Freight forwarders have special coverage needs because they act as common carriers for shippers; their role makes them subject to the Carmack Amendment. A freight forwarder is required to provide motor carrier filings, register with the Federal Motor Carrier Safety Administration (FMCSA) as a freight forwarder, and to supply the FMCSA with evidence of liability and cargo filings.
Great West has developed several coverage forms to meet the needs of freight forwarders. They are:
1. Auto Liability or Cargo coverage for Freight Forwarder Concerns - Contingent coverage. The hauling carrier is required to furnish the forwarder with a copy of its policy, an Additional Insured endorsement, or a certificate of insurance. Coverage will respond to a loss if, at the time of a covered loss, the coverage required by the freight forwarder agreement is not collectible.
The limit of insurance payable by these forms is reduced by all sums paid by or on behalf of the hauling carrier. What makes this a contingent form, is that it pays only if the hauling carrier does not. Notice that with this coverage you must require insurance evidence only from the hauling carrier.
2. Motor Carriers - Named Freight Forwarder as Insured coverage. This Additional Insured endorsement is attached to a Great West policy. To be eligible, you need to have a written forwarder agreement with the freight forwarder. Our endorsement will then provide primary Liability and Cargo coverage for the forwarder, including contractual liability and a provision for a notice of policy cancellation or reduced limits.
3. Second Level coverage. This endorsement is attached to provide the forwarder coverage in excess of what is required by the motor carrier in its contractor agreement with the forwarder. For instance, if the agreement between the forwarder and the motor carrier requires the trucker to maintain $1 million liability, but the forwarder wants $2 million of coverage for himself/herself, we would use this endorsement to provide that additional coverage. This endorsement provides coverage only for the forwarder. The motor carrier is not the insured.
Because a forwarder is required to have liability filings with the FMCSA, Great West makes those filings for you and will issue an MCS 90 endorsement, if appropriate. Most forwarders issue a sub-bill of lading to the hauling carrier to transfer some responsibility to it as the carrier. However, even though there is a forwarder contract transferring responsibility to the hauling carrier, a contingent exposure still exists for the forwarder. Examples: selecting a hauling carrier with an unsatisfactory FMCSA rating or one which has hired questionable drivers; other examples would be having a certificate on file for the hauling carrier's cargo policy which excludes coverage for certain types of commodities or excludes off-temperature losses. You may have a contract in place, but can the hauling carrier afford to pay a loss if its insurance does not cover it?
From what we have seen, freight forwarders tend to set up separate legal entities for these operations. The reasons vary and range from a need for a different set of books to protecting the assets of affiliated truck operations by separation. Be sure to also ask your agent about:
Insuring an owned auto titled in the forwarder business name.
Hired and Non-Owned Auto Liability coverage. Examples of exposures are an auto rental on a business trip or an employee using his/her personal car on forwarder business.
Commercial General Liability coverage for office exposure, off-premises sales calls, and independent contractors operating on your behalf.
Workers’ Compensation coverage for officers, office staff, and other employees of the forwarder entity.