How to Underwrite Transportation Insurance
Domestic Transportation Underwriting
Transportation is one of the major classes of Inland Marine insurance. Transportation coverage covers all outgoing and incoming shipments of the insured, whether on the insured's conveyance or in the care, custody and control of others. Shipments in the care custody and control of others is known as Motor Truck Cargo. Shipments to overseas ports should be insured under a separate Ocean Marine policy.
Transportation Coverage provides coverage for the goods of the insured from the time they leave the initial point of shipment until the goods reach their final destination. Coverage is provided whether the goods are in the custody of carriers for hire or on the insured's own vehicles.
Transportation insurance provides important coverage for all shippers and should be a part of any insurance program. However, transportation coverage is often overlooked because its advantages are not fully recognized.
Trucks in Transit
Transportation Insurance Coverage Advantages:
Advantages of having Transportation Insurance are:
1. Collecting reimbursement from a carrier can be aggravating for the insured as well as causing a negative cash flow. Transportation insurance provides prompt payment for losses because the policy calls for payment to the insured within 30 days after acceptance of satisfactory proof of loss. Bills of Lading and other contracts of carriage between shipper and carrier have no time limit for payment of claims. In addition, the burden of collecting is transferred from the carrier to the insurer.
Even for goods on the insured's vehicles, the insurer will pay the loss, and assume the burden of pursuing recovery if another driver caused an accident that destroyed the Insured's goods.
2. The policy pays the entire loss up to the limit of insurance regardless of the amount of the carrier's liability. This situation can occur when the shipper declares lower values (released value) to the carrier in return for a lower shipping rate.
It is often less expensive for an insured to ship by released value and buy transportation insurance than it is to ship under a full value Bill of Lading with no insurance.
3. The coverage pays for certain losses even when the carrier is not liable, such as "acts of God" (i.e., earthquake windstorm, and flood).
4. Even when fully liable, the carrier may try to avoid settlement if the loss is in excess of the limits or not covered under the carrier's cargo policy. This situation could drag on indefinitely and involve expensive legal costs to the insured. Having Transportation insurance avoids this potential problem.
5. The carrier may not be financially capable of paying claims. Railroads are generally able to meet their obligations, but many public truckers may be insolvent or have limited resources at the time of a loss. Securing Transportation insurance will pay even when the carrier is insolvent.
6. A Transportation Policy combines coverage for the insured's goods in transit on all modes of transportation when a limit of insurance is purchased for a particular mode of transit.
7. Temporary Storage of goods are covered. Goods in transit that must be stored temporarily while awaiting transfer to another vehicle are automatically covered since the goods are still considered to be "in transit".
Trucks Transporting Goods
Covered Property on a Transportation Policy
A description of the "lawful goods" covered must be shown on the Declarations page. This should be reasonably detailed and reflect the commodities on which the premium is based. Merely showing "general freight" or "packages" is not satisfactory, since such descriptions could include almost anything. If the insured ships only certain commodities, these should be listed by type. Usually the cargo can be defined as “...and similar property''.
Modes of Transportation Covered by a Transportation Policy
This insurance policy will only cover those modes for which a limit of insurance is shown in the Declarations. The various modes are:
1. Any public motor carrier, which includes common carrier trucks, contract carrier trucks, express carriers, and United Parcel Service;
2. Any railroad;
3. Any air carrier operating within the coverage territory allowed in the policy;
4. Any inland or coast-wise water carrier, which includes inland water carriers and coast-wise steamers with in U.S. territorial waters:
5. The insured's land motor vehicles. Private carriers may use owned, leased, or rented vehicles;
6. The insured's aircraft.
[Shipments to overseas ports or coverage needed outside of domestic shipments should be insured under an Ocean Marine policy.]