When transporting items commercially, securing your cargo properly could be the difference between life and death. A mother and daughter were tragically killed this month in Minnesota after an 800-pound boulder fell off a truck and struck their car, according to police.
This tragedy – and others that do not involve loss of life – could have been prevented if proper guidelines were followed. But accidents do happen. On average, over 10 million motor vehicle accidents occur in the U.S. every year. The damages caused by these accidents cost upward of $230 billion annually. Without the proper insurance in place, a company or organization involved with transporting goods could be exposed to costly repairs and litigation fees that could put the existence of a business in jeopardy.
In both the U.S. and Canada, several policies offer protection, ranging from Auto Liability to Umbrella policies to Cargo Insurance. However, the amount and types of coverage needed will vary significantly from one organization to another based on the number of vehicles and drivers, what is being transported, the industry, length of routes, experience level and other factors, said Steve Shepard, Underwriting Manager, Transportation, Burns & Wilcox, Indianapolis.
“You really need to be working with an insurance broker or agent who specializes in this type of coverage because they will be in the best position to guide you,” Shepard said.
“If your driver is at fault, you could be responsible for a loss settlement well above your insurance limit, which could threaten the business.” Rebecca Roberts, Burns & Wilcox
All organizations hauling goods in the U.S. should review the Driver’s Handbook on Cargo Securement provided by the Federal Motor Carrier Safety Administration (FMCSA). Available online at no cost, the handbook provides guidance on securing, transporting, loading, immobilizing and restraining cargo, said Rebecca Roberts, Associate Vice President and Managing Director, Burns & Wilcox, Indianapolis.
“These regulations are designed to protect the public – you and I – when driving with families on the road,” Roberts said. “There are clear statements as to how cargo should be handled and it seems those guidelines weren’t followed in the Minnesota tragedy.”
Start with a standard Auto Liability policy
For vehicles that haul products from point to point, an Auto Liability policy is typically purchased with limits up to $1 million per vehicle in the U.S., according to Roberts. In the U.S., Auto Liability covers bodily injury and property damage where a driver of the insured vehicle is at fault. In Canada, the limits go up to $2 million, said Mauricio Zani, National Product Leader, Inland Marine, Burns & Wilcox Canada.
A significant accident, even one that does not involve a serious bodily injury or death, could see costs in excess of $1 million when legal fees, cleanup costs and other expenses are totaled. Some insured parties may benefit from an additional Umbrella policy, where additional limits totaling multiple millions of dollars may be available. Defense or legal costs are generally covered by the Auto Liability policy, Roberts said.
“You have to remember that the business owner is ultimately responsible for the actions of his or her employees, so there’s a lot on a day-to-day basis you can’t control,” Roberts said. “If your driver is at fault, you could be responsible for a loss settlement well above your insurance limit, which could threaten the business. So you want to make sure you have the proper coverage.”
Cargo Insurance in the U.S.
Cargo Insurance in the U.S. is separate from Auto Liability and Umbrella policies. It provides coverage should cargo be damaged or lost when travelling by land, sea or air. It can also limit a commercial operation’s exposure to liability resulting from the shipment of products.
“A typical Cargo policy will have limits between $100,000 and $500,000. Companies hiring a third party to transport items will often require a minimum amount of coverage as part of a contract to protect their loads,” Shepard said.
Policies differ in Canada
Transportation-related insurance products in Canada include General Liability (GL) or Commercial General Liability (CGL). They are legally required and cover the insured’s liability to others, or the property of others, excluding goods in their care, custody or control.
The most common type of Cargo Insurance in Canada is Carriers Legal Liability, which covers the legal liability of the insured for its customers’ cargo. A separate Cargo policy covers the insured’s goods while they are being transported, Zani said. Both of these policies usually cover cleanup costs for debris and freight costs.
“One way to help reduce the liability a company or organization could be faced with is to more effectively train drivers.” Mauricio Zani, Burns & Wilcox Canada
Collision and Comprehensive (Comp) coverage are part of an Auto policy in Canada but are optional, Zani said. Collision covers the insured in the event of an at-fault accident while Comp covers damages not related to a vehicular accident such as theft, vandalism or hail. There are similar Collision and Comp options in the U.S.
“Auto Liability and CGL policies have a duty to defend if the insured is being sued,” Zani said. “Commonly a settlement is reached by the claimants and insurers with the assistance of local adjusters, but they would defend if it went to court.”
Truckers pack U.S. roads
There are 3.5 million drivers in the U.S. trucking industry, according to 2015 statistics published by TruckerPath.com. Truck drivers often work 70 hours in an eight-day work week before getting a day off and log 432 billion miles combined annually.
Commercial trucks pose extra hazards on the road because of their size and the potential for unsecured loads. 2016 data from the AAA Foundation for Traffic Safety found that more than 200,000 crashes involved debris on U.S. roads during the previous four years. Road debris has resulted in about 39,000 injuries and more than 500 deaths between 2011 and 2014.
In May of this year, police say one motorist died after a piece of concrete fell off the back of a flatbed truck on an Oklahoma highway.
In the Minnesota tragedy, police say the boulder rolled off the truck’s bed after crossing railroad tracks. It took investigators a few days to track down and arrest the alleged driver, Joe P. Czeck. However, Czeck is unlikely to face personal liability penalties unless criminal activity is found, Roberts said.
Training can be improved
One way to help reduce the liability a company or organization could be faced with is to more effectively train drivers, Zani said. This would improve their driving skills and also help them better understand the logistics of transporting goods.
Many drivers on the road today are not native to the United States and Canada and may experience challenges navigating the roads during inclement weather such as snow and ice. Some drivers may not be familiar with how to properly secure, stack or store items on a truck or even load heavy items using machinery, Zani said.
“We are going through a situation where there is a clear shortage of drivers so companies are really struggling to staff those positions,” Zani said. “Stringent requirements are needed for all drivers for operating a vehicle and handling their loads.”
“If you are monitoring drivers and load securement, a tragedy such as the one we saw in Minnesota would likely be prevented,” Steve Shepard, Burns & Wilcox
Having a standard safety plan and program in place can also help decrease chances for an accident, Shepard said. Employers can incentivize drivers for following or exceeding federal, state and corporate safety regulations while penalizing those who fail to do so. A state Department of Transportation (DOT) official can pull over a vehicle at any time for a variety of reasons to inspect cargo and loads, so drivers are at risk for penalties any time they are on the road.
“Given the gravity of the situation created when loads are not secured properly, drivers should have both an understanding and regular on-going training regarding Cargo Securement Requirements as detailed in chapter 2 of the FMCSA Driver’s Handbook. When adequate knowledge and training cannot be provided in-house, a reputable consultant specializing in DOT training should be secured by the employer,” added Jon Kovach, President, Afirm, a premier provider of premium audits, inspections and risk solutions.
“If you are monitoring drivers and load securement, a tragedy such as the one we saw in Minnesota would likely be prevented,” Shepard said. “Incentivizing drivers to follow set policies can go a long way as well.”
As with any coverage need, an insurance broker or agent must be consulted. Click here to forward this article to your insurance broker or agent to ask if you need this coverage, or share this with clients to start the conversation and ensure proper protection.
This information was provided by Burns & Wilcox, North America’s leading wholesale insurance broker and underwriting manager. Burns & Wilcox works exclusively with retail insurance brokers and agents to assist clients like you with their specialty insurance needs. Ask your insurance broker or agent if Cargo Insurance or an Umbrella policy is right for you