Not all cargo insurance is created equal

W Joel Baker Headshot
Updated Jul 6, 2023

From time to time Joel Baker truck driver -- that’s me -- has been asked by a customer or a broker if my insurance is from "XYZ Insurance" company. When I respond and say: “No, why do you ask?” I typically get back something like this: “Our company doesn’t, or can’t, do business with any trucking company who has their insurance from XYZ Insurance company.” Usually, what they are politely trying to tell me is that the customer or broker has had a previous bad experience with that company in the form of a denied claim. Most of the time, it’s a denied cargo claim. Sometimes they’ll also state something along the lines of “XYZ insurance company does not provide broad form cargo coverage.”

So what in the heck is “broad form” cargo coverage and why does it matter? The answer is simple, but the details can get us lost in the weeds. Hopefully to keep us out of those weeds I’m going to stick to the basics.

First of all, when anyone brings up “broad form” cargo coverage they are actually borrowing a term used most commonly with homeowner’s insurance policies. There are actually three forms of coverage: Basic, Broad, and Special. The verbiage used within a policy rarely actually uses these terms. Rather, the policy will detail coverage for what are known as perils (I’ll explain perils in the next paragraph.) What the policy states about the perils determines whether the policy provides Basic, Broad or Special form coverage. The terms Basic, Broad and Special are most frequently used between insurance companies, underwriters and agents so they can more easily discuss the policy coverages.

OK, what’s a peril? A peril is the cause of the loss. For example, the scenario in my last article: the loss of my cargo (glass panels) was due to my collision with the dock. So the peril for the loss of the cargo was collision.

Now lets look at sample lists. Important -- Each insurance company creates its own list of what is and is not a covered peril and what perils are exempted from coverage. Note "Special Form" in these examples covers all perils and specifically lists those that aren't covered, unlike the other forms. 

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As shown in the table above, it’s very easy to see why a customer or broker may not be able or willing to accept cargo coverage if the policy provided by an insurance company only provides coverage for a very limited number of perils.

Now this is where the weeds get somewhat tall, thick and a bit difficult to navigate. Remember that I mentioned that each insurance company creates its own list of what is and is not a covered peril. Sometimes two different insurance companies can have the same list but not use the same form verbiage. Lets compare 2 lists of perils for two different and fictitious insurance companies:            

Notice that even though ABC Insurance Company has what it calls “broad form” cargo coverage, the coverage is exactly the same covered perils provided by XYZ insurance company’s “basic form” coverage. So the form title used by an insurance company does not necessarily reflect the coverage that we are seeking or coverage we believe we have purchased.

Now it should be very clear that it is crucial for us as truck owners to ask and be aware of which perils are covered and which perils are not covered by the cargo insurance policy, no matter what the insurance company has titled it (what form name is being used). If we don’t, and we have a cargo loss that is not covered by our policy, we can be sued and held liable in court for the loss of cargo. Being held liable in court means most likely being required to compensate the owner of the cargo for the entire value of the loss.

Because insurance policies are contracts, they are written by attorneys and can contain legalese that is hard for most of us to make sense of. Insurance companies understand this. So to help, some insurers provide some type of a policy or product summary/guide/overview or similar type of document for their insureds/customers. Requesting a copy of this document can be the easiest way to find out what perils are covered or exempted within your policy. For the companies that don’t provide such a document, it’s best to ask your insurance agent for a list of both covered perils and exempted perils.

[Related: Deception wreaks havoc ... again!

Need help with your own insurance? Call the author of this story, W. Joel Baker -- if you have questions about insurance you'd like to see addressed by Baker here in Overdrive, drop a comment under this story or get in touch with him directly via his websites. 

Find more information on the ins and out of trucking insurance in the Overdrive/ATBS-coproduced "Partners in Business" manual for new and established owner-operators, a comprehensive guide to running a small trucking business. Click here to download the brand-new 2023 edition of the Partners in Business manual free of charge.