitations, exclusions, conditions, and definitions that apply to this coverage.

12. Terminal

A building or structure where a transfer of covered property from one mode of transport to another occurs. The terminal may provide temporary storage for the covered property but no permanent storage. The term transfer is limited to loading, unloading, and temporary storage.

13. Trailer

A vehicle used over the road, designed to carry cargo, and to be hauled by a tractor or other self-propelled motor vehicle. The following are examples of trailers that this definition includes:

14. Transit

The shipment or transport of covered property by the named insured.

Note: This assumes a reasonable expectation that the property will, in fact, be transported.

15. Vehicle

This is any vehicle, truck, tractor, trailer, or combination of these being hauled by a single power unit.

IM 7456–SCHEDULE OF COVERAGES–MOTOR TRUCK CARGO LEGAL LIABILITY COVERAGE (01 12 changes)

This Schedule of Coverages is used with IM 7451–Motor Truck Cargo Legal Liability Coverage. IM 7456 contains the following information:

Policy Number (01 12 addition)

The 01 12 edition added a space to enter the policy number.

Covered Property

Property covered is described in the space provided.

Coverage Limits

The 01 12 edition added quotation marks around the word Limit (“Limit”) in several places because Limit is a defined word.

This is the most paid for loss that involves any one vehicle.

This is the most paid in a single occurrence, regardless of the number of vehicles involved.

Note: This may or may not involve multiple vehicles and/or terminals.

Terminal Limits

The terminal numbers, addresses or descriptions and limits of insurance are entered in the spaces provided.
IM 7484–Additional Terminals Schedule–Motor Truck Cargo is used to list additional terminals.

Coverage Extensions

The limits on the Schedule of Coverages for the following coverages apply to all covered locations:

The limit is $10,000 unless a different limit is entered.

No entry is required.

Supplemental Coverages

Each of these coverages provides additional limits of coverage or additional coverage. Required entries vary by type of coverage.

The limit is $2,500 unless a different limit is entered.

The limit is $50,000 unless a different limit is entered.

The limit is $10,000 unless a different limit is entered.

Deductible

One deductible is entered that applies to all covered losses.

Additional Information (01 12 change)

This section of the schedule of coverages lists endorsements and forms included when the policy is issued.

The previous edition referred to this section as Optional Coverages and Endorsements.

IM 7451–MOTOR TRUCK CARGO LEGAL LIABILITY COVERAGE FORM ANALYSIS

This analysis is of the 01 07 edition.

This coverage form is similar to IM 7450–Motor Truck Cargo Legal Liability Coverage–Reporting Form analyzed above, except for seven sections. This analysis addresses only the seven sections that are different.

Coverage Extensions

IM 7451 does not have the Coverage Extension for Fraud and Deceit.

Supplemental Coverages

Two Supplemental Coverages in IM 7451 are changed and seven are eliminated.

The following are the two changes:

The following are the seven supplemental coverages that are eliminated:

Note: The only Supplemental Coverages in IM 7451 are Freight Charges, Newly Acquired Terminals, and Pollutant Cleanup and Removal.

Perils Excluded

Four exclusions in IM 7450 are not in IM 7451 because they apply to only Supplementary Coverages that are not in IM 7451. They are:

Valuation

The valuation terms for Equipment and Supplies in IM 7450 are not in IM 7451 because they are not covered property.

Reporting Conditions

The Reporting Conditions section in IM 7450 is not in IM 7451 because it is a non-reporting coverage form.

Other Conditions

The exception in the Restoration of Limits condition under Supplemental Coverages–Contract Penalty in IM 7450 is not in IM 7451 because IM 7451 does not cover Contract Penalty.

Definitions

The following three definitions in IM 7450 are not in IM 7451 because they are not used in IM 7451:

IM 7457–SCHEDULE OF COVERAGES–CONTINGENT CARGO COVERAGE

This Schedule of Coverages is used with IM 7453–Contingent Cargo Coverage. IM 7457 contains the following information:

Policy Number (01 12 addition)

The 01 12 edition added a space to enter the policy number.

Covered Property

Property covered is described in the space provided.

Limits

·         Property in Vehicles Limit

This is the most paid for loss that involves any one vehicle.

·         Property in Terminals Limit (if checked)

This is the most paid for loss in a single terminal.

·         Catastrophe Limit

This is the most paid in any one occurrence.

Coverage Extensions

The only coverage extension is Defense Costs. It does not have a limit.

Deductible

One deductible amount that applies to all covered losses is entered in the space provided.

Additional Information (01 12 change)

This section of the schedule of coverages lists endorsements and forms included when the policy is issued.

The previous edition referred to this section as Optional Coverages and Endorsements.

IM 7453–CONTINGENT CARGO COVERAGE FORM ANALYSIS

This coverage form is similar to IM 7450–Motor Truck Cargo Legal Liability Coverage–Reporting Form analyzed above except for 11 sections. This analysis addresses only the 11 sections that are different.

The primary difference is that this coverage responds only when the required subcontractors policy does not respond as expected.

This analysis is of the 08 09 edition.

This analysis is of the 01 07 edition.

Coverage

There is no coverage section in the IM 7453. All coverage information is within the Property Covered Section.

Property Covered

Coverage applies to both property in vehicles and property at a terminal location. A subcontractor of the named insured must be legally liable as a common carrier or contract carrier, but the named insured cannot collect from the subcontractor of its insurance carrier.

The reason the named insured is unable to collect from the subcontractor must be due to one of the following reasons:

·         The subcontractors insurance policy was either cancelled or nonrenewed, and the named insured was not notified.

·         The subcontractor’s limits were insufficient to cover the loss.

·         The loss or damage was not covered under the subcontractors coverage form.

The named insured is required to obtain evidence of insurance from the subcontractor prior to any shipment with that subcontractor. The insurance must provide motor truck legal liability coverage with limits that are sufficient to cover the legal liability in the bill of lading.

The IM 7450 covers the named insured legal liability, not the subcontractor legal liability.

Property Not Covered

All are the same, except that the IM 7453 does not list Other Carriers.

Coverage Extensions

IM 7453 does not have the Coverage Extension for Debris Removal or Fraud and Deceit.

Supplemental Coverages

The IM 7453 does not contain any Supplemental Coverages.

Perils Excluded

Four exclusions in IM 7450 are not in IM 7453 because they apply only to Supplementary Coverages that are not in IM 7453. They are:

What Must be Done In Case of Loss

Recovery from Subcontractor is added. The named insured is required to take all reasonable efforts to obtain coverage from the subcontractor and this includes meeting requirement for filing claims against that subcontractor’s insurance carrier.

Valuation

The valuation terms for Equipment and Supplies in IM 7450 are not in IM 7453 because they are not covered property.

Reporting Conditions

The Reporting Conditions section in IM 7450 is not in IM 7453 because it is a non-reporting coverage form.

Other Conditions

The exception in the Restoration of Limits condition under Supplemental Coverages–Contract Penalty in IM 7450 is not in IM 7453 because IM 7453 does not cover Contract Penalty.

Definitions

The following three definitions in IM 7450 are not in IM 7453 because they are not used in IM 7453:

The definition of Subcontractor is added. It is a trucking company the named insured hires to transport property of the type described in the schedule of coverages.

ENDORSEMENTS AND SCHEDULES

Motor Truck Cargo Legal Liability Coverage Forms, Endorsements and Schedules

IM 7460–Concealed Damage Exclusion

This restrictive endorsement excludes loss or damage to covered property unless the damage to the shipping container or packaging materials is visible.

IM 7461–Refrigeration Breakdown Coverage–Vehicles

This endorsement covers cargo that spoils because the refrigeration unit breaks down. An important condition of coverage is that the units must be inspected at least monthly and records of inspections kept for a minimum of one year.

IM 7463–Reporting Conditions Endorsement

(Use with IM 7451)

This endorsement adds reporting conditions. IM 7482–Reporting Schedule must be attached to supply necessary information.

IM 7465–Operating Territory (01 12 change)

This endorsement restricts coverage to only shipments made within a specific radius of the designated city and state. The 01 12 edition added a space to enter the policy number.

IM 7466–Property Excluded (01 12 change)

This restrictive endorsement excludes all coverage for the types of property selected in the endorsement. Five are listed, but to be excluded, they must be selected. Other property can also be added and selected. The 01 12 edition added a space to enter the policy number.

IM 7468–Contingent Coverage

This endorsement covers property of others in terminals and in or on vehicles in a subcontractor’s care, custody, or control and for which the named insured is legally liable as a broker, freight forwarder, or consolidator. This endorsement defines subcontractor as a trucking company the named insured hires to transport property of others. This coverage is subject to a number of requirements, conditions, and limitations. IM 7469–Contingent Coverage Schedule–Motor Truck Cargo must be attached.

IM 7469–Contingent Coverage Schedule–Motor Truck Cargo (01 12 changes)

This schedule is used with IM 7468–Contingent Coverage to provide certain required information. The 01 12 edition added a space to enter the policy number. It also added quotation marks around the word Limit (“Limit”) because Limit is a defined word.

IM 7470–Mobile Equipment Coverage (01 12 changes)

This endorsement covers mobile equipment that is in a terminal, on a vehicle, or is used to load or unload property. The mobile equipment can be owned or be property of others in the named insured's care, custody, or control. The 01 12 edition added a space to enter the policy number. It also added quotation marks around the word Limit (“Limit”) because Limit is a defined word.

IM 7471–Trailer Coverage

This endorsement covers non-owned trailers that are under either a bailment or a trailer interchange agreement. This coverage is subject to several requirements, conditions, and limitations. IM 7472–Trailer Schedule–Motor Truck Cargo must be attached.

IM 7472–Trailer Schedule–Motor Truck Cargo (01 12 changes)

This schedule is used with IM 7471–Trailer Coverage to provide certain required information. The 01 12 edition added a space to enter the policy number. It also added quotation marks around the word Limits (“Limits”) because Limit is a defined word.

IM 7473–Additional Named Insured Endorsement (01 12 change)

This endorsement extends coverage for the additional named insured entity or entities on the endorsement schedule. The 01 12 edition added a space to enter the policy number.

IM 7474–Theft Exclusion–Motor Truck Cargo (01 12 change)

This restrictive endorsement excludes coverage for loss due to theft from a vehicle or terminal but only for the types of property listed on the endorsement. Five commodities are listed that can be selected, but there are also many open spaces in which to enter property. The 01 12 edition added a space to enter the policy number.

IM 7475–Theft Limitation (01 12 change)

This restrictive endorsement first excludes theft and then adds it back in on a limited basis. Theft coverage is limited to only the type of property described on the endorsement schedule, and that property is covered only while at a covered terminal or in or on a transporting vehicle. A per occurrence limit must be entered in the space provided. The 01 12 edition added a space to enter the policy number.

IM 7476–Unattended Vehicle Exclusion

This restrictive endorsement excludes coverage for loss due to theft from an unattended vehicle. It applies unless someone was hired to guard and watch the vehicle and its contents or somebody was on or in the vehicle while it was in transit or at a terminal or another location for loading or unloading.

IM 7477–Electronic Equipment Coverage

(Use with IM 7451)

Coverage for direct physical loss or damage from a covered peril to off-board electronic equipment used to communicate with or track vehicle movement and for on-board electronic equipment used for communications and to monitor the vehicle's characteristics. IM 7478–Electronic Equipment Schedule–Motor Truck Cargo must be attached.

IM 7478–Electronic Equipment Schedule–Motor Truck Cargo (01 12 changes)

This schedule is used with IM 7477–Electronic Equipment Coverage to provide certain required information. The 01 12 edition added a space to enter the policy number. It also added quotation marks around the word Limits (“Limits”) because Limit is a defined word.

IM 7479–Parked Trailer Exclusion (01 12 change)

This restrictive endorsement excludes theft coverage for covered property of others from a trailer that is parked and detached from its power unit. However, coverage does apply if the trailer is at a terminal or location on the endorsement schedule. The 01 12 edition added a space to enter the policy number.

IM 7480–Cotton Exclusion

This restrictive endorsement excludes coverage for loss or damage to cotton from fire. It applies only if the cotton was in the named insured's care, custody, or control within 72 hours following the ginning process.

Note: Ginning removes the cottonseeds from the cotton.

IM 7481–Vehicle Alarm Endorsement

Theft coverage is excluded if an alarm is not maintained and activated on vehicles at all times when covered property is in transit. The alarm can be deactivated during loading and unloading, but only if a designated employee or the power unit's owner-operator is present throughout the loading or unloading process as a guard.

IM 7482–Reporting Schedule–Motor Truck Cargo (01 12 change)

(Use with IM 7451)

This schedule is used with IM 7463–Reporting Conditions Endorsement to state the type of reporting and adjustment periods. It also lists the basis of the reports, the reporting rate, the deposit premium, and the minimum premium. The 01 12 edition added a space to enter the policy number.

IM 7483–Personal Property Coverage (01 12 changes)

Business personal property and personal property of employees is covered subject to the limits and deductible on the endorsement schedule. Coverage applies when the property is in transit in or on a vehicle the named insured operates. It also lists additional property not covered, additional perils excluded, and loss settlement terms. The 01 12 edition added a space to enter the policy number. It also added quotation marks around the word Limits (“Limits”) because Limit is a defined word.

IM 7484–Additional Terminals Schedule–Motor Truck Cargo (01 12 changes)

(Use with IM 7455 and IM 7456)

This endorsement lists and describes additional covered terminal locations and their limits. The 01 12 edition added a space to enter the policy number. It also added quotation marks around the word Limits (“Limits”) because Limit is a defined word.

IM 7485–Refrigeration Breakdown Coverage–Vehicles and Terminals

This endorsement is similar to IM 7461–Refrigeration Breakdown Coverage–Vehicles, except that it also provides coverage inside the terminal.

IM 7486–Refrigeration Breakdown Schedule–Motor Truck Cargo (01 12 changes)

This schedule is used with IM 7461–Refrigeration Breakdown Coverage–Vehicles and IM 7485–Refrigeration Breakdown Coverage–Vehicles and Terminals to provide necessary information. The 01 12 edition added a space to enter the policy number. It also added quotation marks around the word Limits (“Limits”) because Limit is a defined word.

IM 7487–Flood and Earth Movement Exclusion (01 12 changes)

This endorsement restricts coverage by adding exclusions for loss or damage to covered property at a terminal location from earth movement, volcanic eruption, and flood. The 01 12 edition added a space to enter the policy number. It also updated the flood and earth movement exclusions and definitions.

IM 7488–Named Perils Endorsement

This endorsement changes the Perils Covered provision to restrict coverage to only specified perils as defined in the coverage form.

Note: The specified perils are much more restrictive than other inland marine forms, so it is important to review them before recommending this endorsement.

IM 7489–Scheduled Vehicle Limitation (01 12 changes)

This restrictive endorsement is used to limit coverage to only the vehicles listed and described (and for the limit entered) in the spaces provided on the endorsement schedule. The 01 12 edition added a space to enter the policy number. It also added quotation marks around the word Limits (“Limits”) because Limit is a defined word.

Note: Additional company specific endorsements may be available and used. Each should be examined to determine its effect on coverage. Safeguards such as theft security, alarms, and climate controls may be required as a condition of an insurance company to provide coverage or to accept a particular exposure.

 

Contingent Cargo Coverage Forms Endorsements and Schedules.

IM 7490–Named Perils Endorsement–Contingent Cargo Coverage

This endorsement restricts coverage. It changes the perils insured to direct physical loss or damage caused by a specified peril.

IM 7491–Parked Trailer Exclusion–Contingent Cargo Coverage (01 12 change)

This endorsement excludes theft from a parked trailer disconnected from its tractor or other power unit. It then gives the coverage back, but only when such trailers are parked at terminals or other locations on the endorsement schedule. The 01 12 edition added a space to enter the policy number.

IM 7492–Property Excluded–Contingent Cargo Coverage (01 12 change)

This endorsement excludes coverage for loss or damage to the commodities on the endorsement schedule. The 01 12 edition added a space to enter the policy number.

IM 7493–Refrigeration Breakdown Coverage–Contingent Cargo Coverage

This endorsement adds spoilage coverage but only when the vehicle's refrigeration or heating unit malfunctioning causes it. The Spoilage exclusion under Perils Excluded remains in effect other than with respect to the coverage this endorsement provides.

IM 7494–Reporting Conditions Endorsement–Contingent Cargo Coverage

This endorsement changes the coverage form to a reporting basis. The Reporting Conditions are the same as in IM 7450–Motor Truck Cargo Legal Liability Coverage–Reporting Form.

Note: A reporting schedule must be added to state the rate, adjustment period, reporting period, and reporting basis.

IM 7495–Theft Exclusion–Contingent Cargo Coverage (01 12 change)

This endorsement restricts coverage. It excludes coverage for theft loss, or damage to the commodities listed on the endorsement schedule. However, it does cover loss or damage caused by looting during a riot or civil commotion. The 01 12 edition added a space to enter the policy number.

IM 7496–Theft Limitation–Contingent Cargo Coverage (01 12 change)

This endorsement excludes theft. It then provides theft coverage on a limited basis but only for the type of property described on the endorsement schedule. It is covered only while at a covered terminal or in or on a transporting vehicle. A per occurrence limit must be entered in the space provided. The 01 12 edition added a space to enter the policy number.

IM 7497–Unattended Vehicle Exclusion–Contingent Cargo Coverage

This endorsement restricts coverage. It excludes loss or damage due to theft of covered property from a vehicle or property in or on a vehicle that disappears at the time of loss or when the vehicle is stolen. It does not apply if an employee or another party is hired or appointed to occupy or attend the vehicle.

Note: Additional company specific endorsements may be available and used. Each should be examined to determine its effect on coverage. Safeguards such as theft security, alarms, and climate controls may be required as a condition of an insurance company to provide coverage or to accept a particular exposure.

REGULATORY COMMISSION REQUIREMENTS

Financial Responsibility

Trucking concerns that operate as common or contract carriers for hire are subject to governmental regulation and requirements with respect to their financial responsibility and liability to shippers of property. Based on the nature and scope of the trucker's operations, the Department of Transportation (DOT), Federal Motor Carrier Safety Administration (FMCSA), or the individual state Public Utilities Commission (PUC) or Public Service Commission (PSC) provides rules and regulations that apply to the conduct of the trucking operations and the degree of financial responsibility required. To comply with such requirements, the trucking concern either purchases insurance or carries some form of indemnity bond. Insurance is the method usually chosen to comply with such requirements.

Department Of Transportation (DOT), Federal Motor Carrier Safety Administration (FMCSA) Requirements

The Department of Transportation (DOT) Federal Motor Carrier Safety Administration (FMCSA) requires an endorsement to the policy. The endorsement obligates the insurance carrier of a trucking concern to pay a shipper or consignee of goods up to $5,000 in or on any one vehicle and up to $10,000 in any one occurrence for loss due to the trucking concern's negligence.

Public Service Commission or Public Utilities Commission Requirements

The Public Service Commission (PSC) or the Public Utilities Commission (PUC) of certain states requires certain levels of insurance on intrastate shipments trucking concerns make in or on their vehicles. Compliance is overseen and supervised by the commission in each state. It requires that motor truck cargo legal liability insurance coverage forms and policies have an endorsement that obligates the insurance company of the trucking concern to meet that state’s minimum financial responsibility limits. Because these limits can differ in each state, the named insured and the insurance company must be aware of the limits and the rules and laws that apply to trucking activities in a given state.

Filings

Common and contract carriers are required by law to file certificates of cargo insurance with the regulatory or supervisory commissions of the states where they operate. If they operate in more than one state, a different but similar certificate must be filed with the FMCSA because of each state's different laws and requirements. These certificates obligate the insurance company to insure against some perils that the coverage form or policy may not include. This provision and requirement obligate the insurance company to include the necessary endorsements with the insurance coverage form or policy and to file certain prescribed forms with the proper governmental agency or authorities to help the named insured comply with the laws.

Reimbursement

Motor Truck Cargo Legal Liability Coverage does not pay all losses a trucking concern can be liable for on the cargo or property hauled or transported. This coverage may not be as broad as the liability assumed by motor carriers under the bills of lading or shipping documents they issue. Under the terms of the FMCSA endorsement, the insurance company must assume the full extent of the cargo liability of the motor carrier imposed by the endorsement if it is required to pay such a loss to the shipper or consignee of the property. Policy terms and agreements between the insurance company and the named insured entitle the insurance company to be reimbursed by the named insured for payments made to others beyond what the coverage form or policy provides.

UNDERWRITING CONSIDERATIONS

Motor truck cargo legal liability coverage insures the legal liability of common and contract motor carriers for the lawful goods of others they accept for transportation between certain points under tariffs and bills of lading or contracts and shipping receipts. Coverage applies from the time the trucker takes possession of the cargo to be carried at the point of origin to the time the goods arrive at their intended destination and the consignee accepts them.

Some general points to consider are the motor carrier’s experience, financial strength, loss history and the quality of the motor vehicles that make up the fleet. The types of merchandise hauled, their value, and susceptibility to loss, damage, or theft affect the underwriting and pricing decisions. If terminal coverage is provided, location-oriented underwriting must be applied, and the values in a terminal at any one time may create a catastrophic loss potential.

Common carriers have a higher degree of responsibility for the merchandise they haul than contract carriers. While contract carriers are responsible only to the extent of their liability as spelled out in the shipping contract (and only if their negligence contributes to the loss), common carriers are liable for all loss or damage to the goods with only five exceptions. The exceptions are loss or damage due to acts of nature, acts of the public enemy, exercise of a public authority, fault, or neglect on the part of the shipper, or inherent vice or the nature of the property itself.

Key elements in underwriting motor carriers include evaluating and determining their financial condition and experience. The trucker’s financial condition should be sufficiently healthy so it can afford to hire a suitable number of qualified drivers and purchase and maintain a safe and adequate fleet of vehicles appropriate for the operations conducted.

A trucking concern's experience is measured in part by determining the length of time it has been in business, the nature of property hauled over that time, and evaluating the reasons for any changes in the nature or types of property hauled. Consistency and stability in operations enable a trucking concern to have a greater level of competency in its work. It also eliminates guesswork and learning new tasks that allow the named insured to focus on safely and efficiently performing the work it is best qualified, prepared, and experienced to do.

Drivers must be evaluated carefully. More control can be exercised over drivers who are employees than over independents or owner-operators. Non-employee drivers must be carefully screened, and it is best if the named insured uses the same ones consistently. The degree of experience of all drivers and periodic scheduled training and education are essential to keep bad habits from occurring or developing. Periodic and unscheduled drug testing and securing motor vehicle reports are essential to maintaining control over drivers and being aware of their current status through such periodic tests and reports.

The radius of operations is important. The greater the distance from the base of operations, the greater the number of problems and issues that can develop through the natural loss of control as distances increase. Depending on the radius of operations, the degree and methods of control will be affected and have to change to respond to individual circumstances.

Terminal operations introduce fixed location underwriting issues and greater concern over fire and other property-based perils. The elements of construction detail, the nature of the occupancy or goods stored, public and private fire protection, and the influence of surrounding exposures must be addressed and understood, and problems or shortcomings resolved. The catastrophe limit becomes a more significant factor when terminals are involved, and the number of vehicles with loads at such facilities must be evaluated in light of the possibility of a total loss. The services provided at such terminals can vary, and facilities that include truck washes, repairs with welding and painting, and substantial storage operations can change the complexion of the facility and the trucking operation as a whole.

Related Article: Commercial Property Underwriting Considerations