Motor truck cargo losses frequently cause headaches for transportation companies – and, in certain situations, their insurance brokers too.

Damage or loss of cargo has some specific pitfalls for insurance brokers. Motor truck cargo is a complex risk, with diverse exposures. If appropriate coverage and limits are not in place, cargo claims may not be covered. When that happens, the claims might end up being paid under another policy: the insurance broker’s errors and omissions liability insurance.

E&O liability is the principal business risk for professionals, a class that includes insurance agents and brokers. Failure to suggest coverages, adequate limits, or mistakes that result in claim denials are common sources of broker E&O claims. One of the challenges in placing motor truck cargo risks is they have a lot of moving parts (no pun intended), and it can be easy to overlook something. An uncovered cargo claim can cost a broker not only in money lost, but also in the loss of a customer and personal reputation damage.

Here are some tips for brokers to avoid E&O exposures in motor truck cargo business:

Know what the client is hauling. Some motor carriers specialize in certain types of cargo, but often they will haul whatever a shipper needs to move. The types of cargo matter to a cargo policy, because certain kinds are inherently more risky than others. The phrase “freight of all kinds” is a catchall that should be included in cargo coverage forms under commodities transported. If it isn’t, a motor carrier might face a claim denial for a commodity transported that is not listed. The loss might get covered under a freight broker’s contingent cargo policy, but that typically is a lengthy process, which can strain a motor carrier’s business and customer relationships. Insurance agents and brokers should not count on a third party’s coverage to respond to cargo losses that can be insured on behalf of the motor carrier client.

Know what’s coming back. Motor carriers operate on thin margins, so they avoid deadheading whenever possible – that is, delivering goods to a destination and then driving back an empty trailer. Backhauling is an efficient way to move goods and make money, but insurance brokers should pay particular attention to:

  • Disparities in values. For example, if the outbound haul is valued at $250,000 but the backhauled cargo is worth $450,000, and the cargo policy is written for a lesser amount, guess what? The excess value is not going to be covered. Also to keep in mind, a few cargo insurers have coinsurance clauses on their motor truck cargo policies as well.
  • Types of cargo. Dry van trailers can hold a lot of commodities, but often they need to be cleaned and prepared for certain types of cargo. If a motor carrier hauls chemicals on its outbound delivery and produce on the inbound haul, and the trailer isn’t properly cleaned, that backhauled cargo could become adulterated and result in a total loss. Similarly, cargo that must travel in a refrigerated trailer, or reefer, must be hauled at a constant temperature. If the reefer isn’t precooled before loading, there’s a good chance of spoilage and cargo loss, or at a minimum, rejection of the cargo by the receiving consignor. That type of claim may not be covered under most cargo policies.

Check the limit adequacy. This goes back to disparities in the value of different cargo, but it’s a key issue for motor carriers for whatever they plan to haul. For example, auto transporters might haul nine brand-new Toyota Camrys to a dealership on one trip and have a few S-Class Mercedes-Benzes on the next. Does the motor carrier’s cargo policy have adequate limits to cover loads that might differ by hundreds of thousands of dollars? If not, there’s potential for an uncovered cargo loss exposing both the motor carrier and insurance broker to potential liability.

Ensure accuracy in the application. Fields in coverage applications that are left blank or unaddressed may be missed opportunities for structuring more favorable coverage or even getting a lower rate. Similarly, conflicting data in separate sections of the application can skew coverage. An example: a motor carrier’s application lists 80 trucks but its motor unit schedule shows 109. The 80 trucks might be owned by the motor carrier, and 29 more are contracted owner/operator rigs. Accurate data is helpful to the client and the underwriter. Lowballing or highballing projected revenue or gross mileage can arbitrarily make a big difference in rate or renewal terms. For example, regardless of the provided mileage or revenue rating basis, any seasoned underwriter will usually get a certain premium level per power unit and then divide the premium for all units by the provided rating basis amount. In some cases, a broker might have gotten a higher rate than would have been developed had the projected rating basis values not been lowballed.

Insurance agents and brokers have an important role to play in advising and protecting motor carrier clients. Taking the right steps consistently not only can help brokers avoid E&O claims, but also avoid damaging account relationships that can cost them clients and a negative reputation.

Tokio Marine America can help motor carriers and their risk advisers navigate the complexity of motor truck cargo. We’re a digitally savvy insurer that understands transportation logistics and cargo risks. We help manage conventional and emerging risks through our expertise and proprietary needed coverages. During times of change and stress, we prove our value by focusing on delivering Anshin, the Japanese word for safety, security and peace of mind.

Talk to us about the risks your business faces. To learn how Tokio Marine America can make a difference in your business, visit or contact me at

About Author

Stefania Cappelli,
Director, Inland Marine at Tokio Marine America
Stefania Cappelli is an Executive Underwriter of Inland Marine at Tokio Marine America. Her career experience includes roles in underwriting various classes of business as well as underwriting management. She holds a master of business administration degree in leadership development from Brenau University. She can be reached at 770-225-1653 or

About Tokio Marine America

As part of our commercial inland marine product offering, the transportation industry is well served by unmatched financial strength, dedicated underwriting experts, and a suite of flexible and proprietary insurance products that can be tailored to fit your needs.

With over a 100-year history in the U.S., Tokio Marine America (TMA) offers tailored products to a diverse range of customers – from small to large-sized global businesses seeking traditional multi-line coverage, to larger private and public companies requiring full risk management solutions. Our commitment to providing the highest level of service is paramount. More than 93% of our customers recommend TMA based on our superior claims service. TMA is one of only three insurers with an A++ (Superior) XV rating from A.M. Best. With a solid foundation of financial stability, our strength lies in understanding your business and working in partnership to exceed your expectations.

By offering fully integrated solutions to meet our customer’s needs, we endeavor to deliver ANSHIN – safety, security and peace of mind to all our customers.

Tokio Marine America (TMA) is the marketing name for Tokio Marine America Insurance Company (TMAIC).