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Shipping Insurance

Shipping Freight- Do you have enough insurance?

What type of insurance is required for a carrier, freight broker, and a freight carrier?

The Federal Motor Carrier Safety Administration (FMSCA) requires all carriers, freight brokers and freight forwards to carry insurance. The type of insurance required varies depending upon which of three types of companies requires it. The type of insurance that needs to be filed with FMCSA is as follows for each of the authorities:

BMC-91 or Public liability insurance (bodily injury/ Motor Common Carrier)
BMC-91X (property damage/environmental restoration)-- Motor Contract Carrier
• Freight Forwarder (Note: Non-vehicle operating freight forwarders may seek waiver of this requirement.)
• Freight:--$750,000 - $5,000,000, depending on commodities transported; $300,000 for non-hazardous freight moved only in vehicles weighing under 10,001 lbs.
• Passengers:--$5,000,000; $1,500,000 for registrants operating only vehicles with seating capacity of 15 or fewer passengers.
BMC-34 Cargo insurance--$5,000 per vehicle; Motor Common Carrier
• $10,000 per occurrence Freight Forwarder
BMC-84 or Surety Bond--$10,000 Broker of Freight
BMC-85 Trust Fund Agreement--$10,000
• BOC-3 Legal Process Agents--see reverse side All Authorities

In order to properly identify the difference between a carrier, freight broker, and a freight forwarder, FMSCA has provided definitions of each. The following list has been obtained from FMSCA. These cover both domestic and international terms.

Motor Carrier: A company that provides truck transportation. There are two types of motor carriers, private carriers and for-hire carriers. To operate as an interstate motor carrier, either as a private or as a for-hire carrier, a company must register with FMCSA by filing a Form MCS-150.

Private Carrier: A company that provides truck transportation of its own cargo, usually as a part of a business that produces, uses, sells and/or buys the cargo being hauled.

For-Hire Carrier: A company that provides truck transportation of cargo belonging to others and is paid for doing so. To operate as an interstate for-hire carrier, a company must also register with FMCSA by filing a Form OP-1. There are two types of for-hire carriers, common carriers and contract carriers. A for-hire carrier may be both a common and a contract carrier, but must file separate registrations to obtain both licenses.

Common Carrier: Before January 1, 1996, this was a company that provided for-hire truck transportation to the general public. The services offered and the prices charged were published in a public tariff and these were the only prices the common carrier could charge.

Contract Carrier: Before January 1, 1996, this was a company that provided for-hire truck transportation to specific, individual shippers based upon private contracts between the carrier and each shipper, stipulating the services offered and the prices charged to each.

Selecting "Common" or "Contract": The OP-1 form requires an applicant to designate whether it is registering as a "common carrier" or a "contract carrier." The historical difference between these two types is reflected in the definitions immediately above. The ICC Termination Act of 1995 defines contract carriage as truck transportation provided under a contract, but, effective January 1, 1996, it no longer distinguishes between common or contract carriers. However, the Act specifically authorizes FMCSA to continue registering applicants as either common or contract carriers. The current principal distinction between the two types is that common carrier applicants must file proof of cargo insurance while contract carrier applicants are not required to do so.

Freight Forwarder: A company that arranges for the truck transportation of cargo belonging to others, utilizing for-hire carriers to provide the actual truck transportation. The Forwarder does assume responsibility for the cargo from origin to destination and usually does take possession of the cargo at some point during the transportation. Forwarders typically assemble and consolidate less-than-truckload (LTL) shipments into truckload shipments at origin and disassemble and deliver LTL shipments at destination. Forwarders must register with FMCSA by filing a Form OP-1 (FF).

Broker: Also a company that arranges for the truck transportation of cargo belonging to others, utilizing for-hire carriers to provide the actual truck transportation. However, the Broker does not assume responsibility for the cargo and usually does not take possession of the cargo. Brokers must register with FMCSA by filing a Form OP-1.

And last is the Shipper. The shipper is a person or company that has items it needs to ship or transport domestically or internationally.

OK, now that I understand how much insurance is required of a carrier, a freight broker, and a freight forwarder. Do I still have enough insurance to transport my cargo? No matter if you are moving, want to ship items you bid on from an auction, transporting, or shipping goods domestically or internationally you need to make sure you have enough insurance.

Carriers are allowed to limit their liability. Motor carriage was deregulated by two federal statutes, the Trucking Industry Regulatory Reform Act of 1994, and the Interstate Commerce Commission Termination Act of 1995 (ICCTA). Whether a shipper deals directly with a carrier or with a freight broker or a freight forwarder, the shipper should question the amount of cargo insurance coverage the carrier will be providing on the shipment. Shippers should not assume that full-coverage insurance will be provided by the carrier or the broker. Many carriers offer little cargo insurance and freight brokers usually just pass along the carrier’s cargo insurance coverage. In the event of a damage claim, shippers may find themselves without enough coverage and having to file a claim with the carrier directly without the assistance of the broker.

Federal law mandates that carriers file a BMC-32 which provides $5,000 per shipment and $10,000 per incident of insurance coverage to the shippers. Many more established and reputable carriers will offer more insurance for their shippers. This is usually around 25 cents per pound for LTL and 2.50 per pound for TL. Check with your freight broker to make sure you have enough cargo insurance to cover the transportation of your shipment.

The BMC-32 coverage is reported to the FMCSA. All for-hire motor carriers and freight forwarders must carry the BMC-32 and a carrier can have its operating authority revoked if it fails to maintain the coverage. You can see if your carrier, freight broker, or freight forwarder has this insurance at www.fmcsa.dot.gov. in the "Operating Authority (Licensing and Insurance)" section.

Keep in mind that cargo insurance only covers significant loss or damage to the cargo only. Carriers’ insurance does not cover “consequential” damages. An example of consequential damages would be damages that result in lost sales or downtime on a production line due to a lost shipment. Also, carrier insurance does not cover the cost of returning damaged cargo to the shipper. Again, cargo insurance is very low and very tightly defined. Shippers must take responsibility to make sure they have the appropriate insurance. Carriers and freight brokers will offer additional insurance. Rates vary widely depending on the items shipped


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