No transportation companies want to have an accident or breakdown that requires a tow, but motor carriers might be shocked to learn just how expensive cargo towing can be.
Throughout many years in transportation insurance, on both the specialty brokerage and underwriting side, there have been a lot of motor carriers who unknowingly put their businesses on the line. One of the ways that can happen is by not choosing the right cargo coverage. Over the past few years, towing has emerged as a big problem for cargo policyholders.
Did you know that a truck driver might not even get the chance to pick the towing company that responds to a roadside accident or mechanical issue? Many state police departments maintain lists of approved towing firms and will notify them on a rotating basis when troopers respond to an accident.
This might sound helpful, however, only a few states regulate the rates that towing companies can charge. And the "meter" starts running the minute the towing firm sends out a wrecker - or, in some cases, multiple pieces of expensive equipment.
Here's a real-life story about a cargo claim outside a major U.S. city: a tractor trailer carrying electronic equipment broke down on an interstate not long before rush hour, so the state police immediately called a local towing firm. Not knowing what type of equipment was needed on the scene, the towing company brought out 13 pieces of equipment to respond to any hazardous material it might encounter. The tractor and trailer were towed about two miles. The bill? $69,000. As wild as that sounds, five-figure towing bills are not uncommon.
You might think, "Wouldn't my insurance cover this?" Not necessarily. Very few cargo policies address towing, and most of those that do only provide a limited amount of coverage, such as $3,000. If a tow costs a lot more, a couple of things can happen, and both are not good news for the motor carrier. In some cases, the insurer might pay the entire towing claim, but the amount could erode the policy limits, reducing the coverage available for cargo losses. In other cases where an insurer denies the towing claim or only covers a portion, guess who will have to pay the difference - the motor carrier.
Cargo towing presents another set of risks for motor carriers. Towing firms can, and sometimes do, prohibit access to towed vehicles until the towing bill is paid. If a motor carrier can’t inspect their cargo in a tow yard, they can't ensure that the cargo is secure or determine if it's damaged. In the claim above, the motor carrier's situation went from bad to worse. It took a while to settle the bill, and during that time, thieves broke into the trailer and stripped the electronics of copper wiring. In addition to a massive towing bill, the motor carrier now has to deal with a cargo loss and a difficult conversation with its shipper customer.
Tokio Marine America understands the risks and exposures that motor carriers face, and we have a variety of coverages to help protect their business. One of these is a proprietary endorsement for extra towing expense, which is one more way Tokio Marine America gives motor carriers peace of mind.
For more insights on transportation risks and cargo coverages visit our product page.
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