Cargo insurance is underwritten by managed risk clubs, a type of group investment tool. It is available for a variety of cargos and protects against freight loss or damage from external causes during shipping by any means, land, air or sea. Depending on the coverage, however, the club may not pay for instances such as a truck-load coming loose and falling off the road if the driver is thought to be at fault. This is where contingent cargo insurance comes in, to protect freight brokers against claims denied by the carrier’s insurance.
There is no legal requirement that freight brokers carry contingent cargo insurance. However, carriers may be shy to work with those who do not. For events deemed an act of God or terrorists, or a simple refrigerated-truck breakdown, the shipper will look to the freight broker, as the one who negotiated the shipment contract, to cover what the initial cargo insurer does not.
Contingent cargo insurance can cover losses such as theft and damage in transit, including shipping methods such as truck, ship and rail. In cases where a cargo is lost because of an unexpected event, such as a tornado or flash-flood, contingent cargo insurance can help. Different insurance carriers may cover different contingencies, so if you’re a freight broker, you would be smart to shop around.