Hello, and welcome to today's webinar titled The Hitchhiker's Guide to Motor Truck Cargo 101. I'm Lillian Coulson, and I'm pleased to introduce today's webinar. Please be aware of the IMUA statement. It's my pleasure to welcome today's presenters. Lori Conley is an insurance professional who began her career on the brokerage side of the house before becoming a staff adjuster at Hanover, AIG, and Chubb for the majority of her career. As part of her customer-driven focus in 2016, Lori joined the claims management provider Crawford & Company. She is currently part of their global marine and transportation team focused on her area of expertise, ocean and inland marine claims. Lori is a horse lover who also enjoys skiing and gardening. Her favorite times are spent with family and friends on her small farm in South Brunswick, New Jersey. And to the left on your screen, Ryan Murphy is a graduate of Texas A&M at Galveston with a Bachelor of Science degree in Maritime Administration with a minor in Economics. During her time there, she was a varsity member and captain of her sailing team. Before graduating from college, she was a marine underwriting intern at AIG. From there, she was hired full-time to the AIG analyst program, learning how to underwrite inland marine, hull, P&I, and ocean cargo. She is now an inland marine and ocean cargo underwriter, leading the training and development of incoming marine underwriting analysts. In her spare time, Ryan enjoys sailing, the rum races, and Galveston Bay. Welcome Lori and Ryan. Great. Thanks, Lillian. Can everyone hear me, hopefully? Yep. We can hear you. Okay. Perfect. Awesome. Okay. Well, I guess we'll go ahead and begin. Welcome, everyone, to today's Hitchhiker's Guide to Motor Trip Cargo. For the agenda, we pretty much split this into three modules for you guys, which I'll begin with the first, which is how to underwrite motor truck cargo, and then I'll hand it off to Lori for the second module for claims. And then lastly, we would love to hear from you guys about any questions that you may have. So please go ahead and gather them while we present. And to kick it off for the first module, I'm going to go ahead and break this down into three sections for you guys. One is just a basic understanding of what motor truck cargo insurance is. The second is going to be how to evaluate an application for a potential motor truck cargo insured. And then third, we need to look at what coverage can your insurance carrier actually offer if you want to do a program. So to begin, we're going to go through all of these points here. And I do want to say I'm going to try and break each section into 10 minutes, so there's going to be a lot on the slides, so you guys can look back for reference. I'll just do a brief overview. All right. So what is motor truck cargo insurance? Now right here, we have the definition of motor truck cargo legal liability, which is the liability insurance for parties of interest who carry the cargo of others and is used in the event that the cargo is destroyed, damaged, stolen, or otherwise declared a loss while in the process of being shipped. Now it's important for you guys to know today for simplicity, we're going to go ahead and do motor truck cargo legal liability, so truckers who are hauling goods for other people. But there is also motor truck cargo coverage for those truckers who are transporting their own goods, as well as just a trip transit for a one-time hauling exposure. So to begin, we have to say, why is motor truck cargo even considered inland marine? And I think inland marine is almost the wild, wild west of marine insurance, because it seems really complex, and it's not, I promise. So essentially, right here, we have it broken down into three things. Inland marine insurance covers movable property, and also instrumentalities of transportation and communication, as well as legal liability exposures as they leave. So to put it simply, whenever I tell people what it actually is, it's everything that is not for walls in a building, that is the physical damage or legal liability of it. And down here, we have the nationwide inland marine definition, so if you guys want to click on that bottom hyperlink and check out the 12-page PDF version of it, I would suggest checking it out. Now whenever we think of a motor truck cargo policy, which we'll just go ahead and refer to it as MTC for short, you have to think, okay, who actually needs this policy? Now it's anyone who has an insurable interest in the goods being hauled or shipped. And I think the best way that insurable interest was defined to me is, insurable interest is the reason why you are not able to take a life insurance policy out on another person, because you no longer have an insurable interest in them staying alive, essentially. So basically, someone has to own the goods at some point in the transportation process, which is how we define parties of interest. And down here below, we have them broken out into five different parties. The first three will be the ones that we focus on, which is the shipper, which can be the owner of a goods who needs it shipped, as well as the owner and shipper of a goods. So let's say, again, it's an owner who is shipping their own goods versus motor truck cargo legal liability, where it's an owner of goods that needs their stuff shipped by a carrier. And then the buyer is ultimately who the goods will go to in the end. And at the bottom, we have two other parties of interest, which are freight forwarders and freight brokers, and those are whenever we get into more complex logistics risks. So for the sake of simplicity, we'll stick to the shipper, buyer, and carrier as parties of interest for today. Now how do we know which party of interest actually has ownership of the goods during transit? Now this is going to be found and defined in our bill of lading. Now what is a bill of lading? It's essentially three things. One, an evidence of contract between a shipper and a carrier, two, a receipt of the freight service and goods, and three, which is the most important, it's the document of title or ownership of goods, which is essentially why a carrier is allowed to deliver these goods to the buyer. Now there are different types of bills of lading, or BOL for short. The most simplistic and most common is going to be a straight bill of lading, which basically the customer has already paid for the goods, the carrier can just go ahead and deliver it to them. A more complex one, and that's not really as often seen, is going to be an order bill of lading, which is a negotiable contract. So it's usually the buyer hasn't actually quite paid for it yet because those negotiations are going through a bank. Now the bottom two can either be straight or order, meaning the customer's already paid for it or it's a negotiated contract. And a release bill of lading basically means that the carrier, who's actually driving the truck, is charging a lower rate and is in return released from the liability of the total amount of the goods that they're shipping. So it's kind of a win-win for both people. And then a through bill of lading, again, can either be straight or order, and it covers shipments transported by two or more carriers or by two or more modes of transportation, being either rail or air or truck, et cetera. So moving on, what are we actually shipping or having hauled or transporting? And that's going to be a commodity, which is a better way of just saying stuff. A commodity is something that is being bought or sold or is in the act of trade. Now whenever we're looking at transit risks for trucking, we have to think about commodities of concern. Now these are items that are either going to be fragile and susceptible to breakage or water damage, for example, such as books or completed products that if they're broken, they have to be put back together again. Also, high-value target items such as electronics and jewelry can be either susceptible to theft. And then we have to think about refrigerable products, because usually foods and pharmaceuticals have to be shipped in refrigerated containers. And if the refrigerator containers may break down, then that will lead to spoilage of the goods, which then leads to usually more often than not a total loss of the goods being shipped. And then lastly, we're going to look at heavy and oversized equipment. Now these are things that you've probably seen on the highway, such as turbine wings or large pieces of equipment or even houses. And these are super susceptible, because these can be damaged by hitting bridges or buildings or other cars or because of the weight of how it's loaded on a truck. The return can be displaced, and then the whole thing gets overturned. Now I'm all about visuals, and so we'll get to that in a later slide. And so then before we get to that, we're going to go through the types of motor carriers. Now there's a common carrier, contract carrier, household goods, specialized. I would say most of the time for motor truck cargo legal liability, you're going to be dealing with a contract carrier, because they have a contract with a specific owner of goods to carry and deliver their goods throughout. And then also when we look at specialized carriers, those are going to be the ones who are hauling specialized or oversized or heavy goods. And here are the visuals. As you can see, here's what refrigerated trucks look like. I'm out here in Houston, so we have a lot of oil and gas service business, so we get a lot of hot oil trucks, because we also have to do the liability of those. For heavy and oversized equipment, up north, logging is a huge industry. Down here we can see that wind turbine. We have a house being hauled, and then there are also tandem trucks, which are usually seen by postal services, such as the UPS. And last but not least in the first module, it's super exciting, the legal and regulatory framework of the U.S. It is very important to understand how that affects the way that transit is done in the U.S., and I suggest you guys look into the first two items, and Lori will actually touch on the Cromack Amendment in her segment, so I'll go ahead and hand off that to her in a little bit. Ryan, I'm not sure if you want to have a poll now. Actually, I think she's going to dial in. I will bring out the poll. So here we have a poll. Which one does not describe a bill of lading? Oh, hello. Yes, I brought up your poll for you, Laurie. I'm not sure if you are up to the poll, but I brought it out for you. Great, thank you. All right, we'll go ahead and broadcast these results. It's a super easy poll question for you guys. It looks like everyone has got it correct for the most part. Yeah, a bill of lading is three things. It's a receipt, it's a proof of ownership, and most importantly, it's an evidence of contract. Okay. So, sorry guys, before I got kicked off, we're going to go into the Federal Motor Carrier Safety Administration. Now, this is an agency in the U.S. DOT that regulates the trucking industry. And their primary mission is to reduce crashes in industry and fatalities involved in the trucking business. And what we'll touch upon later is as an insurance carrier, sometimes a trucking company that requires motor truck cargo legal liability coverage also needs for the carrier to file on behalf of them in certain states in order to do business there. And we'll touch upon that later. All right. Now, we're into the second step. So, now that there's a basic understanding, we're also going to look at what you need to view for an applicant for motor truck cargo insurance. Now, this list is not exhaustive, but it does provide a pretty good foundation. What I'd like to look at first is going to be the radius of the operation. So, that's basically going to be what the shipping route for your potential insured will be. We can look at if they're just shipping within the same city, which is locally, or if they're going across a couple cities, which is regionally, or if we get into longer hauls, which goes into intrastate and interstate risks. Now, whenever we go into intra and interstate risks, that then leads us to the next point, which is cargo at rest is cargo at risk. Whenever truckers are driving these longer distances, they will at some point need to stop for various reasons, either for a weigh station, or to go to sleep at night, or to fill up for fuel. Now, concerns with these longer routes is going to be that the drivers are going to have fatigue, which could lead to higher crashes, which then leads to damages of goods, as well as if they're going through high theft areas, and let's say they stop in cities such as Miami or Houston, these are prone to theft rings in the motor truck cargo industry. Now, whenever you're reviewing an insured, you can kind of ask them, you know, hey, whenever your drivers are stopping overnight, are they parking their trucks up against a fence to make it harder for thieves to take out cargo, or are you making sure that they're not stopping overnight in these high theft areas if they're required to go at least a couple hundred miles outside of these cities? Next, we need to review what the value of their shipments actually are. So, we can look at what the average value of a shipment versus what their max value of a shipment. Their commodity breakdown, as well. So, you would look at an insured who's hauling automobiles a lot differently than insured who, for an extreme example, hauling dirt to a construction site. These are different values, so they need different coverages, as well as different endorsements. Also, we'd like to look at the management style of an insured, which can kind of help with adverse selection, you know, adverse selection being usually the people who are more engaged in like shady business will most likely be the ones who are purchasing insurance. Now, this isn't the end-all, be-all case, but things that you can look at for a motor truck cargo or trucking company's management practices are, you know, how are they hiring their drivers? And, for an extreme example, what are the age of their drivers? Are they having drivers who are like 16 and 90 years old? Are they having a high employee turnover rate, which is usually a bad sign? How many years are they in business? This usually correlates to how much knowledge they have in the industry, as well as experience. Do they have designated programs that are set up in place to train their employees for safety and maintenance of their vehicles? And, in the next three, we'll dive into further on the next slide. We also want to check out their financial strength. Just like we all have our own credit scores, so do businesses. And, usually, a poor financial score can be an indication that, you know, you're insured will be unable to pay claims or to pay premiums. It could also reflect that they have poor loss control habits. And then, my favorite two confusing words in the industry are moral hazard and moral hazard, and moral hazard, one being the neglectful attitude towards preventing loss, in general, and one being, you know, insurance fraud, which is intentionally causing a loss so they can collect on the proceeds. Reports are super helpful and useful from other parties. Central Analysis Bureau or CAB reports are really a great way to kind of check your insured's application versus what they have on file. And, it can also help whenever you're looking at them compared to national average as far as safety or stops or violations. MVRs are Motor Vehicle Reports that you can find through each state. And, while you get those, this can most likely be more useful for maybe more of the casualty side of the trucking business, but they are good to still look at and use as a tool. OS and D are overages, shortages, and damages. And, those reports will kind of give you an indication of open and unpaid claims against the carrier for their cargo losses. If they have a frequency or severe of those, those can usually be a poor sign. Moving on, of course, you want to see their vehicle and fleet maintenance. If they have a great program in place, then they're more likely to not have breakdowns or overturns on the road. For cargo practices, you want to know kind of how your insured is protecting the goods that they're hauling, especially if it's temperature sensitive goods or if they're fragile. And, even if they are shipping commodities of concern, such as high theft goods, is there a way that they are packaging it to make it less susceptible to theft or prevent thieves from being tipped off? Are they using technology such as RFID for inter-inventory tracking purposes? And, are they sealing their trailers? And, we'll go further into the use of technology here. The trucking world is changing, and it's also increasing in its technology. So, you know, is your trucker using GPS for routes, as well as monitoring for their speed and fuel and other logistics concerns? Another great technology use is, do they have a remote control engine cutoff? And, these, the industry is still adapting, so you may or may not see these amongst your insurance applicants. And then, getting close to the last, what I think is super important is that, usually, when you have an insured who is a trucking business, they are going to have a terminal, which it can, if it's a small trucking group, maybe that they're loading their goods in and out of someone's garage at a house. Or, maybe they're a huge corporation, and they have distribution centers all across the US. These are both going to be considered terminals. And, in transit insurance, you are basically insuring the goods while they're in the course of transit. So, even while they are sitting inside a terminal waiting to be loaded, that is still being considered in the course of transit. So, if you are covering terminal exposures, so you're giving a limit of while the goods are sitting in the terminal, you're going to kind of have to be concerned about the cope information of the terminal. Now, this is a term that's more closely related to property, and it stands for construction, occupancy, protection, and exposure. Construction is basically, is this a frame building, meaning it will go up in flames like that? Is it non-combustible or masonry non-combustible or steel? So, it's constructed of steel and fire-resistant materials. Occupancy is another property term of, like, what is going on inside a building. For example, this is just going to be a warehouse and storage unit as a terminal versus, you know, a hospital or a habitational residence of an apartment building complex. Protection is essentially going to be how close are they to a fire department or water source around them in case of a fire, and exposure is, is this terminal next to a fire manufacturing or, like, a restaurant or something that's hazardous, or are they next to an open lot where there's no one around them? Other things you want to look at as far as terminals are going to be how they store their goods. Is it sprinklered? If it is temperature controlled, what are the controls in use, as well as any safety or management systems they have in place. And last but not least, what's super important is to look at your insured applicant's loss history. A good industry standard is that usually, you know, you'll want three years minimum to kind of get a feel of how their activity has gone throughout the year. Preferably five years is great. Let's say that they have a huge loss two years ago, and it was because they were hauling cars. Now, do they no longer haul cars? That's no longer an issue. That would be a business practice that has changed that has affected their past experience. Whenever you look at their loss history, you also want to view, you know, are they frequent losses, or are they severe? Frequency could be, you know, small losses resulting in $500 worth of damaged goods, and then what you can look at as a company is, well, can I put on $1,000 deductible, and then those go away? Or you can look at severe losses, so it could be a one-time huge turnover event, and, you know, and is there a way you can help mitigate their loss? And be creative and say, hey, let's do a safety control program. You also want to look at the types of losses. OTR is short for over the road, or if they're having losses like fire breakouts in their terminal to kind of get a feel of how the insurance operations are going. And then what you can do, again, as mentioned, is to be creative and say, hey, is there a way to mitigate future loss? Is there a way that we can put a deductible or structure on here to kind of make the program benefit both us as the insurance carrier, as well as the insured? Okay, and lastly, we're also going to look at what coverage can your insurance carrier provide? After you have a basic foundation of what motor truck cargo legal liability is, as well as what to review in an application, what are you actually able to offer? As far as policy forms go, motor truck cargo is a non-filed class of inland marine business in most states, which means a lot of flexibility in what policy form you use, as well as what rates you use. Now, there's also different types of forms that I don't think we'll have time to touch on, but you need to understand if your form is admitted versus non-admitted, or is it proprietary, meaning that your company has filed these forms and it's what you're using, versus advisory organizations such as the ISO or AIS, meaning that they file on behalf of their member companies, and if your company is a member company, listed under them. Policy limits, again, these are things that you'll find from what they may need based on their application. So, their per vehicle limit will probably, you could use either their average vehicle load or what they expect to ship as their maximum vehicle load. You know, how much do they have stored at a terminal at any one time? Are they planning on acquiring new terminals, meaning they need coverage for that in the future? Do they need coverage for refrigeration breakdown because they're hauling temperature-sensitive goods, or trailer interchange, meaning that they actually are using non-owned trailers and are required to have that coverage based on the fact that they're essentially renting them, or cat coverage because you're covering flood and earthquake. You also need to agree with the broker, as well as the insured, on how you're going to value the goods. Usually, those will be found in your policy form. So, for example, we have an expert from the ISO form, and it's going to be, you know, we'll value your property on the lesser of the following. And, essentially, it's usually what is it that can restore the good? What is it that's stated in the bill of lading? And, again, the point of insurance is to be made whole. It's not to incentivize anyone to actually have a loss. So, for coverage extensions, these are things that you can look into to see if your policy forms will also include these. These are pretty much industry standard, as far as, you know, we also pay to help remove some debris from a loss or pollutant, or if they have earned freight charges, as well as the newly acquired terminals. There are a lot of things that are usually excluded, and you need to look into that on your own carrier's side. Are there certain goods that you guys will always exclude based on your appetite, as well as employee dishonesty? That's usually always excluded. We don't want to encourage employee theft. And then, also, you probably should look at your coverage territory. Do you have a trucker who is also doing business within Mexico? For example, AAIS-admitted forms will only cover trucking within the U.S., Canada, and Puerto Rico. And then, also, we need to look at our premium base. What are you basing this on? A lot of times, you can either do gross revenue. So, how much is the insured, or the trucker, making? Are they making $20 million a year? If so, we rate that on a per $100 of the value. Let's say we're doing 10 cents per 100 of 20 million. Their premium for the year is going to be $20,000. Or are you charging them based on the miles that they're traveling, or the value of the shipments? Or let's say you have a smaller insured where they only have eight trucks. You're actually going to be charging them a flat rate of, let's say, $1,000 per truck. Meaning $8,000. So, there's different ways you can do it, and you'll have to see what your carrier prefers. And then, also, coming back to the FMCSA, or motor carrier filing process, these are things that you guys can dive into on your own time. What I would love to point out, specifically, is the BMC-34 endorsement. Now, there are certain states that require insurance carriers to file coverage on behalf of their insured in order to do trucking through their state. What that means is if your insured is trucking through a certain state, and they require a filing because the state needs proof that they have insurance, then your insurance carrier will file, let's say, a BMC-34 endorsement. Now, if your carrier files its endorsement on behalf of your insured, it is made until an until-canceled-or-replaced basis. So, that means that, as an insurance carrier, you're saying, we are covering, you know, X, Y, and Z trucking. Now, let's say that you non-renew the account, or you lose the account, and you don't cancel that form, you're kind of on the hook. So, that's one thing I want to leave you guys with. And, in that, I do apologize. I know that was slightly rushed. There's so much to get through. If you guys have any questions, feel free to go ahead and ask after Lori's section, and Lori is going to do an excellent job into diving into claims that are in motor truck cargo cases. Lori? Thank you. Thanks, Lillian, for the introduction and for inviting me to present today. Ryan did a great job. And, I just love the title that Eileen came up with for this webinar, The Hitchhiker's Guide to Motor Truck Cargo. So ironic that, just like a hitchhiker jumps into a stranger's car, once a shipper loads their cargo onto a carrier's trailer, they just never know how that ride's going to go. I've been handling these claims for so long now that I always avoid driving in the truck lane. So, let's move on here. By the way, I've never done this before, so. Where to start with a motor carrier cargo claim. As a motor truck cargo 101 webinar, my goal today will be to share a basic overview of the steps necessary to complete a claim investigation. This is a $60,000 shipment of asparagus that looks great in this photo. However, this is a reefer breakdown claim. The smell was so bad that this is the, only the single photo, the only single photo that was taken. If you had a shipper loaded, stowed, and sealed trailer, and upon arrival or delivery, the cargo looked like this, the motor carrier would deny liability and argue improper loading and stowage. However, in this case, it was a motor vehicle accident, and all the product was sadly destroyed. That is according to the tow yard. This is the remains of a tractor trailer overturn, also known as the towing company's worst nightmare. No equipment to recover, no cargo handling or excessive storage charges to bill out. The CARMAC amendment. Well, Ryan briefly touched on it. There's just a couple things. This is something, again, you're going to have to dive into. If you're handling claims for any length of time, you will get to know it. One of the important things to know is that CARMAC takes the place of state or common law for loss of damage to interstate cargo. This protects interstate motor carriers from facing a different body of law from each state they do business in. Since most motor carriers offer regional services and can operate in several different states on a given day, you know, this makes sense. If cargo is being transported within the boundaries of a single state, this is considered intrastate, and state law would apply. So if you were to get served, you know, legally on a claim, you'd want it moved to federal court. Well, hopefully, you know, the judge is familiar with, you know, the federal laws that apply to motor carriers. The CARMAC amendment also establishes a uniform rule of recovery by interstate shippers against motor carriers and freight forwarders. It allows a shipper to recover for actual loss of damage to the property caused by the carrier. CARMAC protects the carrier from causes of action that may expose it to damages beyond the value of the goods. For instance, let's say a steel milling machine is damaged, and as a result, the equipment owner had to send that customer's material to another mill to be processed. In addition to the cost to repair the equipment, they may sustain loss of profits. And while the carrier would be legally liable for the actual damage, the equipment owner would be liable for the loss of the equipment. And while the carrier would be legally liable for the actual damage caused to the equipment, consequential damages would likely not be recoverable under CARMAC. So for our discussion purposes today, we'll focus on claims involving common carriers. In order to determine the legal liability, the cause of loss, scope of damages, liability and limitations that may apply, and salvage potential. But first, let's do a quick, oh, let's wait for that. Polling is gonna be after this. Okay, here we go. So CARMAC applies only to transportation by a motor carrier in the United States between a place in a state and a place in another state, true or false? So go ahead and place your vote. Numbers are still coming in, so I'll give it another second. Okay, I will broadcast the results. So CARMAC applies only to transportation or only interstate transportation. So if the cargo is being transported within the boundaries of a single state, CARMAC would not apply. That would be considered interstate. So thank you to everybody who polled. So knowing who the players are is a starting point to allow you to determine from the outset of the claim the potential defenses and liabilities of each party. Who is the motor carrier? Perform a Google search like Ryan said earlier. Check the SAFER web to determine the fitness records of the motor carrier. The SAFER web will give you carrier contact info, details of the carrier operations, the current or active carrier authorities, motor carrier numbers, their fleet size, types of cargo hauled, inspections, crashes, safety ratings. I can't say enough about, you know, really investigating up front who you're handling this claim for and, you know, what kind of experience do they have? Where do they operate? Really important to know. Is a freight forwarder involved? This would raise a red flag that this may be an import shipment and you'd want to request a copy of the import or freight forwarder's bill of lading. Like Ryan said, a through bill might be more than one, you know, carrier that handled this cargo. They might have contracts of carriage that were in place prior to the carriers receiving the cargo, which may limit the motor carrier's legal liability. A through bill of lading might limit based on if it was an ocean shipment under COGSA or if it was an air shipment under the Warsaw Convention. You know, your investigation, you really want to try and see if there are limitations or liabilities that the motor carrier can depend on. Transportation brokers and logistics providers. Carrier broker agreements can limit or increase the legal liability of a motor carrier. Some can include delivery delay penalties like loss of production, labor costs, while other damage beyond what is even afforded by the policy. So you'd have to issue, you know, a limits letter. And while other contracts can limit the carrier liability based on a monetary per pound limitation or sometimes a max limit of liability would occur per occurrence. And keep in mind where in circumstances, I don't see it often, but on occasion, the transportation broker might be asked, might ask a carrier to add them as an additional names insured on, you know, to a motor truck cargo policy. And this would expose the transportation brokers to the policy exclusions. Owner operator, they're often what is called leased on to a motor carrier. They have a contract with a carrier to work with them exclusively. Some contracts will require the owner operator to provide evidence of insurance for their equipment. And other carriers insist that they insure the owner of equipment for the driver. And one of the reasons why is if there is a motor vehicle accident or a tractor trailer overturn with the steep cost of towing and recovery expenses, having adequate debris removal or towing limits is critical in getting equipment and cargo released from a tow yard. To avoid mounting storage charges and also to save the load from being rejected or destroyed. And we have another polling question. If you would bring that up kindly. Conact applies only to transportation by a motor carrier in the United States between a place in a state and a place in another state, true or false? I'm sorry. Did we do that one? I'm sorry. Oh, did we? Oh, yeah. Yeah, I'm sorry. I'm pulling up the wrong one. Oh, that's okay. As I was reading it, I'm like, hmm. Groundhog Day. Okay. Which of the below entities are not subject to CARMAC liability limitations? And we'll broadcast the results. And nearly everyone got that correct, private motor carriers, because they can't be legally liable to themselves. Okay. We are going to move on to the next one. Okay. What type of cargo is being hauled? So general merchandise. What is it? What is it used for? What is the value? What is the way? Is it easily replaced, repaired, salvaged? You'll learn all kinds of things about all kinds of things because there's just so much, you know, everything that is around you right now where you're sitting has been on a truck and delivered. So you will learn a lot about different things. Refrigerated cargo. Is it fresh? Is it frozen? Is it meat or waffles? You know, when you're dealing with refrigerated or frozen cargo, the difference is incredible. You know, a frozen shipment of chicken versus a frozen waffle. You know, there is a critical thought time there. Does it have a best before date or an expiration date? You know, my kids are one time looking for a snack and I said, oh, I think we have those cinnamon buns in the freezer. And he's like, oh, it's no good. I'm like, well, what's the date? He's like, oh, the best before date was last week. I'm like, well, it might not be the best, but it's still okay. Anyway, cargo, you'd be surprised how often the receiver gets it, says that there's something wrong with the temperature on it. Meanwhile, it was an expired product. So you always want to check the expiration date. Automobiles. New autos. Used autos. Owned or newly purchased. Purchased site unseen at auction or from a private seller. While pre-shipment inspections are usually performed by the carrier, it's always good to know where it originated from. You'd be surprised how many people buy an automobile online, you know, sight unseen, and when it arrives scented, doesn't realize that they bought it that way. And really the same is for heavy equipment as well. What you'll see often as well on heavy equipment is, you know, where it was picked up from. Sometimes it's purchased from an auction. Sometimes a construction site or a parking lot. Other things important on a heavy equipment claim. Does the manufacturer overseas need to evaluate or repair the unit? Can a local shop complete the necessary repairs? An independent expert or engineer may be required for high-valued equipment like amusement rides, cranes, assembly line equipment. When the manufacturer would prefer to consider the unit a constructive total loss, a second opinion is always a good idea. High-value commodities. Ryan touched on this. Some limitations on the motor carrier may apply. Special conditions may include carriers not allowed to leave the shipment unattended. Once a vehicle is loaded, the carrier will immediately be transported at least 200 miles. I mean, these are things that, you know, the motor carrier can become legally liable for if they don't follow, you know, directions immediately. We'll move on to the next slide. Where did the shipment originate from? Check the dates to confirm. Like on loading receipts, you would check the dates to confirm when the transit commenced. And this should also be the date of loss. Not the actual date that, let's say on this one, the track or trail overturned. It would be the date that the driver signed for accepting the shipment. So in addition to loading receipts to check the date, you want to research maybe weather archives at time of loading. You could also look at the loading location and do a Google Earth search to see what kind of loading dock they had, whether it was covered or not. Shipping manifests are important. You want to know, was it a live load or did the carrier pick up a fully loaded and sealed trailer? This is important for a shortage claim when you need to know if the driver had an opportunity to witness the loading, check the quantity of the cargo, or for a damage claim to determine if the driver was able to witness the stowage and securement. When did the loss occur? If the damage to the cargo appears to be forklift related, it could be caused at the time of loading or unloading. On a perishable shipment, if the trail attempt increased subsequent to the revert cargo being loaded, it may not have been properly cooled prior to loading. A lot of people don't realize that trailers are not intended to cool products. They really are units that maintain temperatures. Also, a bill of lading should be checked to determine whether a century cycle or a continuous cycle mode was requested for transit on a reefer trailer. This can make a big difference as a century cycle really allows for further degrees, warmer or cooler, where a continuous cycle maintains the unit at a closer degree. Why did the loss of damage occur? Like Ryan said earlier, the Federal Motor Carrier Safety Administration, FMCSA, is a great resource, not only for underwriting but also for claims. In fact, the FMCSA published new cargo securement rules, which went into effect in January 2004, requiring all motor carriers operating in interstate commerce to change the way they use cargo securement devices to prevent articles from shifting or falling from commercial motor vehicles. The changes may require motor carriers to increase the number of tie downs used or proper use of dunnage, ratchets, shoring bars, inflatable bags, or a combination of these securement methods, depending on the types and weights of cargo involved. This is really important, too, on import shipments when your motor carrier might be hauling containers. If they're not loaded correctly, once they get on the highways, they can wind up like this one in this photo. A load shift can make a big difference. The driver actually was seriously injured in this crash, but he did survive the shipment of perishable products. Why did the loss occur? Again, weather archives, time of loading, during transit, on the delivery route. Did the product, was it loaded, you know, water damage? Driver error could be a factor. Was the refit set at the correct time? Did the driver intentionally break the seal on the trailer? Did the rigger correctly measure the height of the load? Did the hired escort or pilot car follow the permitted route or instruct the driver correctly? Probably one of the most important questions when you're investigating a cargo claim. Why did it happen? Equipment failure. Who performed maintenance on the trailer or the equipment? This is especially important to know on a reefer shipment, as most policies have coverage limitations. Car carrier trailer fires are frequent occurrences when hubs ignite due to ball bearings not being properly lubricated. Again, these are all maintenance issues. Inherent bites. Typically investigate on shipments of produce or perishables, which can deteriorate quickly. Who have a cargo of steel and similar metals subject to rust? If not, probably oil can be an issue. You should request a copy of the USDA inspection. Check, again, for the best before and expiration date. Plaintiff's burden of proof. Although CARMAC imposes strict liability on the carrier for loss of damaged goods, a shipper must first establish a prima facie case for damage to cargo under CARMAC. So a lot of cargo owners will say, well, the driver picked it up, and it was okay, and they delivered it, and it was damaged, and now they own the cargo. They do have a burden to prove their damages. So were the goods delivered to the carrier in good condition? The goods were delivered to the company in damaged condition. What were the damages? So the one, let me just go back for a second. The one, I'll say the one exception to the rule would be food products. Everybody knows what the new safety regs on food. There may not be any physical evidence available. Food product is considered adulterated. If, among other things, it has been held under unsanitary conditions, whereby it may have been rendered injurious to health. We live in a time of biohazard. One produces a food product, must exercise remarkable care to ensure that the food chain is not tampered with or contaminated with organisms or otherwise become unsuitable for consumption. But it is important that the motor carrier does not be, you know, isn't put in a place where they're, you know, they feel responsible for demonstrating loss or damage to the cargo because that is the cargo owner's responsibility. Then once damage is established and obvious through, you know, photos, it could be photos, it could be a report, the burden then shifts to the carrier to show that it was free from negligence and that the damage to the cargo was due to one of the accepted causes or defenses. Once damages are demonstrated, however, carrier is unable to rely on available defenses. And this is important. Carrier is unable to rely on available defenses if its own carelessness contributed to the loss. So I think everybody's familiar with these five carrier defenses. So the carrier is absolved from liability if it can show that any of the following acts or omissions of the shipper was the predominant cause of loss. Failure of the shipper to prepare and pack the shipment adequately to ensure safe carriage under ordinary conditions. Failure to use proper containers. Failure of the shipper to properly pack, stow, and load or brace if it is a shipper's load, stow, and pack shipment. Failure to provide specific and legible instructions in marking the packages. Failure of a shipper to provide proper instructions for the carrier of the cargo en route. I've seen a lot lately, especially on refrigerated shipments where the freight broker told the carrier to set the reefer temp at a different temperature than the actual bill of lading stated it should be. So looking at the proper hauling instructions is important. Load confirmations, bills of lading, really scrutinize your documents. The act of God defense. An act produced by natural phenomena is considered an act of God when there is no intervention of inhumans, such as lightning, flood, hurricane, tornado, or blizzard. Everybody thinks, oh, well, there was a hurricane, that's it, or a flood. And act of God, we're not liable. Well, now with the forecasting the way it is, I mean, especially in hurricanes, there's so much warning. I mean, if the motor carrier does have an opportunity to move the cargo to a higher place if it's flooding or move it out of the path of a hurricane, if they have the ability to do that, they might not be able to rely on this act of God defense if they didn't act in the best interest of the cargo to their best ability. Public enemy, this would involve military force of an enemy country. Public authority, this would apply to circumstances involving loss of control of the property by the carrier due to a legal process beyond its, you know, which you can prevent martial law or by quarantine, let's say, in customs or something. And inherent violence. Were the goods received by the carrier in good condition but delivered in bad condition? The carrier is liable for the loss. But not if it can show that the damage was caused by inherent violence, defects, or natural shrinkage of the product. Do data mitigate. So consideration of mitigate is specific to the type of freight involved, so it's not going to apply to every single shipment. Again, food is one of those things where, you know, produce, believe it or not, produce is often salvageable. So, you know, the timeliness of getting it in the salver's hand is important. Inspections. When the loss involves a tractor trailer overturn or a motor vehicle accident, when the consignee refuses to accept delivery, it's important to provide photos to the cargo owner and encourage them to accept delivery for inspection. Oftentimes in a tractor trailer overturn, the freight broker or the cargo owner is like, we don't want it, don't even bring it here. But if you could send them photos, you know, if the cargo is not really damaged, sometimes they will take and at least, you know, inspect it, which is great. And the consignee has a duty to accept damaged goods when they're delivered, unless they are totally worthless. I mean, they can't just abandon the cargo to the carrier. The consignee is in general a better position to dispose of the damaged cargo than the carrier, particularly when the consignee is in the business of trading in that type of merchandise involved. The same could be said for the shipper. Examples would be commodities like glass or metal, paper, auto parts, where the cargo owners have relationships with secondary markets like recyclers, scrap dealers, and salvers. Really try and get that cargo delivered to them. On-hand notices can be issued. We'll go into that a little bit. Segregation. Protection and removal. Most tow yards perform recovery at the scene of a tractor trailer overturn and will immediately dispose of significantly damaged cargo and repalletize and shrink wrap the found cargo. Other options include hiring outside vendors or paying the consignee's warehouse personnel, which can be engaged to assist to separate damaged cargo from the damage, arrange for drying, freezing, oiling, or removal of the product from the packaging, for testing, reworking, relabeling. You do have to get creative in trying to mitigate the loss. Another brief word about tow yards. Everyday tow trucks, trade associations, insurance companies, and other industry insiders see outrageous billing charges that often bankrupt small trucking businesses. And even though experts from all sides recognize there's a problem, it's grown more widespread and expensive in the last few years. Bills of $20,000 to $30,000 on tow yards just for the cargo portion. I'm not even talking about the equipment. It's really, really important to be generous on motor truck cargo underwriters with your debris removal and towing limits because a lot of these tow companies will hold the cargo hostage with mounting storage charges. It's just ridiculous. So salvage. When goods are hauled by a carrier are damaged, rejected, or refused upon tender to the cargo owner, company, or person entitled to receive them, after giving notice to the owner or other parties that have an interest, the motor carrier has a right to sell or dispose of the cargo by hiring or engaging the services of a competent salvage agent. You'll see this a lot with lumber, produce, wire, steel, metals, paper products. There's a big secondary market for that kind of stuff. So damages. So once a carrier is determined to be legally liable for a loss, just how much must it pay? Cost, selling price, wholesale, retail? As a general rule, whether goods are lost or destroyed, the carrier is liable for their value or place of destination. The market value of destination is used as a basis for arriving at the correct measure of damage. So shipments from a manufacturer to a processor or contractor are compensated for on the basis of replacement costs to the shipper on the date of loss. When a carrier loses a shipment from a seller to a buyer, the usual measure of damage is the invoice price to the buyer. That's the shipper's selling price. So you see where I'm going here. There is no set rule, and, you know, depending on who hired the motor carrier will determine what the correct remedy. If the cargo owner, let's, for instance, I'll give you an example. If the cargo owner bought the goods at wholesale and can replace them at wholesale, then the claim against the carrier must be limited to that purchase price, the wholesale price. However, if the claimant can't replace the goods at wholesale because they are not readily available, and let's say for manufacturing purposes the lack of parts or holding up their assembly line, they may be entitled to claim retail replacement costs provided their business requires immediate replacement to avoid, you know, to avoid a lot of consequential damages. And freight charges. Carrier's liability for invoice price and shipment from a seller to a buyer contemplates and includes the cost of freight to destination. So if freight charges have been prepaid, they will not be specifically refunded. Because if you're paying based on how much the cargo was sold for, and that's already contemplated the freight charges, you would not add that on again. Because that is always questionable because people always say, well, I want that, you know, I want my freight charges reimbursed. And it's like sometimes they haven't even paid them. You haven't paid the motor carrier. And secondly, you know, that price to that customer included those freight charges, so that's just something to be aware of. And where the loss is a partial loss, a pro rata part of the prepaid freight may be included in the claim. So that's it for me. I just want to say in closing that, you know, these claims are difficult. Third-party legal liability claims can be very challenging. So having a good working relationship with an attorney specialized in the fine of business or someone to counsel you through some of the more complex claims is really helpful. You know, if you are in a staff setting with other adjusters and bouncing ideas off each other, I mean, it's just a great, you know, go back to your underwriter. They're a great resource. But I have one polling question before we close this up. Which of the following is not one of the five carrier defenses under CARMAC? If you'll go ahead and vote on that one. I just want to thank everybody for joining today and thank the IMUA. I've been doing this for a long time. a long time. I've done it successfully because of help from my peers and people in the industry. Insurance industry is great, and we all help each other. If I could help you at all, please reach out to me, and enjoy the rest of your day. Thank you. Thank you so much, Lori and Ryan, for a very informative presentation. We'll take questions now. And to ask a question, we're bringing the Q&A pod up right now, and you'll type your question into the Q&A pod, and then click Submit. And then we'll receive your question. While we're waiting for questions to come in, Ryan and Lori, do you have any takeaways, like a key takeaway from the webinar today that you'd like to share? Sorry, my phone was on mute. This is Brian here. Again, yeah, Lori, great presentation. I want to thank everyone as well. And that just, you know, you can always lean on your peers and those who are above you to really dive into it because inland marine can be a bit tricky, especially with the transportation industry. Thank you. Okay. And we do have some questions. We have some compliments to both Lori and Ryan that you did a spectacular job on the presentation. We have a question. How often does the FDA get involved in condemning shipments of perishable goods? Well, I guess I will take that one. So you probably want to know how often does the USDA get involved in condemning shipments. So when you do have a shipment of perishable produce, most often you would ask the, the motor carrier could call the USDA, United States Agricultural Department, and ask them to come out. They charge a fee, usually a couple hundred dollars, usually I would say less than $300. They do do an inspection. They, how often does it, they don't get involved often, but when they do, they condemn it every time. Lots of times that's the last thing a motor carrier wants to do is get the USDA involved. But yeah, they do most often condemn the shipment. Thanks for the question, Hartford Marine. Does a shipper have to offer a full value liability coverage before they can limit their liability on the VOL? Ryan, do you want me to take that one? Yes, for sure. So, does the shipper have to offer full-value liability coverage before they can limit their liability? Well, some, if the shipper, I mean, most carriers do have a public, a tariff that they have to file, and most do say that they have to offer options, so it's not all motor carriers have the option to purchase full coverage, but anybody can limit their liability. You know, I don't know if that answers the question there, Eric, but motor carriers always have the option to limit their liability, but whether they'll ever get any business if they do, I mean, that's the question, and the other point that's important here is if a freight broker is involved, sometimes a motor carrier can rely on the freight broker's tariff. If you do have one, a claim that involves a freight broker, you should always check to make sure that they don't have a published tariff, because that alone can limit the motor carrier's legal liability. I hope that answers your question. We do have two questions. One is about states that file, that require filing, and the other one is about industry loss ratio for the product. So, I mean, I know that IMUA does have a state filing guide for motor truck cargo that's posted on the IMUA website. I don't know if Lori and Ryan, do you have anything to add about that? Yeah. Hey, so Ryan here. So, for carriers who are doing long-haul trucking, and especially for hire carriers, so trucking that's contract carriers, if they're hauling non-exempt commodities, that's most of the time when they need to carry a federal filing, and usually whenever an insurer sends you an Accord app or an application, it will state on their application whether they require a filing or not, and you can also tell based on the radius of their operations where they're based out of, and just say what exempt commodities are. Those are usually unmanufactured goods or fruits and vegetables or items that don't really have a lot of value. So, non-exempt commodities of value usually require the filing across state lines, and as Lillian said, IMUA is a really great resource for filings, and you can also go on to the FM SDSA website to get more information. I hope that helps. And then, as far as the industry's loss ratio, it really, it's kind of a broader, since I can't speak to the industry as a whole, but I can maybe speak to what the loss ratio is mostly for, if it is a trucking for hire, usually they perform pretty well, but it does vary based on their commodity, what they're doing, it's a little, you'd have to go into more specifics maybe, but if they are a trucking for hire, for example, sometimes they pair their APD, their auto-physical damage of the truck, with the motor truck cargo, some companies will do that because the auto-physical damage of the truck usually performs worse than the motor truck cargo actually does, so in that sense, it's a better performing loss ratio than that line of business. And I know that doesn't completely answer it, but we can get back to you on that, certainly. Thank you so much. That's our questions for today. Thank you also to our attendees for your participation and your interesting questions. All attendees will receive an email with a link to an electronic survey. Please take a moment to respond to the survey and provide feedback to IMUA. This concludes today's webinar. Have a great rest of the day.

webinar

The Hitchhiker's Guide to Motor Truck Cargo

Lori Conley

Ryan Murphy

motor truck cargo insurance

underwriting

claims handling

Carmack Amendment

documentation

industry loss ratios