What’s Behind Your COI – Certificate of Insurance

Shippers want their transportation partners to pick up on-time, deliver on-time, and not to damage the freight. The reality is, challenges occur every day in transportation. When a challenge does occur, the shipper wants assurances their transport partner will manage a claim in a timely manner and be paid as per the terms of the agreement. As brokers are facilitators to manage the claim between their shipping partner and carrier partners, understanding the COI and what is behind the COI is critical.

The standard process when shippers and brokers on-board and vet a new carrier:

1.      They review safety records, MC#s, lanes and rates.

2.      The carrier sends a Certificate of Insurance (COI), many brokers also request to be a named insured to receive notification about any updates to the policy automatically.

The COI traditionally is what is reviewed to ensure the carrier has the limits required for auto, non-owned auto, personal liability, and cargo insurance. Unfortunately, a quick look at a COI won’t cut it, and even deeper dives in COI’s are not always proving a viable method of vetting and avoiding a claim in today’s double broker market. (Follow Tim Bannon, he does point out how the double brokers alter COIs to be approved by shippers and brokers). If you have come across a legitimate carrier and COI, the next question becomes: Does the insurance contract behind the COI provide the coverage your shipper needs?

When looking at a sample of a COI, the bottom left is generally the cargo insurance box, if it does not list ‘All Perils’ that is the first indicator that the insurance contract may have exclusions. Many shippers and brokers do not look behind the COI to understand what the exclusions are, or how they could affect their business in the event of a claim. (In addition to reading further here, you may also want to follow Drew Wilder on LinkedIn. He is a great resource to assist with understanding what is behind the COI).

Here is a sample list of exclusions that some insurance contracts have:

1.      Truck unattended or truck unhitched from trailer.

2.      By misappropriation, secretion, conversion, infidelity or any dishonest act on the part of the Insured or any other party of interest, employees or agents of the Insured, or any person to whom the property may be entrusted;

3.      By or resulting from strikes, lockouts, labour disturbances, riots, civil commotion, or the acts of any person or persons taking part in any such occurrence or disorder;

4.      Due to inherent vice, or delay, loss of profit, loss of use or loss of market;

5.      By shifting of load, poor packing or rough handling; nor for loss or damage caused by contact with oil or grease or any other commodity, marring or scratching, wetness or dampness, leakage of liquids, contamination, or as the result of being spotted, discoloured, moulded, rusted, frosted, frozen, rotted, soured, steamed or heated or changed in flavour;

6.      Due to any dishonest, fraudulent or criminal act by the Insured, a partner therein or an officer, director, trustee or employee thereof, whether acting alone or in collusion with others;

7.      By mis delivery, any mysterious disappearance or by pilferage.

It is not uncommon for insurance policies to have exclusions, your auto for example may not cover items stolen from your car. Another example, car insurance certainly would not cover you if you stole your own car. The concern with the exclusions for brokers and shippers is that they make it obvious a carrier is not interested in protecting a shipment. If a carrier allows exclusions like these in their policy, they are either ignorant to the drawbacks of having exclusions in a policy for a broker or shipper, or skipping on proper protection and hoping brokers and shippers don’t notice. In either case, they are in one way or another rejecting the Transportation Act’s responsibilities given to the carrier.

For example, under the Transportation Act, unless a load is ‘shipper load and count’ (SLC) and the driver never saw it loaded, the contents are the carrier’s responsibility if the load shifts. If Clause 5 above is an exclusion in a carriers COI, the carrier (though entirely responsible for the packing of the load in the transportation act), will not be paying any claim on damage from a shifted load.

For another example, if Clause 7 is an exclusion in the COI, if the carrier delivers to the wrong customer or loses the freight the shipper is not covered. Ouch, I guess the carrier doesn’t care much to present to brokers and shippers that their fundamental obligation to deliver a load to the correct location is something they are willing to back up in their policy, and/or pay a claim on if they fail to do so.

Right now, the challenge is that there are too many insurance brokers and underwriters that will not change these exclusions, when a challenge occurs for a shipper or a broker, claims are denied by the insurance broker and underwriter. Carriers, check your policy and make sure you explain to potential broker and shipper partners the value you bring to the table with a clean ‘All Perils’ COI. Shippers and brokers, request the full COI and insurance contract. You are within your rights to do so, and choosing not to work with a carrier whose insurance doesn’t meet your standards will protect you and your shipper.

As always, stay diligent, and work with your insurance partners! They have the expertise to ensure you and your customers are covered.