One of the most commonly misunderstood coverages in the transportation industry is truck broker liability. Many third-party logistics firms think they have adequate coverage to protect them when most often, they do not.
The Lexington Truck Broker Liability policy is a hybrid primary liability policy that addresses a truck broker’s general liability arising out of the ownership and the use of a truck by the motor carrier of a brokered move, in conformity with a written truck brokerage agreement.
Coverage Highlights:
• Primary liability coverage provides bodily injury and property damage liability coverage protecting the truck broker if they are brought into legal action caused by a truck accident involving a motor carrier to whom they brokered a load
• Limits of liability similar to an automobile liability policy apply to each accident with no policy aggregate
• Defense costs are outside the limits of liability
• The same coverage applies regardless of the type of cargo being hauled
• Coverage is not conditional on having a certificate of insurance on file
• Limits up to $5 million are available
Who Needs Truck Broker Liability Coverage?
• Independent truck broker companies
• Independent third party logistics companies
• Independent freight forwarders
• Incorporated truck broker subsidiaries of motor carriers
• Motor carriers with unincorporated truck broker division
Your Submission Should Include:
• A complete narrative description of operations
• A copy of the truck brokerage agreement
• A completed Lexington Truck Broker Liability Insurance Application
Contingent Auto Liability (CAL) versus Truck Broker Liability (TBL)
Let’s look at some of the differences:
• CAL “Pays of behalf of the insured damages resulting from auto liability that may arise on a contingent basis”
• TBL “We will pay those sums when an insured becomes legally obligated to pay because of bodily injury or property damage resulting from the ownership, maintenance and use including loading and unloading f an auto and arising out of the insured’s operations as a transportation broker”
Note the TBL does not mention being contingent as therefore primary coverage and is in essence a hybrid policy covering a truck broker’s liability arising out of an auto claim on behalf of a trucker the insured brokers to.
Big Differences:
There are specific conditions that could negate coverage for an insured under the CAL policy that are not present in the TBL policy
• Certificate of Insurance or Verbal Checklist- this is a condition of coverage under the CAL and without same there is no coverage. The TBL has no such condition so if the insured accidentally misses one and there is a loss, there would be coverage.
• Double Brokered Loads- any occurrence sustained by a motor carrier whom the insured has entrusted shipment is covered. Unfortunately, if a trucker double brokers the load, there is no coverage because the trucker has entrusted shipment to only one trucker usually. Note: No such exclusion in the TBL
• Defense/ Duty to Defend- Both programs have a duty to defend except the CAL will not defend if there is other valid insurance. So a truck broker could be sued and not defended if the trucker’s coverage is providing defense.
• Commodities Excluded- explosives, gas, acid, liquefied petroleum. There are no such exclusions under the TBL.
• Errors & Omissions are excluded under the CAL. The TBL does exclude professional services. Note: We are seeing more and more requests for stand-alone E&O coverage
• Punitive and Exemplary Damages- Excluded under the CAL and not under the TBL
• Annual Aggregate- CAL has an annual aggregate which is the most they will pay during a policy period. The TBL is like an auto policy and per claim.
• Valid and Collectable Insurance- there is no coverage under the CAL if there is valid and collectable insurance which means in most cases if the trucker’s certificate is valid and in force there would be no coverage. TBL has no such exclusion.
Other Issues:
• Coverage: TBL has broader supplementary payments than CAL. The TBL does exclude expected or intended injury, mobile equipment and racing. We see none of these issues material to coverage differentiation.
• Agent’s Duty- We all are in the business of trying to sell the best coverage to protect insureds. In the past when there was only CAL coverage, there was not a choice. It makes sense to offer TBL coverage if a prospective insured meets risk acceptability and best practices standards
• Providing COI’s to the truck broker’s customers and shippers- Since the TBL is a hybrid GL/Auto policy it makes sense when issuing a certificate to put under the “other” section at the bottom and put TBL.
Note: There are a great deal of shippers who are not aware this coverage is now available. When they hear it is available, they demand it. It also helps truck brokers meet risk acceptability standards with new shippers.
