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Shippers Beware!

The Federal Motor Carrier Safety Administration (FMCSA) has issued a final rule that will eliminate Cargo Insurance requirements for freight forwarders and most motor carriers.  Only household goods carriers will be required by law to maintain Cargo Insurance.  All other motor carriers and freight forwarders will no longer be required to maintain Cargo Insurance as of March 11, 2011.

What is the logic of this?  The FMCSA originally proposed eliminating Cargo Insurance in a proposed rule dated May 2005 along with the then new unified registration system.  The FMCSA has noted that motor carriers typically carry Cargo Insurance in excess of the regulatory requirements ($50,000 Minimum).  Most Shippers require the carrier to have cargo insurance as a condition for doing business.  Shippers also have the option of buying their own cargo insurance policy.  As a result, the FMCSA felt that since Shippers and motor carriers negotiate their own contracts, the FMCSA did not need to regulate Cargo Insurance.

Big and Medium Shippers understand this and have mechanisms for verifying that the motor carriers that they use do have Cargo Insurance.  But smaller, infrequent Shippers typically assume that the government regulates motor carriers and that a motor carrier automatically carries all the liability insurance necessary to protect the public—including Cargo Insurance.  As of March 11, 2011, this will definitely not be the case.  Any Shipper who ignores verifying the kinds of insurance that it feels is necessary to protect them and their freight from liability issues with a motor carrier will do so at its peril.

One Solution to this problem for Shippers is to use a freight broker such as Freight Tec to move their freight.  Freight Tec qualifies every single carrier and verifies that each carrier has Active operating authority, Cargo Insurance, Automotive Liability Insurance, and appears to be reasonably safe according to the information available from the federal government.  This is a great service for Shippers who do not have the budget or do not want to do a carrier qualification process by themselves.  In addition, Freight Tec carries its own Professional Errors and Omissions Liability Insurance Policy (same as Doctors, CPA’s, and attorney’s carry) to protect its Shippers from loss in the event Freight Tec makes a mistake and fails to properly qualify the carrier.  Less than 100 freight brokers out of 15,000 nationwide carry this insurance. This provides added Peace of Mind to Freight Tec’s Shippers.

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