Cargo insurance exclusions that leave truckers out of pocket

Cargo claims usually fall short for one of a handful of reasons: the theft happened under conditions the policy excludes, a reefer unit failed without breakdown coverage, the freight was on an excluded list, the load was worth more than your per-truck limit, or the damage was to a trailer rather than the freight. When that happens, the gap is yours. Under federal law, an interstate carrier is generally liable for the actual loss of freight in its care, so the shipper or broker looks to you for whatever the policy doesn’t pay.

What does cargo insurance cover?

Motor truck cargo covers the freight you haul for other people, not your truck and not your liability to the public. Most forms pay for loss or damage to that freight while it’s in your care, from causes like a collision, an overturn, fire or theft, up to your limit and after your deductible. Some forms pay only when you’re legally liable for the loss. Broad forms cover every cause they don’t exclude, while named-peril forms cover only the causes they list, so a load that shifts and breaks on a named-peril form may not be covered at all. Then come the exclusions.

Theft from an unattended truck

This one surfaces at the worst time. Many cargo forms don’t pay for theft from an unattended vehicle unless specific conditions were met: doors locked, keys removed, an alarm set, or the truck parked in a fenced, lit or guarded lot. Some set a limit on how long the truck can be left. Others exclude theft of a dropped, loaded trailer unless it had a kingpin lock or sat in a secured yard.

Say you take your 10-hour break at an open truck stop lot, 300 miles into a load of electronics, and the trailer is broken into overnight. If your policy requires high-value freight to be parked in a secured lot whenever it’s unattended, that claim can be denied, even though you did what most drivers on a long run do. Read your theft conditions word for word. Then compare them to how you actually park, and if a condition can’t be met on a normal trip, talk to your agent about a different form before the next load.

Reefer breakdown

A basic cargo policy usually doesn’t pay for spoilage when the refrigeration unit quits. Reefer breakdown coverage adds it, with conditions: a unit maintained on schedule, sometimes an age limit, and records to prove both. It often carries its own, higher deductible.

Even with the coverage, the claim turns on the unit’s download. If the setpoint was wrong, the unit was on cycle when the bill of lading said continuous, it ran out of fuel, or the trailer was never pre-cooled, many policies call that driver error rather than breakdown and exclude it. A receiver that rejects a whole load over one bad reading is a separate problem, since some policies pay only for spoilage you can prove. Keep every download.

The rest of a reefer program, from unit age to commodity limits, is on our refrigerated trucking page.

Excluded and limited commodities

Cargo policies come in two basic shapes. Some cover only the commodities listed on the policy, and anything else you haul is simply not covered, while others cover everything except the freight on an excluded list. Either way, the list matters as much as the limit.

Freight that often shows up as excluded or limited includes electronics, cell phones, tobacco, alcohol, pharmaceuticals, copper and other metals, jewelry, cash and securities, live animals, household goods, fine art and hazardous materials. Some policies don’t exclude these outright but cap them at a lower sublimit. That cap is easy to miss. A $100,000 policy with a $25,000 sublimit on electronics pays no more than $25,000 on a $90,000 load of televisions, before the deductible.

Check the commodity against your actual policy before you take freight outside what you normally haul, not against what you told your agent when you bought it.

When the load is worth more than your limit

Cargo limits usually apply per truck. Say you carry $100,000 and take a load of copper wire the shipper values at $185,000. If the whole load is stolen, the policy pays no more than $100,000, and depending on how your form applies the deductible, it can pay less. The other $85,000 or more is between you, the broker and the shipper.

Car haulers see a version of this with per-vehicle limits, where one expensive car on the top deck can go past the per-car cap even when the load limit looks fine.

Brokers set their own floors, often $100,000, and ask for more on high-value freight. Meeting the broker’s minimum doesn’t mean the load is covered in full. The broker-carrier agreement or the rate confirmation may hold you to the full value no matter what your policy pays, and some add conditions of their own, like no stops within the first few hundred miles, team drivers or tracking. Read every rate confirmation, too. An attorney should review the liability terms in your broker-carrier agreement, because that’s where you agree to the number you could owe.

Some insurers can raise the limit for a single high-value trip. Ask before you accept the load, not after.

Trailer interchange is not cargo

Cargo covers the freight. It doesn’t cover the trailer it rides in. If you pull a trailer you don’t own under a written interchange agreement, damage to that trailer is what trailer interchange coverage is for. On a power-only load with no interchange agreement, you usually need non-owned trailer physical damage instead. Back a borrowed trailer into a post on a power-only load, and the cargo policy usually isn’t the one that responds.

Other exclusions worth reading

A few more come up often enough to check on every policy:

• Loads you hand to another carrier. Most cargo forms cover freight only while it’s on your own listed trucks or in your care, so re-brokering a load to another carrier usually leaves it outside your coverage entirely.
• Unexplained shortages, especially on a sealed trailer you never saw loaded. Ask for “shipper load and count” on the bill of lading when you can’t verify the freight.
• Freight parked at your yard or terminal, which many forms limit by time or by a lower limit.
• Weather damage to open loads, when flatbed freight wasn’t tarped the way the shipper required.
• Poor packaging, delay and loss of market, which are usually excluded outright.

Questions to ask before you take a high-value load

Run through these before you accept the load:

1. What’s the declared value, and is it above my per-truck limit?
2. Is this commodity excluded, limited or sublimited on my policy?
3. Where will the truck sit during breaks and overnight, and does that meet my policy’s unattended vehicle conditions?
4. Does the rate confirmation or broker agreement add security rules, like no-stop miles, team drivers or tracking?
5. Does the agreement make me liable for full value, or for more than my policy pays?
6. On a reefer load, what setpoint and mode does the bill of lading call for, was the trailer pre-cooled, and can I pull a download if there’s a dispute?
7. Who loads and seals the trailer, and will the seal number be on the bill of lading?
8. Whose trailer is it, and do I need trailer interchange or non-owned trailer coverage to pull it?
9. Will the load sit anywhere overnight before delivery?
10. Can my agent add a higher limit for this one trip?

If you’d like us to read your cargo form against the freight you actually haul, send your policy through our gap report. When you’re ready to shop the coverage itself, start with our trucking application.

Quick answers

Is cargo insurance mandatory?

Not under federal rules, unless you move household goods, and those carriers must keep cargo coverage on file with FMCSA. For everyone else, cargo insurance is a contract requirement: brokers and shippers set it, usually at $100,000 or more, and check for it before they tender a load. The liability exists either way.

Is cargo insurance the same as inland marine?

Cargo is one kind of inland marine. Motor truck cargo is written as inland marine coverage, the branch of insurance for property in transit and property that moves from place to place. Inland marine covers a lot more than freight, though: a contractor’s equipment floater and an installation floater are inland marine too. When someone calls your cargo policy “inland marine,” they’re describing the same coverage.