Comprehensive Overview of Logistics Risk Management & Insurance
With over 30 years of experience in underwriting transportation and logistics insurance, this content delves into the intricacies of logistics risk management and insurance. It covers the definition of logistics, regulatory aspects of freight brokerage, operational goals in logistics, insurance coverages offered, and professional liability exposures. Insightful discussions on managing contractual risks and selecting carriers are highlighted, making it a valuable read for those involved in the logistics industry.
- Logistics Risk Management
- Transportation Insurance
- Freight Brokerage
- Insurance Coverages
- Professional Liability
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Presentation Transcript
LOGISTICS RISK MANAGEMENT & INSURANCE
My Background Over 30 years Underwriting Transportation and Logistics Insurance Authored Both Trucking and Logistics Policy Forms Developed the GTU SaferWatch Carrier Risk Management Assessment Spoken/ Taught Logistics Insurance at Various Industry Meetings
The World of Logistics Definition of Logistics- Non-Asset Vantagepoint- over $200 billion industry- one in 3 shipments is involved Logistics Entities Freight Brokers- our discussion today Freight Forwarders 3PL & 4PL NVOCC Ocean Carriers Customs Brokers Air Carriers Railroads
Regulatory- Freight (Truck) Broker Definition The term broker means a person, other than a motor carrier or an employee or an agent of a motor carrier, that as a principal or agent sells, offers for sale, negotiates for, or holds itself out by solicitation, advertisement, or otherwise as selling, providing, or arranging for, transportation by motor carrier for compensation. Source 49 USC 13102
Logistics Operation Goals Assume the contractual risk from the shipper Pass the contractual risk to the carrier Insure with best-in-class logistics insurance coverage Understand - what risks are insured and what risks are not Select the carriers that you and counsel can defend in a courtroom HNI Opportunity to Set a UNIQUE Strategy of Insurance and Risk Management
Logistics Insurance Exposures and Coverages Offered Public Liability: Truck Broker Legal Liability, Contingent Auto Legal Liability, Third Party Legal Liability GTU Blog for you and your insureds- Difference between Truck Broker Liability and Contingent Auto Liability- https://truckbrokerinsurancenetwork.gtu-ins.com/the- differences-between-truck-broker-liability-and-contingent-auto-liability/ Cargo Liability: Contingent Cargo Liability, Cargo Legal Liability - Discussion General Liability Excess Liability- an opportunity- discussion
Logistics Insurance Exposures and Coverages Offered (Continued) Professional Liability/ Errors and Omissions GTU Blog for you and your insureds: Why Professional Liability- https://truckbrokerinsurancenetwork.gtu-ins.com/professional-liability-insurance- for-truck-brokers-why-they-need-it-and-coverage-intentions/ Freight Brokers Bond Shippers Interest GTU Blog for you and your new people: Truck Broker Insurance 101- https://truckbrokerinsurancenetwork.gtu-ins.com/truck-brokers-and-truck-broker- insurance-101/ Understand the Difference Between Trucking Coverages and Logistics Coverages
Endorsements that are Commonly Required in Broker-Shipper Contracts Additional Insured Loss Payee Waiver of Subrogation Primary and Non-Contributory 30 day Notice of Cancellation General Liability Per Location Aggregate- Nucor
Regulations- Know the Rules and Laws Map-21: Requires express disclosure of a party s operating authority in written contracts. This for a broker or a carrier. 49 U.S.C states Specification of Authority: For each agreement to provide transportation or service for which registration is required under this chapter, the registrant shall specify, in writing, the authority under which the person is providing such transportation or service. 49 CFR 371.7(b): A broker shall not, directly, or indirectly, represent its operations to be that of a carrier. Any advertising shall show the broker status of the operation. Source/ Attribution: Marc Blubaugh- Benesch
Logistics Underwriting- 5 Legs of the Underwriting Stool Operational Contractual Insurance Carrier Selection Control The GTU/ HNI Underwriting Strategy- Build the Defendable File Both For & With Your Insured!
Operational Underwriting Issues Authority- What authority dictates coverage form Affiliated Entity- involving 2 entities Trailers & Trailer Pools- assets in a non-asset operation Dump/ Scrap/ Oil/ Intrastate- worse operation and carrier selection Non-Transportation Operations International- Not understood Last Mile- Iterations Cyber
Contractual Underwriting Issues Shipper Contract Nomenclature Non-Compliance Insured as Carrier Indemnification Broker Carrier Agreement Parties Insurance Indemnification
Shipper Customer Contractual Goals Defense and Indemnification for cargo loss Defense and Indemnification for public liability Contractual Liability Insurance- future product? Contractual Compliance to the Broker Shipper Agreement
Contract Indemnification Issues: Creating Future Problems Correct Indemnification: Indemnifying the shipper for defense and indemnity for claims, acts, errors and omissions by the broker Incorrect Indemnification examples: Indemnifying the shipper for any and all liability absent the liability of the broker Indemnifying the shipper for any and all liability of the carrier The Need for Contractual Best Practices!
Industry Failures and Broker- Shipper Contracts The Insurance Industry- Poor Explanation and Communication The Legal Industry- No Competence when Dealing with Insurance Matters GTU Blog for you and your insureds- https://truckbrokerinsurancenetwork.gtu-ins.com/brokershipper/
Insurance Underwriting Issues Lack of Diligence in Explaining Coverage Required Lack of Understanding of Exposures Lack of Understanding of Insurance Being Sold
Carrier Selection Issues DOT Safety Rating AM Best Rating CSA Equivalents Years in Business Using GTU/ SaferWatch Algorithm- Discussion GTUs Blog for you and your insureds: SaferWatch- https://truckbrokerinsurancenetwork.gtu-ins.com/why-we-and- you-should-use-saferwatch-for-carrier-selection/ AM Best- https://truckbrokerinsurancenetwork.gtu-ins.com/truck-broker-carrier- selection-and-carriers-insurance-issues-with-am-best-rating/
Control Underwriting Issues Fining Carriers- A big NO! Federal Coercion Rule- Problematic GTU Blog for you and your insureds- https://truckbrokerinsurancenetwork.gtu- ins.com/communication-versus-control-issues-and-dilemmas-for-truck-brokers/
Nuances of Logistics Coverage Opportunity & Understanding Opportunity- Pay on Behalf Versus Indemnity Understanding -Hired and Non-owned- Works for a Freight Forwarder/ Not for a Truck Broker- Discussion Opportunity- Excess Limits- Most Logistics Operations are underinsured. EBITA and issues with Primary Liability Opportunity and Understanding- High Self-Insured Retentions on Trucking & Logistics do not make sense, nor does a carrier know how to defend properly a third party carrier claim Understanding -Professional Liability- what financial loss is the insured legally liable for outside- Is it indemnity or liability? Claims Made?
Policy Weaknesses Full Recourse- LogistIQ Non-Industry Specific- Avalon Defense in the Limit- Most British forms Punitive Damages Excluded Contractual Issues Optional Duty to Defend Since the industry is mostly surplus lines, policy comparisons are a requirement!
The GTU Risk Appetite Who we serve: Truck Brokers Couriers Chassis Operators Freight Forwarders Lease Operations Shippers
GTU Logistics Coverages Offered Truck Broker Liability, Third Party Liability & Contingent Auto Liability Contingent Auto Liability Lease Shipper s Contingent Auto and Rail Liability Professional Liability (E & O) Excess Limits- Treaty up to $25 million General Liability Surety
Questions, Comments, & Next Steps Ben /GTU are happy to do a conference call and discuss logistics with producers and marketing folks and your insureds. Get your book of business on a SaferWatch account. Need name and MC number. Send Ben carrier list and MC Numbers in Excel. Get your insureds a plan for contractual best practices and compare to coverage to avoid E & O s. Let GTU help you set up a Logistics Practice within your Transportation Division Establish a Strategy of what HNI Transportation Wants to Be in Logistics
