Paul Stewart

Logistics and Transportation Law/Commercial Transactions- Representing National Logistics Companies,Shippers and Carriers

Our firm recently recovered policy limits on a cargo claim from the motor carrier’s insurance company, even though the claim had been denied when filed by the carrier with his insurance company. While this case was a bit complicated with parties and legal theories, the solution was quite simple, once discovery and apprpriate motions had cleared the air and established the roles of the parties..

I. Clear Requirements for Cargo Insurance coverage as an Additional Insured.

As I have recently written here, most Broker/Carrier Agreements (“BCA”) have (or should have) provisions whereby the motor carrier is required to have the shipper or 3PL named as an additional insured on the carrier’s cargo policy. (Here you should keep in mind that the motor carrier’s cargo policy is not a contingent policy, nor is it laced with other requirements the shipper or 3PL would have to satisfy if claiming against their contingent policy.)

However, even if the carrier should fail to name the shipper/3PL as additional insured, most cargo policies since 2013 include ISO language similar to the following:


This language requires that the motor carrier be under contract (BCA) to have the shipper/3PL named as an additional insured, and if so, even if the carrier should fail to have the shipper/3PL named as additional insured, the policy would cover the claiming party up to the limits of the policy, provided claim is properly made upon the carrier’s insurance company.

Where such language is a part of the insurance contract, notwithstanding the carrier’s failure to have the 3PL/Shipper actually named as an additional insured, the 3PL/Shipper becomes an additional insured. Ohio Cas. Ins. Co. v. Chugach Support Servs. Inc., Case No. C10-5244RBI (W.D. Wash., 2011).

IILessons to be Learned for Expanding the Insurance Coverage via Additional Insured.

  1. Always include appropriate contractual requirements for the motor carrier to have the affirmative duty to name the shipper/3PL as an additional insured on the carrier’s cargo insurance policy.
  2. While properly filing a cargo claim against the motor carrier in compliance with 49 CFR 370 et seq., also notify the motor carrier’s insurer that you consider your company to be an additional (primary) insured under the policy, whether the motor carrier has had you so named, or not. This should be sufficient to put the insurer on notice, while the cargo claim is first being processed against the motor carrier’s insurance. Such notice is sufficient to put the insurer on notice of your status as an additional insured under the Additional Insured Endorsement.

Just as insurers have a duty to defend additional insureds where there is an action against such parties, it is likely that such insurers may be held liable for all costs of cargo claims litigation, should they not acknowledge that the 3PL/Shipper is an insured under the carrier’s cargo policy.

Such a duty can be inferred from cases such as United Parcel Serv. v. Lexington Ins. Grp., 983 F. Supp. 2d 258, wherein the Court held that the standard was insurer “knowledge of facts that potentially bring the claim within the policy’s indemnity coverage, even if those facts are extrinsic to a formal complaint.”

3. Once the issues of the cargo claim have been considered first under the direct claim against the motor carrier’s policy, should there be no proper resolution, the shipper/3PL should make claim directly as an additional insured under such policy, since the shipper/3PL will not be subject to some of the potential reasons for declination by the insurance company as to the motor carrier’s direct claim.

4. Should the insurer fail to pay the cargo claim, the shipper/3PL may now sue the motor carrier and their insurer directly, with standing both as the shipper of the damage/lost cargo, as well as an insured under the policy. This action may also seek attorney fees and costs since the first declination by the insurance company.

III. Conclusion.

The status of additional insured is not any longer complicated or more costly for any of the parties to the BCA. However, many motor carriers often strike such provisions from the BCA, more out of reflex than any possible prejudice to them. 3PLS and shippers should maintain a strong insistence on such provisions being included within all BCA’s with carriers. If for no other reason than it is actually doing the carrier a favor of insurance against their indemnities and duties under the Carmack Amendment, at no additional cost to either party.

Bottom line…if you are not fully aware of how to use the additional insured status as a shipper or 3PL, you should make every effort to acquire this knowledge and appropriate contractual language within your BCA.

It is a belt and suspenders move which is clearly more value laden than without such contracting and claims management.