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12.4 Inland Marine Transportation Coverages

Common Carrier Cargo Liability​

Goods and merchandise transported within the country require specialized insurance. Motor Truck Cargo coverage protects carriers that have care, custody, or control of cargo during domestic shipments. The carrier’s legal responsibility depends on the type of operation. A contract carrier is generally liable according to the terms of its agreement with the customer. A common carrier, however, owes a higher duty of care and may be held nearly strictly liable for loss of or damage to cargo in its custody.

Although common carriers are generally held to a high standard of responsibility for cargo in their custody, they are not liable for losses caused by:

  • Acts of God, such as storms, floods, or other natural events
  • Acts of a public enemy, such as war
  • Actions of a public authority, such as confiscation or quarantine of property
  • Fault or negligence of the shipper, such as improper packaging
  • Inherent vice, meaning a condition or defect within the property that causes it to damage or destroy itself

Bill of Lading​

When a common carrier accepts cargo for transportation, it issues a bill of lading. This document serves as both a contract of carriage and a receipt confirming that the goods were received into the carrier’s custody. Bills of lading are used when common carriers transport cargo by land, sea, or air.

A bill of lading identifies the shipment date, the carrier, the shipper, the consignee, or person receiving the cargo, a description of the goods, the destination, and the extent of the carrier’s liability. It also states whether the transportation charges have been prepaid or whether the carrier must collect a specified amount from the consignee upon delivery.

Straight Bill of Lading​

A straight bill of lading does not limit the stated value of the cargo. As a result, the carrier may be legally responsible for the full value of goods lost or damaged while in its care. This type of bill of lading is generally used when shipping charges have been paid in advance and directs the carrier to deliver the merchandise to the named consignee.

Released Bill of Lading​

A released bill of lading, also known as a released value bill of lading, states an agreed value for the cargo that limits the carrier’s liability if the goods are lost or damaged. The carrier and shipper agree to this value before transportation begins. This type of bill of lading is used when the shipper authorizes the carrier to release the cargo to the consignee upon delivery, regardless of whether the shipper has already received payment.

Shipping under a released bill of lading generally costs less than shipping under a straight bill of lading because the carrier’s liability is limited to the value agreed upon by the carrier and shipper.

Motor Truck Cargo Forms​

Truckers and motor carriers can protect themselves against liability for cargo in their care by purchasing Motor Truck Cargo insurance. Two primary cargo forms provide open perils coverage for property while it is in transit: the Motor Truck Cargo Carriers Coverage Form and the Motor Truck Cargo Owners Coverage Form.

Motor Truck Cargo Carriers Coverage Form​

The Motor Truck Cargo Carriers Coverage Form is designed for a carrier that owns the motor truck and accepts property belonging to others for transportation under a bill of lading or other shipping receipt. The covered property must be described in the Declarations. Coverage applies to the property under the following circumstances:

  • While the property is in the carrier’s custody, beginning when it is accepted for transportation and ending when it is delivered to its destination
  • While the property is being loaded or unloaded at a warehouse, storage area, terminal, or similar facility
    • At a warehouse or storage area, coverage is limited to 72 hours, excluding Sundays and holidays
    • The 72-hour limitation does not apply to property located at a terminal
  • While the property is being returned to the named insured when delivery cannot be completed

Under the Motor Truck Cargo Carriers Coverage Form, covered property does not include accounts, currency, money, securities, bullion, jewelry, furs, stamps, live animals, works of art, contraband, or the vehicle transporting the cargo. Import and export shipments are covered only after the applicable Ocean Marine insurance has ended.

Motor Truck Cargo Owners Coverage Form​

The Motor Truck Cargo Owners Coverage Form is designed for a named insured that owns both the motor truck and the cargo being transported. Coverage applies to property described in the Declarations while it is in or on a land vehicle owned or operated by the insured. Coverage begins when the vehicle leaves the location where the shipment originates and ends when it reaches its destination. Therefore, coverage applies only while the property is actively in transit.

Under the Motor Truck Cargo Owners Coverage Form, covered property does not include accounts, currency, money, securities, gold, jewelry, furs, live animals, works of art, contraband, tarpaulin covers, or the vehicle transporting the property.

Transit Coverage Forms​

Although carriers assume significant responsibility for cargo while it is in transit, some losses may fall outside the carrier’s legal liability or exceed the amount the carrier is required to pay. Therefore, cargo owners should obtain insurance to protect their financial interest in property entrusted to a hired carrier.

Annual Transit Coverage Form​

The Annual Transit Coverage Form is designed for businesses that regularly ship or receive property throughout the year. It covers the insured’s personal property and property belonging to others while it is in the insured’s care, custody, or control and being transported by a hired carrier or messenger. Coverage also applies while the property is being transported in or on a land vehicle owned or operated by the insured.

When property is transported by a hired carrier or messenger, coverage applies while the property remains in that party’s custody. Coverage ends when the property is delivered to its destination or returned to the insured. When property is transported in or on a vehicle owned or operated by the insured, coverage begins when the vehicle leaves the point of origin and ends when it arrives at its destination.

The Annual Transit Coverage Form is generally written on a named perils basis, covering losses caused by specified perils such as fire, windstorm, collision, and theft. Broader open perils coverage may also be available.

Trip Transit Coverage Form​

The Trip Transit Coverage Form is designed for insureds who do not ship property regularly but need coverage for a single shipment. When the property is transported by a hired carrier or messenger, coverage applies while it remains in that party’s custody and ends when the property is delivered to its destination or returned to the insured. When the property is transported in or on a vehicle owned or operated by the insured, coverage begins when the vehicle leaves the point of origin and ends when it arrives at its destination.

The Trip Transit Coverage Form may be written on either a named perils basis, which covers only the causes of loss specifically listed in the policy, or an open perils basis, which covers direct physical loss unless the cause is excluded.

An Insurance Story

An appliance manufacturer hires a common carrier to transport appliances to The Furniture Company, which has already paid for the goods. The carrier issues a straight bill of lading, making it responsible for the full value of the shipment. Because the carrier is transporting property belonging to others, its Motor Truck Cargo Carriers Coverage Form protects its interest in the cargo. The Furniture Company regularly receives shipments throughout the year, so its Annual Transit Coverage Form provides additional protection for its property while the appliances are in the carrier’s custody.

These transit and cargo coverages insure the appliances, not the truck transporting them. The carrier would also need commercial auto insurance written on a Truckers Coverage Form or Motor Carrier Coverage Form to provide liability and physical damage coverage for the truck.