Government Ends Cargo Insurance Rule for Truckers

The federal government is no longer requiring that about 76,000 of the nation’s for-hire truckers carry cargo liability insurance.

Over the objections of shippers and transportation brokers, the Federal Motor Carrier Safety Administration (FMCSA) issued a rule effective March 21 that lifts the requirement for these for-hire motor common carriers that represent about 30 percent of the nation’s truckers.

Household goods motor carriers and household goods freight forwarders will continue to be subject to the FMCSA’s cargo insurance requirement.

The agency said it does not believe it is necessary for it to mandate cargo insurance that benefits commercial shippers. “Commercial shippers should be able to protect their own property loss and damage interests in the marketplace without continued FMCSA intervention,” the agency said.

The agency said it found enforcement of the rule is not necessary because most truckers carry insurance beyond the mandatory limits. It also said the requirement falls outside its primary responsibility, which is safety.

The government had required property and freight forwarders to maintain a minimum amount of cargo insurance and file evidence of this insurance with FMCSA. The requirement has been bodily injury and property damage liability in the minimum amount of $750,000 to $5 million depending on the nature of the cargo being transported; and cargo liability in the minimum amount of $5,000 per vehicle and $10,000 per incident.

There are more than 150,000 motor carriers that are already exempt from the government insurance mandate for various reasons.

The federal government has required some carriers to buy cargo liability coverage since 1935. But federal law actually gives regulators the discretion whether to mandate the insurance. Jurisdiction over motor carrier and freight forwarder cargo insurance was transferred to FMCSA from the Interstate Commerce Commission (ICC) in 1999 and regulatory proposals to eliminate the requirement have been under consideration since at least 2005.

The change means that insurance companies no longer have to attach an endorsement (Form BMC-32, Endorsement for Motor Common Carrier Policies of Insurance for Cargo Liability) to cargo insurance policies.

The federal agency said it found that motor carriers typically have cargo insurance well in excess of the regulatory requirements, in part because many shippers require such insurance as a condition of doing business. Also, some common carriers offer shippers the opportunity to purchase additional cargo insurance and shippers have always had the opportunity to purchase cargo or inland marine insurance directly from insurance providers rather than rely on motor carriers and freight forwarders to provide coverage for loss and damage risks.

FMCSA said it asked five insurers with the largest number of cargo policies what percentage of their clients carry more than the $10,000 aggregate minimum, as required by FMCSA. All five insurers said that most of the policies they write for cargo liability are well above the FMCSA minimum. Most said their policies are for $50,000 to $100,000 liability.

Based on its inquiries, FMCSA said it believes most carriers will continue to carry cargo insurance because their customers will require it.

The only shippers that FMCSA said it considers in need of the protection provided by the cargo insurance requirement are individuals who arrange to move their own household goods. FMCSA decided that these individuals are “less knowledgeable about carrier liability requirements and need the protection afforded by the existing regulations.”

The Property Casualty Insurers Association of America was among the business groups backing the change, arguing that the private insurance marketplace should determine appropriate insurance coverage.

Topics Carriers Legislation Trucking