Freight Brokers and Contingent Cargo Insurance

Contingent Cargo Insurance, I’ve heard of it, but what is it? Contingent Cargo Insurance is an insurance policy usually carried by Freight Brokerages as a customer-based protection plan. Why does a brokerage need it since the Carrier has to have insurance? When would a brokerage need Contingent Cargo Insurance? First of all, there is no law that requires a Freight Brokerage to carry contingent cargo insurance. They DO NOT have to carry it. But, most shippers won’t deal with a brokerage that doesn’t have it. Why? Most shippers feel they can sue the broker or collect from the brokers Contingent Cargo Insurance if a load is hijacked or once delivered, is damaged or missing pieces. But, this is not true. That falls under the carriers insurance. A Brokerage does not personally load the freight, count it, inspect it, nor haul it. And a lot of times the carrier does none of this BUT haul it. Yet the carrier takes possession of the load and is therefore responsible for it. If it is hijacked, damaged, or is missing pieces, the carrier and/or receiver goes back to the shipper, NOT to the Brokerage. Then the carrier and shipper work it out or the carrier, shipper and receiver work it out. The Brokerage is truly the intermediary, but, YES, there are times when he/she can be held responsible. Below are the only two reasons I know of as to when a Brokerage would be better off in carrying Contingent Cargo Insurance. (1) Plain and Simple: If the Brokerage signs an agreement with the Shipper stating that he/she will take responsibility if something goes wrong. (2) If the Brokerage fails to check out the Carriers insurance and something does goes wrong. This can hold true if a Brokerage is exceptionally busy or chaotic one day and he/she forgets to check the Carrier insurance. Maybe the Brokerage has decided to take on Agents or has hired some new Agents and out of nervousness, they forget to check the Carrier insurance. Or Maybe the Brokerage has done business with the Carrier before and doesn’t think he/she needs to check the carrier insurance again. Then, all of a sudden while in route, the Carrier wrecks and a whole load of eggs are broken. No problem, the Carrier’s insurance will cover it. WRONG! The Carrier had forgotten to pay his insurance premium that month and it was cancelled three days ago. But the Broker didn’t know this because he/she forgot to check the Carrier’s insurance. Due to the negligence of the Broker, having Contingent Cargo Insurance would surely save the day.
©2008 a1freightbrokertraining