Simply put, underinsured is defined as not having enough insurance to cover a loss.
Too many motor carriers incorrectly believe that their liability for loss and damage is limited to their cargo insurance. Since the FMCSA no longer requires a motor carrier to maintain any cargo insurance, the marketplace appears to have set the “standard” amount of cargo insurance at $100,000 per shipment/per occurrence. However, unless steps are taken, a motor carrier’s liability for loss and damage is not limited to that $100,000.
Not realizing they face unlimited liability, many motor carriers accept all shipments they are endered without even knowing or asking to know their value. In a recent lawsuit where we represented the broker (assignee of the shipper’s claim) the motor carrier claimed that its liability was limited to its $100,000 cargo insurance limit, that it could not ask either the broker or the shipper the value of a shipment and that the broker had duties to know the value of the shipment, to tell the carrier the value of the shipment, to make sure that the carrier had full coverage, and to ensure that shipment was not underinsured. The motor carrier was oblivious to the fact it could be held liable for the value of the shipment regardless of its cargo insurance limit.
There are a few actions we suggest you routinely take to properly insure your cargo.
1. Check all new shipping contracts to make sure your cargo policy carries adequate limits.
2. Know the stated values of all shipments carried.
3. Review your cargo insurance policy for restrictions and endorsements as well as co-insurance clauses.
Contact your agent on any shipments you know will have a higher value than your current policy limit holds. The agent should be able to contact your insurance carrier and inform them of the situation, and/or quote trip-specific limits ensuring each load is properly covered.