What Contingent Cargo Insurance Actually Covers | Episode 342

Most freight insurance problems start long before a claim ever happens. In this episode, we break down contingent cargo insurance, coverage gaps, excluded commodities, theft claims, and why many brokers and carriers misunderstand what’s actually protected when freight moves. We also cover practical risk management strategies for verifying coverage, handling high-value freight, and avoiding costly surprises when a shipment goes sideways.

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Transcript

Cold Open And Big Promise

SPEAKER_01 0:19

Insurance, we're breaking it all down on today's episode. Ben, we just wrapped up a good one here. We hit on contingent cargo. What is it cover? What is it not cover? How to properly uh ensure that any commonly excluded commodities or high value is truly covered. Um, we talked through how to uh get theft protection or coverage for a customer on some of their loads. And then also kind of it was towards the end, but it was really good. So make sure you follow all the way to the end. But um just meeting your customers' requirements, even of you know, producing a certificate of insurance, even if the coverage isn't actually there. What are your thoughts on the episode we just wrapped there?

Community Updates And Sponsor Offer

SPEAKER_00 1:00

It was the tagline I was gonna add, which is if you think it's covered, it's probably not. If your customer thinks this insurance covers it, it probably doesn't. Right. So if you want to understand why that's the case, that is this entire episode. All of the things we found that we've thought were insured, covered, or would be helpful and why they haven't been in as many instances as we could explain in this one.

Life Updates Sports And Weather

SPEAKER_01 1:23

Yep. All right, let's get into it. All right, welcome back for another good episode here. We're gonna get into some insurance stuff. Um, if you're brand new, make sure to check out all of our other content at the website freight360.net, as well as the YouTube channel. You guys have been doing a great job leaving a lot of comments. We do respond to a lot of those on our final mile segment that comes out every single Tuesday. Um, so make sure to engage with us that way or just send us a message through our website. Uh, refer us to your friends, share us with, you know, if you got a coworker that's new. And I know a lot of you have uh have, you know, been telling people, hey, listen to the podcast, check out their YouTube channel. It's great ancillary training in conjunction with however your brokerage trains. We appreciate it. It's a growing community here. The Facebook group is is well over a hundred thousand at this point. So um keep it uh keep it coming, guys. And this episode is brought to you by Ascend TMS. So if you're looking for a TMS, Ascend gives you the option to get 90 days absolutely free of their pro version, no credit card required. You do need to have a referral code. We have one, it's in the description or show notes, so give that a uh give that a try. It's definitely a a really good option for the small to medium-sized broker. You get all the bells and whistles without the cost. So, Ben, what's going on in uh South Florida? We're approaching the uh, which I guess what you guys call the in the golf world, it's your off-season, which is ironically, it's our it's our in-season up here, but warm enough?

SPEAKER_00 3:02

Definitely, we're definitely moving out of season, and it's definitely noticeably getting warmer. We Ava had, it was awesome. It was like her second tennis tournament on Saturday, but it was also at like 11 until one, give or take. So, like right in the middle of the day, which you know, for kids like five, six, seven, and eight, I'm like, and mine, I'm like, well, why would you just like nine in the morning? I'm like, because like the sun is directly overhead and it's about 96 degrees. And I'm like, these poor kids are basically just out in blazing hot sun. But she did good. It was a great time, had a lot of fun. But to your point, like noticeably different than like the weekend or two weekends before. Like, you're starting to just notice the heat is like it's just less clouds, and it's just like hotter longer. Like you just notice when you walk outside. I'm like, I don't gotta look at the thermostat. I'm like, it's turning the corner into summer.

SPEAKER_01 3:51

Yeah, for sure. Um, sports NHL continues to barrel through the playoffs here. Um, this will drop Friday, so I don't know how Thursday's game will go, but as of middle of the week, the Sabres are tied two to two against Montreal. Um you had Carolina swept their series over Philly. Um Vegas is winning their series, Colorado's winning their series. We're uh we're getting into it. And then the NFL uh NFL's schedule drops Thursday at 8 p.m. So if you're listening to this on Friday, you'll know who and when your team is playing all 17 games. I did see um there's a game in France this year. I think one in Germany. I heard about that. They're starting to like leak them. I didn't know if I don't know why I feel like the Steelers had a game, one of those games.

SPEAKER_00 4:47

Um I think they do because it was funny because like well, I listened to Still Pittsburgh Radio in the morning, and I know they mentioned they were talking about NFL friends in France, and I think the Steelers had the uh game in Ireland last year, and it wasn't Steelers' New Orleans Saints in Paris, October 25th. That makes sense.

SPEAKER_01 5:08

That's a fresh I don't think we've had an NFL game in Paris. Yeah. So interesting. Elsewhere in uh sports, did you see the like the full body cam footage or the whatever whatever footage of Tiger Woods, his uh arrest from was it last month? His uh or was it two months ago when he flipped his car? They showed the whole thing and they're trying to get like the toxicology report released and all that. But put him on your prayer list. We want to see Tiger in a good spot.

SPEAKER_00 5:42

Yeah.

SPEAKER_01 5:43

So oh PGAs this weekend. Where's it playing this year?

SPEAKER_00 5:47

Up in PA. I can't remember.

SPEAKER_01 5:49

Okay.

SPEAKER_00 5:50

Nice. That's good.

DOT Blitz Week And ELD Focus

SPEAKER_01 5:51

One of the four majors, right? Yeah, so all right, good stuff. News. We are in DOT Blitz Week, and I will tell you, it is noticeable. Um, we record on Wednesday, so it really runs Tuesday, Wednesday, Thursday each week. Here's the here's the one thing that kind of bugs me. Is and this was talked about at the TIA policy forum with the FMCSA last year, is that every year DOT's like, we're gonna have this week, we're gonna focus on certain safety things, and we're also gonna advertise exactly when it is. So if you want to hide from us, you can just not work that week. It's like kind of.

SPEAKER_00 6:29

Didn't they put a statement that like the point the point wasn't to like catch people? It was like they like put a statement I remember like last year or the year before, saying it was directly related to that. Because people are like, like, what is the point? It's like putting up a DOI checkpoint and then putting it on the news and going, hey, don't drive down this road Friday night at seven o'clock. Like, okay. Like, what I don't know, like well, why would you do that?

SPEAKER_01 6:51

Yeah, yep. But this year their big um okay. If you remember last year, the takeaway was they were checking for uh CDL enforcement, and one in it's like one in four or one in five inspections resulted in a nonvalid driver commercial driver's license. Like that's insane. And that's when they know when it's gonna be. This year they're focusing on uh ELD um compliance. So that could be do you have a valid ELD? Is your E has your ELD been hacked or tweaked? Are your hours of service legitimate? And they can go back and pull records historically, I think like up to 30 days or something like that. That's like the big one this year.

SPEAKER_00 7:38

There is a justification that is deterrence through visibility. The idea is that if carriers and drivers know enforcement is coming, more of them will just fix the equipment, update their logs, avoid driving unsafely, and generally just operate more compliantly.

unknown 7:56

Okay.

SPEAKER_00 7:57

Is that from an article? I was I don't know, GPT just I was like, oh my god. FMCSA or DOT made any public statements regarding why they announced this. And that's what came back. Yeah. Okay.

SPEAKER_01 8:08

Yeah, it's funny.

SPEAKER_00 8:09

It's um It's definitely the lobbying of I my guess would be the large Yeah, that lobbied for less driver enforcement, more money for CDLs, no enforcement regarding any of the carrier stuff that contributed to all this has probably just been lobbying the DOT and FMCSA for decades and throwing money at it, going to be a good thing.

SPEAKER_01 8:30

Dude, it's it's crazy. It's the American Truckers Association. So and if you're a carrier or a broker, like we're not trying to get like one side versus the other on this, but here is the the reality is if you go back and you look at what some of these like if you go back and look at what ATA has pushed as a narrative or what they've lobbied for, they're the ones that have been crying there's a driver shortage, so much so that it's made national news for years.

SPEAKER_00 9:02

And then when you realize it changed policy, it changed like state policy, it changed regulatory policy. Yep, they've lobbied for the influx of drivers, which has driven the rates down, then complained about rates being down and saying there's a shortage, which are two contradicting things.

SPEAKER_01 9:21

Why would the American Truckers Association, who charges a membership fee, more than they lobby to driver shortage because they want more members, right?

SPEAKER_00 9:29

And it's just we've clearly seen it famous saying, look for the incentive, I'll tell you the behavior. If you get paid to have more people, I'll tell you what you're probably doing and why you're doing it.

SPEAKER_01 9:39

Exactly. So um, but the reality is we've we've seen the driver pool and capacity shrink over the last 12 months, which is not a bad thing. It's it's normalized it, is what it's come down to. But then you get these you get these uh very specific weeks or events that will really crunch capacity, um, things like DOT blitz week or things like a major storm, um, etc. So um that's the big thing this week, though. I'm seeing it. Um, I I saw a post, I think it was yesterday, and it was an it was a load that was offering like eight dollars a mile. And the one the guy that posted it was like, he's like, hell yeah, I'm working this week. Like I'm compliant, and here's what I'm gonna get paid for doing my regular job this week. So crazy. So we'll uh we'll come back hopefully next week with the results of the um inspections and how many violations and and whatnot. So good stuff. Anything else in the news?

SPEAKER_00 10:43

No, haven't been paying attention. I have no idea. I think Trump's in China, something, something other. I don't know.

Incentives Behind Enforcement Narratives

SPEAKER_01 10:48

Oh, the MODIS rollout is is coming. That's the new registration system. So there is gonna be a reset on DOT's registration site. They pushed it out. Um what's interesting is they basically told all these carriers that they need to do something in preparation for their like getting their registration updated. And the deadline, like they basically sent this notice out. It's kind of kind of reminds me of like what you were talking about off-air beforehand with your roof, but they they had this like notice sent out that was dated mid-April with like a mid-May uh deadline, and it was received by carriers like a couple days ago, which is in May. So they're basically like, oh, hey, you have a month to do this, but you're actually receiving it a week before it's due. So we'll see. We'll see how the news system um you know rolls out. I know we were on Danielle Smineps Danielle Spinelli's podcast. She's with Gen Logs. We were on hers last Friday, and there's a bunch of them that are at um meeting with FMCSA this week, and I'm really excited. We're gonna have her on the show next week to kind of talk through how those conversations went, but I still think it's a front door issue. Like you're gonna stop bad actors from coming in, but then how do you address the bad actors that are already inside of the uh the arena here? So we'll you know, we'll see how that all pans out. So all right. I wanted to talk insurance here because I feel like we've had a lot of conversations lately around various things, like misunderstandings from brokers, carriers, and even shippers, which is the craziest thing because they're the beneficiary of a lot of these policies about what insurance it like what it covers, what it excludes, what is required in order for it to kick in. Um, and there's just a lot of misunderstandings. So I wanted to kind of dig through a couple different scenarios here. Um, the first one I want to I want to go through is just your standard contingent cargo coverage. Because I see a lot of brokers posting on our Facebook group and on Reddit, and they're, you know, they're asking, like, you know, hey, what insurance should I get as a new broker? Um, the common ones are like a general liability policy and a contingent cargo policy, and it's usually driven from a shipper requirement. Like the customer says, Hey, in order to do business with us, you must have this coverage. All right. So contingent cargo, and I know we've kind of like flirted on this idea in the past. I met with an insurance agent a couple months ago talking about contingent cargo, and he just called it like fake insurance, right?

SPEAKER_00 13:38

He's like, Look the way you did the first time. Fake insurance.

MODIS Rollout And Vetting Bad Actors

Why Insurance Confusion Is Widespread

SPEAKER_01 13:41

Like you're gonna pay money for it. Um, but it really doesn't do much. So, like to give you context, the brokerage I work for, Pierce for Wide Logistics, has been in business for 45 years. We have had one contingent cargo policy claim that has paid out in 45 years and it covered$17,000. That's it. 45 years. All right. So a lot of times carriers or uh shippers are like, hey, you need you need to have contingent cargo because if the carry you carrier you select, if their insurance doesn't cover something, at least yours is a safety net. And it's like, that's not how it works. So to be clear, a contingent cargo policy will only kick in if the motor carrier that you select has the exact coverage that the claim is for. So let me explain that. All right. If you are um moving a load of let's say$200,000 of electronics, okay, it's high value and it's a commonly excluded commodity. If you're if you're moving a load of$200,000 of electronics and that load gets damaged or stolen in transit, all right. Some customers are like, oh, you know, we understand that most carriers only have 100K and they exclude electronics. That's why we want you to have 250K of contingent cargo. Well, our policy is never going to kick in for that because the contingent policy will only ever match what a motor carrier has. Um, so if the carrier doesn't have 200,000 and if the carrier excludes electronics, our contingent cargo policy as a brokerage is not going to do anything in that scenario. It's only meant to match what the carrier already has in place. So then you might ask, well, if the carrier already has the coverage, what's the point of contingent? And the reality is it's it's really the the one like rare scenario where where you might see a kick in is if a motor carrier's policy is uh denies coverage for something like a um the the coverage lapses while the load's in transit and it's unbeknownst to anybody, meaning we didn't know it was going to expire. Um, it just for some reason got repealed while it was in transit and they had the coverage originally and now it's not there. Now that's where ours might kick in. It's so so rare. Um, another really weird scenario that I did some research on this where a contingent policy would kick in is if the carrier's insurance company uh fails to respond when a claim is filed. Um, and that could be that the company folded, it could be they just didn't respond for whatever reason, um which is again extremely, extremely rare. So that's why I think it's valid for someone to say it's fake insurance, right? Because it really doesn't cover much of anything. It's it's more of like a feel-good. And I literally use that terminology to one of our brokers uh last week. He's like, Well, why does the customer want? And I'm like, Well, they just think because you know, someone, you know, some attorney probably said, you know, make sure the broker has insurance too. And it makes management or someone high up in the on the um food chain there just feel good, like they've got extra protection when the reality is it's not going to cover what they think it does.

SPEAKER_00 18:23

Yeah. The yeah, the other thing that I've seen it actually cover is when like the carrier's insurance denies a claim, but like there's a difference of opinion, like shippers still arguing, saying, like, well, no, like you should pay this, right? And then the broker's in the middle because the shipper's going, like, no, like, I'm just not paying you the other hundred grand I owe you until you get the claim paid. Carrier's insurance goes, denied. What I've seen contingent do is basically jump into the middle and then throw in like the law firm that is on retainer, that then your contingent covers the legal fees to argue that you're not.

SPEAKER_01 19:00

Submarine back on their policy.

Contingent Cargo Insurance Broken Down

SPEAKER_00 19:02

Yeah. So I'm like, that's why I've always kind of laughed as I'm like, in practice, the shipper requires a broker to have it. The broker makes sure the carrier has it, the carriers gets denied some most of the time because like the carrier didn't do something they were supposed to, on what I've seen, like a lot of cases. Like, oh, you had an oil light go off a day ago and you didn't make it to a registered approved mechanic to have that turned off. And the driver's like, Yeah, but like the oil light has nothing to do with my refer. And they're like, sorry, one of the long paragraphs in your policy says, if anything needs serviced at all in your vehicle, this is invalid insurance until you go to one of five mechanics in the United States and they're nowhere near them, and then they have no insurance, nobody knows. Which is why large brokerages always like ask this question. So they have like a recorded line for the carrier, hey, is there anything wrong with your vehicle? Anything that needs serviced? So at least you have verified that their person is telling you this, but that still doesn't hold up anyway. So then what happens is the carrier's insurance denies it, shipper holds you responsible, then contingent jumps in and goes, Okay, we're looping in our legal team, and then your insurance just pays the legal fees to argue that it's not your fault, which ironically is not in the best interest of your customer because they basically required you to have insurance to fight them and say it's not your fault. Yeah. Because like you almost never get the money back from the carrier, like it always just goes back to the customer, and then you end up usually just not doing business with them or paying them out in cash. It's like what happens in practice.

SPEAKER_01 20:36

Yeah. And that's one of the things, too, like when we talk about what contingent covers and doesn't cover and what a motor carrier's primary cargo policy covers and doesn't cover. There's you know, we do it's our we do our due diligence to grab a certificate of insurance, make sure it's verified, and we see the limits on it and the dates that make sure that it's valid, but it doesn't list exclusively on a policy, always at least, doesn't always list um exclusions or non-exclusions. And what I mean by that is um certain commodities, and this is like a best practice that certain brokerages will do, but if you know that like eggs, for example, eggs are a commodity that are oftentimes not covered by certain insurance policies, like common exclusions would be like eggs, uh frozen seafood, high value stuff, such as firearms, um, electronics, alcohol, things of that nature. And you'll, you know, you kind of get to know this the longer you've been doing um business as in brokerage. But what a lot of brokers will do as a best practice is say, hey, because my customer requires that we have X amount of coverage for this commodity, we are going to ask the carrier to have their insurance agent produce a certificate of insurance that exclusively states in the remarks section that eggs are not an excluded commodity, right? If we're hauling eggs. Um, or frozen seafood is not an excluded commodity, or you know, fill in a blank on whatever that specific commodity is. That way you know, because if you ask them, like, hey, this is a load of eggs, is your insurance cover? And they're like, Yeah, it covers it. Well, we're just taking their word for it. Like, we don't know. We just have a COI that states they have X amount of coverage, and here's the dates of it. That COI is usually one or two pages, whereas the actual insurance coverage, like the contract, is like 60 pages long, most likely, depending on what their policy is and how um you know how detailed and thorough it is. But the same thing goes for like reefer breakdown, right? Um there's like the the different policies that will have like yours, the the example you gave, where like they might say, um, you know, this coverage is valid, but in the fine print in the contract, well, the carrier is required to properly maintain their vehicle X, Y, and Z. And if they get a check engine light, they need to go to wherever. We don't know that as a broker when we're pulling their insurance from highway or from RMI. Or whatever source you're using.

SPEAKER_00 23:22

They don't have the whole policy. Exactly. And it's like it always just reminds me of like the insurance company's business model, which is delay, deny, defend, right? Like delay, slow down the claims process, deny, reject claims or portions of claims. Defend, aggressively litigate or force the claimant to fight for payment by making them spend more money than the payment was actually worth in the first place. Like all of those things, that's the business they're in, right? So they intentionally don't make it easy for you to see those things. And they make it obscure for the client, like the trucking company, the truck driver, the dispatcher. Like they bury that stuff in the fine print. So like you don't actually know on the face of it like what you're getting for or paid for. The other one, and I'd love to get that attorney on. Remember, we found this on like reefer breakdown, which is like super common to like make sure you have. There is this great article I sent you that basically broke down when you get reefer breakdown. A lot of times it comes with like 10 to 20 more exclusions to your regular policy when you add that. So you actually end up with less coverage in some cases. And this is why you really need somebody that is in that industry to be able to talk you through this. Or I mean, I'd probably use like an LLM more to just go, hey, find the exclusions in this giant document and summarize them so then I can ask better questions to my insurance agent. Hey, like you told me I'm good, but look, apparently, like there's 30 things if I hauled aren't covered. And these are all the things that need to happen for me to have coverage. Is what am I really paying for? And it's it's it's funny but not funny. Like I've had a client for like almost a decade that is an insurance agency. They do mostly like residential stuff like homes, but they do commercial stuff like buildings and things. And like clients constantly go back and forth to their insurance agent and just go, I need a cheaper policy. But the things we always teach their employees is like, you gotta like, well, what are you getting for what you pay for? Yeah, you might have saved$200, but did you just lose half the insurance that you thought you had? Because nobody told you that. They just go, hey, I got you a cheaper rate, but like, what am I getting for that rate? Oh, and nobody just seems to talk about that until something bad happens. Then you find out you saved$200 and now you're out$25,000 because the insurance doesn't cover the thing you thought it covered. Like to me, like it's a very slimy industry that, like, across the board, I feel like is incredibly unethical. It's like required by the government, required by customers, and rarely does what you actually think it does. So yeah, I don't have a whole lot of agreed.

Exclusions High Value And COI Remarks

SPEAKER_01 26:56

Um, another thing, too, that I'll add in is when you're dealing with insurance, because to your point, it is in the insurance provider or the agent or the underwriter, it's in their best interest to what you say, delay, deny.

SPEAKER_00 27:12

Delay, deny, defend.

SPEAKER_01 27:13

Yeah. So if you are trying to verify that a policy does not exclude something, or more so that it does cover something, don't just take the carrier's word for it. You want to verify from a source with the insurance company or the insurance agent that is speaking on behalf of that insurance provider. So if you want to get an insurance, like if you're a new broker and you're trying to figure out your carrier vetting process, and part of that is verify the carrier has insurance. Don't just have the carrier or dispatcher send you a policy or certificate of insurance. You need to pull it from a from the insurance company or um, like, you know, highway, for example, becomes a um certificate holder, like a like assure assist is another one, RMIS. Um, you need to get it from a third party that is not the carrier, but is an authorized person to provide you with that cert. So, further, if you are trying to verify that eggs, for example, is not excluded from a policy, get that in writing. It could be in an email from an insurance agent. Like just say, and if the here's how it sounds with the carrier: like, hey, this is a load of eggs, it's not worth more than 100K, so your limits are good, but we just need to verify that the policy doesn't exclude it. It's not explicitly listed on the certificate. So can you have your insurance agent email me a copy of the certificate with you on copy and just have them verify in the email that it's gonna cover uh it covers eggs in the event of a claim? And that is sufficient, right? You don't have to necessarily have the certificate altered to have it written that way. You can do that though. Like having you know it's the in the insurance companies out there, it's very common for them to get requests to hey, can you list selling it?

SPEAKER_00 29:00

That's the service you're paying for, by the way. Yeah, like that that's part of what you're paying for. So do not feel like you're like asking for somebody to go out of their way or inconvenience them. Like that is the service they provide. You know what you know the I told this story before, but like this is the one I always remember because it was the first time I kind of really learned this. I was probably like 16 or 17, and I was parked at a gas station. I remember I like ran in to grab iced tea or something, and somebody just like backed into my car. So I'm like, I'm not in the vehicle. It was parked where it was supposed to be, and I get their insurance info, and I vividly remembered because the insurance agent for the claim called me like before my parents were home from work, because I'm in like high school, right? So it's like three in the afternoon, and I answer the phone because this is back when you had house phones, not cell phones. Yep. So like answer the phone. I'm like, oh yeah, that was me. I was driving the car. This is my driver's license. And they said, Well, hey, we looked at the photos, and it looks like your car was like a little bit parked on the line, you know, like the parking line. But I that gas station only has two parking spaces. I can still remember it that weren't there. And I'm like, so there's not a space next to it. It wasn't like I was double parked, it was just like by the door. And I was like, Okay. And they're like, We think that you should um assume. Now remind you, I'm like 16 or 17, and this is an insurance company negotiating with me under 18, going, we think you should um accept like 40% of the liability and responsibility. So how you were parked. Do you agree? And I went, agree to what? Again, I'm a kid, and I'm like, agree to what? They're like, well, it looks like like you could have been parked a little straighter. I was like, I wasn't in the car. And they're like, Yeah, but like you weren't parked perfectly. I was like, okay, but I wasn't in the car and it wasn't moving. I was like, your claimant or you know, the person that hit me.

SPEAKER_01 30:44

Your insured customer, yeah.

SPEAKER_00 30:46

Whoever however I said it, I'm like, backed into a car that was parked. How could I possibly be responsible for somebody hitting an inanimate object? I'm like, what if it would have been the building? What if it would have been anything? I'm like, how is that anybody's fault when somebody runs into something not moving? And then he went, Well, what do you think about 25%? I was like, what do you think about no percent? I'm like, I wasn't in the vehicle. Why would I in any way tell you that like this is my fault? Because also you're like a kid and you're like, I'm not getting in trouble for something I didn't do. So it was just like, and I remember at the end of the comment, I was like, okay, well, we're gonna process this as like a hundred percent. Thanks for your time. And I remember being like so confused. I'm like, why did they call me? Why are they asking me this? And why would anyone agree to this? And like later it hit me, I'm like, oh, like that's what they do. I'm like, this is how insurance works. I'm like, that's pretty crazy.

Fine Print Games And Reefer Add Ons

How To Verify Coverage In Writing

SPEAKER_01 31:37

I had one when I was 18. I was in uh I was in a car accident where somebody ran a red light and I T-boned them. It was not my fault. Um, but the insurance companies, when they went back and forth, I was deemed 2% responsible. And it was based off of like for lack of better terms, they explained it to me like because you were there and because you are you. Um, but they were they basically looked at like my age and everything, and they're like, Well, you know, there's had he been a little older and a more experienced driver, there might have been better defensive drive. Like, I was like, okay, whatever. Like, it's insane. But so back to freight though, here is something with a contingent cargo policy. Because I went through this um recently, and we had a a load that was stolen, and we had um insurance on it. Like we had an all-risk policy that actually does cover theft. Um, but it comes with a deductible, and the um the deductible is$25,000. And the broker um, you know, is you know, he's like, Man, this snake's like, I'm gonna have to eat$25,000 to make my customer whole. And he's trying to find like, he's like, Well, doesn't our contingent cargo like he like basically the customer's like, hey, get us all the information on what your policy is. And we want to see what your contingent cargo covers for a future reference. So, like, we you know, we pull the documents, 60 pages of whatever, and then they like there's verbiage in there that says like our contingent cargo policy covers theft. And they're like, Oh, cool. Like, so this this will actually we can we can use this policy because it can help us offset the deductible. And I'm like, well, no, because remember, it will cover theft if the carrier's policy also covers theft. You have to remember the contingent policy will it'll say it covers a lot of stuff, but it's only if the carriers also match it'll only cover up to what the carrier's policy matches. And then he's like, Well, what does a carrier's policy cover theft? And I'm like, Well, hold on. And then there's this verbiage, I'm gonna try to read it specifically. It says, um the verb, the verbiage states that um the broker must use their best endeavors to obtain proof of carrier's uh cargo liability coverage. So basically saying that they can find almost any loophole and say, Well, you guys never actually went and vetted the carrier's insurance because you were purchasing a third-party all-risk policy. So you didn't do your best endeavors. So this will not kick in anyway. So, and they'll always have it's a very like subjective phrase, your best endeavors, like basically saying you have to do everything you possibly can to make sure that X, Y, and Z is true. And you didn't do that, and here's here's where because you you went and purchased a third-party one, and we're gonna argue that you did that because you knew the carrier's policy didn't cover it, or you didn't even bother to check if the carrier's insurance covered it. You don't have any correspondence with their agent or the underwriters, etc. So um just yeah, keep that in mind. Understand when you're getting contingent cargo, it's kind of like a necessary evil to do business with certain customers. But this is why I always encourage people to have a conversation if you can with your customer about not necessarily what your coverage covers, but what are they trying to accomplish? What is it that you know they're asking for this coverage and things to be listed this way or worded this way on a COI, but why? What is the like what is the um use case? Like I had a customer last week that I met with who she was asking to have it was their loadout trailer. So basically, like she had they her company owns 53-foot dry-hands, and they do loadouts. So basically, they have a trailer that gets moved from one city to another, and they will allow the driver, whoever gets whoever picks it up, power only, can use that trailer for like 14 days, I think it is. It just has to get delivered within 14 days. They can do whatever they want with it in the meantime. But they want the policy. So let's let's pause right there, right? Normally, when you do a loadout, you would have trailer interchange insurance and trailer interchange agreement, right? Which states, and that would be the same if like your of a tr if a truck breaks down and a different carrier is gonna load, is gonna hook to that trailer and get it delivered. Well, you want to make sure that my whoever's hauling my trailer, I want their insurance to cover any damages to my trailer, right? If it gets in an accident or whatever, um and it's usually like 40 grand or 50 grand, something like that. All right. So what she's asking, she doesn't want that. She says, Well, I want the carrier's auto liability policy to list my company who owns the trailer as a lost payee. And I'm like, what? Is a lost payee on a liability policy? So then I have this meeting, I'm like, all right, let's have a meeting and talk through the use case here. And she's like, Well, if there's an accident and the you know, so if someone's hauling my trailer and they get in an accident and there's a fatality, I don't want my company dragged into it. And I'm like, well, if I rent a U-Haul and I get in an accident and kill somebody, like, is U-Haul getting sued for that or am I getting sued for that? And she's like, I understand. She's like, this is just what our, you know, our lawyers are telling us to do. And I was like, I was like, I don't think what you're trying to accomplish you're doing it the right way. I'm like, you're not even protecting your trailer with trailer interchange insurance or a trailer interchange agreement. I'm like, you're you're putting yourself more at risk. And so we talked through and I was like, all right, whatever. I said, she's like, well, she's like, carriers have been doing this for us for for years. And I'm like, I'm not saying we can't do it. I'm just saying you're asking a lot because now she's got like 300 trailers to get moved this year. And I'm like, if you know, if you're gonna ask a broker to do that and they're going, you know, let's say we use a hundred different carriers to get this done throughout the year, I'm like, that is gonna take on average, like, what do you think if you have to get a special insurance certificate request from a carrier, um, uh two hours, right? You're gonna probably expect to add. And that carrier is probably just gonna be like, I'm just gonna take another load because this is too much, too much of a heavy list.

SPEAKER_00 38:27

You're gonna pay more money because you have to use the same carriers to not keep going through this, like it significantly increases the cost of friction. And remind me to circle back on this because there's two other things to what you're saying I want to get to after you get through this one.

SPEAKER_01 38:39

Yeah, the only other thing on that note is that like the other thing you have to remember is insurance companies, they work like bank hours, right? So if you have a request and it's at 8 p.m. at night or it's on a Saturday, like you're not gonna get a response until they open back up on a regular business day. So if you're booking trucks, like the the trucking world doesn't stop on Friday at 5 p.m. Eastern. It doesn't. Like if you're booking a load on a Saturday or on a Sunday and it has a special insurance requirement and you need to get an insurance document specialized, good luck. It's just not gonna be realistic. So that's why like what they're what a customer's asking for and what they're actually trying to solve for aren't always in alignment. So, but go ahead. What were the things you had?

Theft Claims Deductibles And Best Endeavours

SPEAKER_00 39:21

The first was I was this was one of that bad accident I was in like 10 years ago. I was on my bike and I got run over by a car. Now, the interesting thing about that was the person driving that car was in a rental car with the rental car's insurance. So I had hundreds of thousands of dollars in medical bills. And my attorney that was assisting with this because the medical bills were like obscene, right? Um, basically, when we were kind of working through it, was like, well, you know, the they only had what's called PIP in Florida personal injury protection, which is the required insurance, which is 10 grand. Like, so they only have 10 grand in insurance? Like, how does that help? And like an ambulance these days is probably close to that, like, let alone whatever it costs once you like that literally covers nothing, right? They're like, okay, well, then we're gonna sue the person. So it's exactly like your example. So the attorney then looped in the person driving the car to go after the insurance they had on their regular cars, because usually there's riders on your normal insurance that cover a rental car sometimes, and then them as a person, like how many how much assets they have. So, like them choosing that insurance, they didn't realize how much risk they had in driving that rental car. And on top of it, it wasn't the person that rented the car. It was like their kid, I think. Um, and I can't even remember because I was like literally in the accident. But like, if I remember in the lawsuit, like it'd be like you renting the car and then like your son or daughter driving it and not having the insurance and you being liable for anything that could possibly happen with it. And people just like don't necessarily understand that. And like, it was like two years of litigation to go through this. And I still ended up with a ton of the bill because that didn't cover it. And like when you really think about these things, like they're much different than I think most people think until something bad happens. Because the other one, and this happened like three weeks ago, another client of ours had a lease program with a large trucking company. I can't remember which one it was, but part of the lease program for the tractor trailer, the tractor and the trailer, right, are covered in the lease by the bigger company because they have better rates. So they actually do have a second policy. Because I remember when the accident happened, I was like, well, hey, send me your cord form. And I looked at it and I'm like, all right, well, like you have auto and this. And they're like, no, they're telling us it's not our auto policy. I'm like, oh, I'm like, that's interesting. Tell me more. And then they sent over the lease agreement that then stated it was on their insurance. But then then you get to one more layer, and it's like, yeah, it was covered by their lease company, but there was a limit of like 15 grand. And just the tow bill and cleanup was over 15 grand. Now it's going to the second insurance. And again, I'm not saying like you need to understand all of these things, but I think where this conversation should be helpful, even for people starting out, is like, you probably want to ask a few more questions than you have been. Because like the only reason Nate and I know this is because so many things have gone wrong with either clients or people we've had to work with or our own freight that, like, once you're in it, you're like, oh my, like, this isn't in any way what we thought this was or how this should go. And after working through like dozens and dozens of these, you're like, yeah, like none of this is what it seems like on the face of it when you're just talking to an insurance rep going, give me the cheapest rate. Because, like, if you do enough business as a trucking company and even have like a handful of trucks, over the course of a few years, like something's gonna happen. It doesn't mean it's your driver's fault. Like somebody could hit your driver, like they might not be at fault at all. But all of these things will start coming into play, whether you're gonna defend your driver because it wasn't their fault. Now your insurance is being involved. They're gonna go, well, do you have coverage for defense? All of those little line items that you're like, I don't really need that. I want to save some money today. You really want to keep looking at as your company grows because like that risk is changing and you're probably not reviewing how you're being protected, which is why, like, this for sure is something you want to be having, uh, in my opinion, like at least like a half an afternoon discussion once a year with your insurance rep, asking lots of questions and anything you could think of. And this is a good use for like an LLM. Like, hey, give me a list of questions I should ask my insurance agent once a year or once a quarter on things that I'm doing that I should be covered for. And then just go, these are the commodities we haul. This is the number of drivers, these are the states we operate in. Give me a list of just questions to ask the person that is selling me this product and have them explain it to you. And like, I love your analogy. Like, you're always like, explain it Barney style, or mine is always like explain it to me like a third grader, right? Like, don't overcomplicate it. Tell me what this does and doesn't help me with and what situations and what situations it doesn't, so that like you understand what you're getting for what you pay for.

SPEAKER_01 43:58

Yeah, I mean, that like the last thing I'll say on it is like I had the conversation with the broker who had the stolen load, and he he was purchasing insurance only on loads that were high value. So his his original reason for getting the all-risk policy was that he has a commodity that's commonly excluded and is high value. So we found a we found a great insurance provider, and the I guess the kind of a bonus was it included theft. So this one happened to be theft, and he's like, and then he's like kind of like coming to his senses afterward, he's like, Well, all of my other loads that are not high value or didn't have an exclusion for this commodity, like those weren't covered for theft. And I'm like, not by not by the insurance that we bought. I mean, maybe the carrier's insurance might cover theft. I'm like, but he's like, well, the customer thinks that like if the load is stolen, then it's gonna be covered.

SPEAKER_00 44:55

And I'm like, Why's the customer think that? Who told them?

Customer COI Demands And Trailer Risk

SPEAKER_01 44:58

Like, I don't know. It just it depends on which carrier you're selecting. And he's like, he's like, well, what is everyone else in the company doing? And I was like, you're the only one that has this insurance for your customer that covers theft because they're the you know, they're requesting it. And he's like, Well, should I be using it on all my other loads for them? And I'm like, if they want it covered for theft, then then yeah. So this is when when you start to deal with specialized freight, so think again, your excluded commodities, specialized uh loads, high value, high risk areas, right? You need to have very detailed conversations with the customer about what they want to be covered for. Because ultimately, at the end of a day, at the end of the day, if a claim happens and the insurance for the carrier denies it, or even if you purchase insurance and it gets denied, or maybe it's uh covered, but there's a big deductible, um, you're not legally responsible to pay out anything as a intermediary to your customer. A lot of c a lot of brokers will to make their customer whole to maintain that relationship, but I've seen uh claims get denied and you just lose a customer over it. And then maybe that customer has a bunch of unpaid invoices that they're just not gonna pay you. Like, and then you know, there's just a lot of messy situation that could happen. So, what's the one uh the one little The one liner you have, it's like an ounce of prevention is worth a pound of cure. A pound of cure, yeah. So unfortunately, like a lot of smaller shipping customers, they haven't had a load stolen yet or haven't been double brokered and come come after for second payment on a freight bill. So um, you know, they they haven't been burned yet, right? So if you try to have this conversation with them, it's not gonna sink in. Um, and that just it just is what it is. You can't get through to somebody a concept that they just can't visualize or really comprehend. Where I've seen great success though, it reminds me of that movie Borat, great success. Um, but where I've seen a lot of success with prospecting on this note is people that they really sell on hey, the processes that I personally go through and the tools and technology and vetting that I require all my carriers to be up to par on. Um, you know, because we're doing this properly, we're protecting you from a bad actor trying to steal your freight, from a um, you know, a uh motor carrier trying to fraudulently rebroker your load to somebody else, which could lead to theft or, you know, whatever. Um, and you know, they try to sell on that and it it resonates with certain customers that have gotten burned before. But then there's the customers that are like, yeah, we've never had a load stolen or been double brokered. And yeah, when you're a smaller shipper who doesn't have a very attractive commodity to steal, it's less likely that you've been burned at that point. But um, you can sell on this, right? Like we always say, like, we give our customers access to the market, right? Access to capacity. But the value adds that we can include with that are here's what we're doing personally, as far as offering you, hey, we can get this additional insurance for you. Or, hey, I want to make sure you understand what is covered from our standpoint and what you're asking for. And let's talk through that. Because if there's a different thing you're trying to solve for, we can find you an option for that. You can buy insurance for almost anything you can imagine, right? The commodity, the the value of the commodity, theft, etc. Um, what's the one? It's uh dishonest acts by third parties where you can actually have double brokerage covered. Um, the reality is though, like insurance comes with a cost. And at the end of the day, there's a risk reward that you know you have to be able to sleep at night with. And some brokerages, instead of like as you scale, this is easier, but they'll just say, like, we will self-insure on certain things. So, like, if we get a load stolen, or if we get double brokered and have to make a second payment, like as a company, we will cover that for our customer. We're not paying an insurance company to cover it, we will just self-insure and it'll be out of our pockets. So that's a decision you gotta make as a business when you're brand new. You probably don't have um the funds, you know, to be able to do that. But that's my take on it.

Real Claims Stories Hidden Limits

SPEAKER_00 49:32

Anything else on insurance? Ask a lot of questions. I mean, at the end of the day, like that's it's not gonna cover anything. You're gonna probably have to find some happy medium between where your coverage is and where your isn't. You're not gonna be able to get everything because this is probably the most misunderstood aspect in the entire supply chain. Like we were talking about small and medium shippers. We have clients that are absolutely Fortune 100 publicly traded companies that do not understand this. I had a call two months ago with a company that is a few billion dollars that ships super high value things. And I was on the call with their director of logistics, their head of risk, and I think someone else, can't remember who it was. And they absolutely said, No, like we're good with your contingent cargo. And I'm like, I mostly just want to see how they perceive it first before I say anything. And I'm like, okay. Then the client sent them the contingent cargo. Then this director of logistics emails the insurance agent back, and I'm in copy, and says, Can you just make this a primary policy? The insurance agent goes, Yeah, sure, it's primary. And I'm like, this person at this multi-billion dollar company thought by asking the insurance agent to make this a primary policy, it's all of a sudden not contingent cargo. I'm like, they don't even know that like a brokerage that does not own assets is not able to purchase a primary cargo policy. And this just miscommunication at this level that people think is like super sophisticated, and they don't like this is happening everywhere. Yeah, that is the message to get across. Like, I've had this conversation with the largest shippers as like an advisor to the shipper. I've had them as the brokerage owner, the broker for trucking companies. I'm like, this is the most commonly misunderstood aspect of the entire industry.

Listener Stories Request And Sign Off

SPEAKER_01 51:27

Yeah, I'll I'll give one last little example here and then we'll wrap. Um what a customer, because a lot of times customers will say, Here's an example of the COI. Here's how it needs to look, right? It's gonna state the coverage, the amounts, and it's gonna state um the it's gonna have the company, like the shipper's name and address listed as the additional insured, right? And you're like, okay, cool. And then like we had one where the customer said, All right, Mr. Broker, we need you to have I don't remember if it was primary cargo, like if it was a cargo policy that was not contingent, it was either a primary cargo or it was um a primary auto liability, so not contingent. And we're like, we're a broker, like we can't get that. And they're like, we require it. So we so my boss go, this is like years ago, he goes to the insurance agent and he's like, he's like, this customer just like they don't, I don't think they understand what they're asking for and that we can't do it. And the insurance agent goes, We can do it for you. Um if you take you know your personal pickup truck and you want to list it on this policy, I can get you primary insurance um and we can list it on the certificate for you. And he goes, It's not gonna cover anything for what they're trying to cover, but it'll meet their requirement to be listed on the certificate. So they did that for a little bit. And again, all it's doing is it's meeting their requirement to have the certificate listed a certain way, but it doesn't actually solve for what they're trying to accomplish in the event that something happened.

SPEAKER_00 53:03

And that's so cool. Because, like, yeah, like I've definitely worked with agents that have done that where they're like, oh yeah, like here was another one that then agent did this for. They were like, we need workmen's comp for your brokerage. And the brokerage was like all remote. All in the US, we're like, we don't have like a physical office. After COVID, they just stayed remote. And they're like, like, we're not going to be anywhere but in our houses. Like, what do you mean, workman's comp? That's to cover somebody if they slip and fall, like, on your property. Like, we don't have property. And they're like, no, like we require it for our property. And they're like, but like, we're not coming to your property. Another company will, and their truck and like they have it. Like, no, we require it. Same thing. I went to the um the insurance agent. I'm like, how do we like address this without just spending a ton of money on something that will never actually be applicable? They're like, oh, yeah. I forget the name of it. It was like a blank thing, but basically it was the same thing. They're like, we'll add it to your policy. Real coverage would be like 25 grand. We'll charge you a thousand. And basically the the wording in the binding document for the insurance basically just excludes everything. So they're like, it'll meet the certificate.

SPEAKER_01 54:10

You could it'll be on there, but it doesn't do anything.

SPEAKER_00 54:12

It will literally cover nothing, but we'll charge you a thousand dollars just to add it so that your cert meets it because we have to write all the legal language that basically just tells them that it covers nothing. So we paid$1,000 to have the cert meet the requirement, and the insurance company just basically put a whole page of why this will cover nothing in any example for any reason ever. Like, okay. Like, boy, is this insane. Yeah. It's just like that's not the way this works. That's not the way any of this works, guys. Like, you're just requiring things for no reason. And whatever.

SPEAKER_01 54:44

So, yeah, good discussion. Um, let us know your comments or if you have any little nuances or stories or crazy situations that you've gotten in with insurance. Um, let us know and we'd love to talk about them. Final thoughts, Ben.

SPEAKER_00 54:58

Whether you believe you can or believe you can't, you're right.

SPEAKER_01 55:02

And until next time, go Bills and go Sabres, I guess.