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Actually it is correct as MikeJr alluded to earlier. An insurance company will not pay off to anyone that is not a party to the bill of lading. Matter-of-fact, if you are not party to the bill of lading, they won't even speak to you. I suspect Misto's firm attempted to mitigate the claim on behalf of their customer (so as not to have their hired carrier speaking directly with their customer), i.e. carrier/insurance pays the claim to the broker, and the broker pays the claim to the customer, however that is a big no-no in the insurance world.
Being listed as a certificate holder on an insurance policy only guarantees you that the carrier's broker will advise you if the insured cancels the policy, and only if they remember to inform you. A Named Certificate infers no other rights or remedies ... read the details of a certificate carefully.
What offers you (as a load broker, inter-liner, 3PL, etc) the most protection is to be added as a Named Additional Insured to the carrier's policy. No broker will ever recommend that a carrier takes that route. No insurance company will offer that service without a significant increase in the carrier's premium and proper vetting of the entity requesting the Named Additional Insured endorsement, and no carrier in their right mind would ever supply that kind of coverage. In effect a Named Additional Insured endorsement on a carrier's policy means that the carrier's insurance company is completely underwriting the Named Additional Insured's operations. However, lately there has been a trend to offer the Named Additional Insured endorsement with clauses the limit the scope of the endorsement, however, insurance companies are still not comfortable offering that endorsement.
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The whole purpose to being a certificate holder, or an additional named insured, is for the carriers insurance policy to cover the expenses of the 3pl in the event the 3pl is drawn into litigation resulting from an accident or other incident involving the carrier. I would have to disagree with Michael that this involves "the insurance company underwriting the Additional Named Insured operations". There are many examples of this in other areas besides transportation. If you lease a car for example,from Ford Motor Credit, they will ask to be an Additional Named Insured on your motor vehicle policy for exactly that reason. You get in an accident, and everyone involved can be a target for litigation. I have yet to have a carrier's insurance company deny our request to an Additional Named Insured on their policy. I don't want them to, nor would I expect them to provide me with any coverage other than when their insured (the carrier) has my customer's freight on board. Most of our major multi-national customers require that they not only be Additional Named Insured on our policy, but also the policies of the carriers we use to move their freight. So far, no problems or concerns on the part of any parties involved.
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Igor Galanter
Well-Known Member
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@loaders ... When you lease from Ford, they ask to be an Additional Insured. That is different than an Additional Named Insured. Additional Insured ensures them that in the event of an accident the insurance company defends them as well if need be, and when the payout for the damage comes, their name is on the cheque as well as yours. An Additional Named Insured is as I described it earlier.
In addition to detailing the policy numbers and limits of the policy holder, a Named Certificate Holder only guarantees that the insurance broker (not the insurance company) will notify you if the policy holder cancels the policy, or if the policy is terminated, and only if they remember to inform you. Here's the exact wording from mine ...
SHOULD ANY OF THE ABOVE DESCRIBED POLICIES BE CANCELED BEFORE THE EXPIRATION DATE
THEREOF, THE ISSUING COMPANY WILL ENDEAVOR TO MAIL 30 DAYS WRITTEN NOTICE TO THE
CERTIFICATE HOLDER NAMED TO THE LEFT, BUT FAILURE TO MAIL NOTICE SHALL IMPOSE NO
OBLIGATION OR LIABILITY OF ANY KIND UPON THE COMPANY’S AGENTS OR REPRESENTATIVES.
A Named Certificate infers no other rights or remedies on the policy holder, the insurance broker, or the insurance company, nor does it protect the certificate holder in any way, shape, or form.
Earlier I wrote "However, lately there has been a trend to offer the Named Additional Insured endorsement with clauses the limit the scope of the endorsement, however, insurance companies are still not comfortable offering that endorsement.", and that is somewhat incorrect. It should have read "However, lately there has been a trend to offer the Additional Insured endorsement with clauses that the limit the scope of the coverage.". Mine reads;
"XXXXXX Ltd. is added as Additional Insured under the Commercial General Liability Policy listed above but only with respect to liability arising out of the operations of the Named Insured."
In this clause XXXXXX Ltd. is the load broker, and the Named Insured is the policy holder, me. This clause ensures the broker that in the event of litigation, my insurance company will protect the broker's interests, to the limits of my policies, but will not protect their interests for anything other than the work I do for them.
You can ask for anything from your insurance broker and insurance company, but you really should know what you are actually asking for. Your insurance broker should be telling you about these subtle differences in terminology and what they really mean to your operation. It's what you are paying them for. However, what usually happens, especially with smaller firms, regardless of whether they are carriers or brokers, is that they go with their local, or personal, insurance broker, and quite often these insurance brokers are in way over their heads when it comes to transportation insurance, and you, as the insured, are left exposed.
Personal experience story ... many years ago we insured with our local insurance broker. Just a few trucks, so what the heck ... that's who you use. But then we grew, and grew, and grew. Eventually we were running 52 units all over North America. One day a transportation insurance broker comes in. He hits it off pretty good with upper management and asks if we would mind if he looked at our policies, so we let him. EYE OPENER. Turns out that we were so exposed that had we endured any sort of injurious accident we would have lost the entire company as well as personal assets. We immediately switched to being covered by a professional transportation insurance broker and an insurance company that specialized in transportation. However, upper management did not want to totally cut out the local broker, so we kept our local property insurance policies with them as well as our PPVs. Fast forward several years, the transportation brokers changes people, I take over our insurance management, and we don't get along (imagine that ... me not getting along with someone ... LOL), so we change brokers. The new broker examines ALL of our policies and discovers we have been double insuring many facets of our operation for years ... tens of thousands of dollars wasted. What makes matters worse is that when you are double covered, it is almost as bad as not being covered at all as each insurance company will say that the other is primary on the claim.
Long story sort ... get a good transportation broker, a really good one. Have them examine all of your policies together, and formulate one single comprehensive insurance package.
Wow ... did I get way off topic on this one or what ... LOL
In addition to detailing the policy numbers and limits of the policy holder, a Named Certificate Holder only guarantees that the insurance broker (not the insurance company) will notify you if the policy holder cancels the policy, or if the policy is terminated, and only if they remember to inform you. Here's the exact wording from mine ...
SHOULD ANY OF THE ABOVE DESCRIBED POLICIES BE CANCELED BEFORE THE EXPIRATION DATE
THEREOF, THE ISSUING COMPANY WILL ENDEAVOR TO MAIL 30 DAYS WRITTEN NOTICE TO THE
CERTIFICATE HOLDER NAMED TO THE LEFT, BUT FAILURE TO MAIL NOTICE SHALL IMPOSE NO
OBLIGATION OR LIABILITY OF ANY KIND UPON THE COMPANY’S AGENTS OR REPRESENTATIVES.
A Named Certificate infers no other rights or remedies on the policy holder, the insurance broker, or the insurance company, nor does it protect the certificate holder in any way, shape, or form.
Earlier I wrote "However, lately there has been a trend to offer the Named Additional Insured endorsement with clauses the limit the scope of the endorsement, however, insurance companies are still not comfortable offering that endorsement.", and that is somewhat incorrect. It should have read "However, lately there has been a trend to offer the Additional Insured endorsement with clauses that the limit the scope of the coverage.". Mine reads;
"XXXXXX Ltd. is added as Additional Insured under the Commercial General Liability Policy listed above but only with respect to liability arising out of the operations of the Named Insured."
In this clause XXXXXX Ltd. is the load broker, and the Named Insured is the policy holder, me. This clause ensures the broker that in the event of litigation, my insurance company will protect the broker's interests, to the limits of my policies, but will not protect their interests for anything other than the work I do for them.
You can ask for anything from your insurance broker and insurance company, but you really should know what you are actually asking for. Your insurance broker should be telling you about these subtle differences in terminology and what they really mean to your operation. It's what you are paying them for. However, what usually happens, especially with smaller firms, regardless of whether they are carriers or brokers, is that they go with their local, or personal, insurance broker, and quite often these insurance brokers are in way over their heads when it comes to transportation insurance, and you, as the insured, are left exposed.
Personal experience story ... many years ago we insured with our local insurance broker. Just a few trucks, so what the heck ... that's who you use. But then we grew, and grew, and grew. Eventually we were running 52 units all over North America. One day a transportation insurance broker comes in. He hits it off pretty good with upper management and asks if we would mind if he looked at our policies, so we let him. EYE OPENER. Turns out that we were so exposed that had we endured any sort of injurious accident we would have lost the entire company as well as personal assets. We immediately switched to being covered by a professional transportation insurance broker and an insurance company that specialized in transportation. However, upper management did not want to totally cut out the local broker, so we kept our local property insurance policies with them as well as our PPVs. Fast forward several years, the transportation brokers changes people, I take over our insurance management, and we don't get along (imagine that ... me not getting along with someone ... LOL), so we change brokers. The new broker examines ALL of our policies and discovers we have been double insuring many facets of our operation for years ... tens of thousands of dollars wasted. What makes matters worse is that when you are double covered, it is almost as bad as not being covered at all as each insurance company will say that the other is primary on the claim.
Long story sort ... get a good transportation broker, a really good one. Have them examine all of your policies together, and formulate one single comprehensive insurance package.
Wow ... did I get way off topic on this one or what ... LOL
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Perhaps then Michael, we are only in disagreement over my incorrect use of insurance terminology. I agree completely regarding the somewhat limited value of being only a Certificate Holder, a mere convenience knowing that the carrier you are using has insurance, but useless when things go sideways. Being listed as an Additional Insured provides the freight broker, or 3rd party, with the defense of the carrier's insurer in the event of litigation, which is something that every load broker should be asking for. It is always a pleasure to have your insight on matters such as this.