Transportation Liability – Busting Three Common Myths

Transportation LiabilityThere was a time when transportation liability was rather simple to comprehend. However, as federal regulations have tightened, and the transportation industry has evolved, liability insurance has become increasingly difficult to standardize and understand. The truth is that today’s transportation liability contracts are negotiated on an individual case, and between shippers and carriers. The problem with this concept is that it opens the door to a ton of myths and speculation about transportation liability, how it’s processed, who is responsible, and several other aspects.

Noted below we will bust three of the most common myths about transportation liability, so you can determine what type of liability insurance program is best suited for your company.

Myth #1 – Carrier and Broker Contracts are Standard

As we stated in the opening, today’s transportation liability programs are almost exclusively negotiated on an individual case basis – between the carrier and the shipper (or the broker who acts on their behalf). None of them are standardized any longer. There are several reasons for this such as the increasing legal standards for assuming liability, different contractual agreements, the unique language on bills of lading and other transportation documents, and so forth. The bottom line is that the assumption that all contacts are generic and follow some sort of standardization is, unfortunately, a false myth.

Myth #2 – As a shipper, I determine how my cargo is shipped and can avoid several damages

It’s also common for shippers to assume that they control the way their cargo is handled and shipped – which would reduce the potential for damage (in theory). While it is true that several shipping contracts can include details like the shipping methods and how it should be handled, the truth is that the more restrictive a shipper is on carrier methods – the more stringent the legal language – including clearly defining the liability for damage.

According to many industry experts, the more aggressive a shipper is about the methods and mode of transportation – the more stringent and complex the transportation liability contract will become. In many ways, as a shipper, you can control how easy and transparent the contract will be. Essentially, sometimes the desires of the shipper can be their own worst enemy.

Myth #3 – My Insurance Will Cover My Loss

Insurance best utilized is insurance never used for items they shouldn’t cover. The purpose of a transportation liability contract is so that those responsible for damaging your commodities cover the financial damages. Relying on your insurance company to cover claims not paid by the responsible party is not that simple. A shipper’s insurance company has a large area of coverage, from cargo, property, and injury liability. While cargo is often covered by many shipper individual policies, the transportation of cargo typically comes falls outside of normal insurance policies. If the cargo is not covered by your insurance carrier, you’ll need a strong and easy to understand transportation liability contract with the carrier to protect your assets.

It’s Not Just Confusing for Shippers

Believe it or not, even some carriers are not 100% clear as to how transportation liability works – how they can be protected, or what they can do to reduce risk. There are other common liability issues that a carrier should understand, that might help them anytime they take on a load.

• FMCSA carrier safety records don’t protect a carrier from liability. While maintaining a positive safety record is vital to protecting you from a potential lawsuit, it doesn’t cover the carrier when damage occurs.
• Contracts with brokers, carriers, and shippers are not standard – so they need to be carefully reviewed (especially the fine print).
• Having insurance doesn’t always cover the carrier – and neither will broker coverage.

A transportation liability agreement is a legal contract. And as the legal world becomes more complex and everybody is looking to cover themselves, it’s vital for shippers and carriers to clarify the language and terms in each transportation liability agreement written and agreed upon.