This coverage is a newer offering in the insurance world, relatively speaking, and has been evolving since its first introduction in the 1980s. What hasn’t changed about contingent cargo is it’s unregulated—there’s no standard form and policies can vary by provider. Because of this lack of standardization, it’s important to read the fine print and understand exactly how contingent cargo protects you.
A Brief Overview of Contingent Cargo Insurance
Contingent cargo covers goods in vehicles that are the legal liability of insureds (usually freight brokers) and their carriers. “Contingent” means it is not primary coverage and will only kick in if the carrier’s general cargo policy doesn’t pay out (because of policy cancellation, insufficient limits, loss or damage exclusions, etc.).
One of the biggest benefits of contingent cargo insurance is the due diligence brokers perform before issuing coverage. To ensure the policy will successfully protect the broker and shipper in a cargo claim, brokers follow a “best practices” system to vet the carrier—including its liability insurance, authority, safety programs, etc. Brokers do their homework to confirm your carrier has the proper credentials and your second layer of coverage will be effective.
Gaps In Carrier Coverage
Why do you need contingent cargo insurance? Because you can’t expect the carrier’s limited liability insurance to provide comprehensive coverage—there are undeniable gaps. Under the Carmack Amendment, the carrier is responsible for full actual loss of a shipper’s goods, but that doesn't mean you’ll be made whole.
A carrier’s cargo insurance may limit coverage or remove it completely. The carrier may refuse to accept liability or carrier’s insurance might be uncooperative or cancel coverage unexpectedly. There are a host of risks you shoulder when relying on carrier insurance, which is why many shippers are turning to brokers for the additional protection of contingent cargo.
Contingent Cargo vs. All-Risk
It’s important to remember that contingent cargo insurance is triggered after a denial of coverage. There are gaps to fill with this type of policy as well.
All-risk shipper's interest insurance provides full-value coverage to shippers for losses both in and outside of the carrier's control. This is the broadest policy form available and is not subject to the limitations set forth by the Carmack Amendment. All-risk insurance can also be purchased on a per-load basis. Investing in contingent cargo insurance is a good practice, but it’s also smart to protect yourself with the more comprehensive all-risk policies.
If you want to learn more about the different types of coverage and how you can get the best protection, contact us and we’ll break down your options.