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.

During my many years in transportation insurance, on both the specialty brokerage and underwriting side, I’ve seen a lot of motor carriers 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, but in fact, 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, pretty much to respond to any hazardous material it might encounter. The tractor and trailer were towed about two miles. The bill? $69,000. 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. One, the insurer might pay the entire towing claim but the amount could erode the policy limits, reducing the coverage available for cargo losses. Secondly, if 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 its cargo in a tow yard, it 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 had 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 or contact me at david.lee@tmamerica.com.


About Author

David Lee,
Director, Inland Marine at Tokio Marine America
David Lee is the Director of Inland Marine Transportation for Tokio Marine America. His insurance career spans nearly four decades with experience in commercial insurance underwriting, MGU program management, and specialty insurance brokerage. David is the Chairperson of the Transportation Committee for the national Inland Marine Underwriters Association (IMUA) and is the former Executive Director of CURE Childhood Cancer - Georgia’s oldest and largest pediatric cancer support organization. He is based in Atlanta and can be reached at David.Lee@TMAmerica.com.

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).