Auto Liability Coverages:

Freight broker insurance is essential for protecting your business from the risks involved in the transportation industry. Auto liability coverages are a critical component of this protection, ensuring that your operations are safeguarded from financial losses due to accidents, claims, or contractual liabilities. Below, we explore the three main types of auto liability coverages for freight brokers: Contingent Auto Liability, Truck Broker Liability, and Primary Auto Liability.

Contingent Auto Liability:

Contingent Auto Liability insurance offers coverage designed to protect freight brokers when a motor carrier's insurance fails or becomes insolvent. This coverage acts as a safety net, stepping in only when the motor carrier’s insurance does not cover a valid claim or when the carrier’s insurer is unable to fulfill its obligations.

The motor carrier’s insurance serves as the primary coverage, and the contingent policy is activated under specific terms outlined in the policy. Contingent Auto Liability can be written with aggregate or per occurrence limits, and whether defense expenses are included depends on the policy structure. In many cases, if the trucking company provides its defense, there may not be separate defense coverage under the contingent policy. Punitive and exemplary damages are often excluded from coverage.

Coverage limits for Contingent Auto Liability typically range between $15 million and $25 million before considering additional limits available in the excess market. Policies often include specific conditions that must be met for the coverage to apply, making it crucial to thoroughly understand the policy details and ask questions before finalizing your coverage.

Truck Broker or Third-Party Liability Insurance:

Truck Broker Liability insurance, also referred to as Third-Party Liability insurance, provides broader protection than Contingent Auto Liability. This coverage is specifically designed to address bodily injury or property damage caused by the freight broker's operations as a transportation property broker. Unlike Contingent Auto Liability, this policy applies directly to the freight brokerage’s liability and does not act as excess coverage for motor carriers or shippers.

Some policies may bundle Truck Broker Liability with General Liability coverage, offering a more comprehensive solution. Coverage is typically written on a per occurrence basis, which is more common than aggregate limits, and defense expenses may be included either inside or outside the policy limits. However, this policy only responds if the freight brokerage is found liable.

While Truck Broker Liability insurance offers broader coverage, it does not assume responsibility for actions taken by motor carriers or shippers. Punitive and exemplary damages may also be excluded, depending on the policy terms and state regulations. Coverage limits generally fall between $1 million and $5 million, with the option to purchase additional limits from the excess market. Since policies vary significantly, it is critical to understand how your specific coverage will respond to contractual obligations with motor carriers and shippers.

Primary Auto Liability for Freight Brokers:

Primary Auto Liability insurance offers direct and extensive coverage to freight brokers, providing protection for liability claims without relying on a motor carrier’s policy. This type of coverage is less common in the market and is typically offered by a limited number of carriers.

Primary Auto Liability policies are designed to provide the most comprehensive protection available but often come with lower coverage limits. Freight brokers seeking higher limits may need to purchase additional excess coverage. Due to its extensive nature, this coverage is generally more expensive than other types of auto liability insurance.

While costly, Primary Auto Liability insurance is ideal for freight brokers who want to ensure their operations are fully protected against liability risks. Understanding the terms and limitations of this policy is essential before purchasing, as it plays a major role in safeguarding your brokerage from financial losses.