Carrier's Liability Insurance example essay topic

PROJECT MOTOR INSURANCE December 2004 Contents Chapter 1 Introduction Chapter 2 Merchandise insurance- cargo insurance introduction o type so object insured amount insurance premium o liability, compensation o risk coverage o exclusions Chapter 3 Carrier's liability insurance general presentation and provision so carrier liability insurance- CMR- Romaniao type so object insured amount insurance premium o liability o risk coverage o exclusions Chapter 4 Vehicle insurance Car Insurance and the Road Traffic Acto Compulsory Car Insurance in the United Kingdom motor insurance against damages and theft o object of the insurance contract insured risk exclusion so insured amount Chapter 5 Third party liability insurance Third party liability insurance in Romaniao International third party liability insurance The Green Card System Bibliography Chapter 1 Introduction The need for motor insurance appeared short after the first cars were introduced at the end of the 19th century, although at that time the number of cars was quite limited as only few could afford it. In fact, motor insurance appeared for the first time at the beginning of the 20th century being included in the category of the insurance for accidents. After 1850 road transportation started to develop, the number of cars increased, they also diversified, as a consequence motor insurance was no longer a type of insurance for accidents but became a new type of insurance as such. Also the total amount of insurance premium in the case of motor insurance was already higher than the total amount of insurance premiums cashed in for all other type of accidents. After the First World War road transportation developed due to the new stimulating trend in the economy and development of the car manufacturing industry. A consequence was the increase in the number of accidents.

The lack of insurance made it impossible to cover up loses or compensate the victims of such events. Thus the motor insurance became also a social necessity. At the beginning motor insurance included only protection for personal injury or other loses suffered by third parties, time brought new types of protection. Motor insurance is not limited to the insurance of the vehicle, but also refers to the protection related to: merchandise insurance- cargo insurance; carrier's liability insurance; vehicle insurance; third party liability insuranfrom its own negligence, in contrast to the strict liability imposed on a common carrier.

However, the contract often makes the trucker responsible for any loss to cargo, regardless of negligence. Exempt zones Certain types of carriage are exempted from the rules that apply to common carriers. Examples are agricultural products (enables farmers to transport their goods to market without traditional regulations), household goods, express carriage, and transportation incidental to air carriage, such as inter modal air-truck carriage. Bill of lading bill of lading serves both as a shipping contract and as a receipt for the goods shipped. (This is an essential document that must be obtained by the adjuster in a claim situation.) It shows the date the goods were shipped, what was shipped, by whom, via what carrier, to an exact destination.

It also specifies the motor carrier's liability. Released bill of lading Bills of lading frequently state a dollar limitation on the value of the cargo or specify a dollar limit of liability. It is usually established according to some unit of measuring the property shipped, such as a specified dollar amount per pound of cargo. The lower freight rates the carrier charges when these dollar limitations are in effect are called released rates. When a carrier's liability begins and ends carrier's exposure begins when property is delivered to and accepted by the carrier. It ends when the shipment is completed, that is, arrives at the final destination and is delivered to the consignee.

At times, it is not totally clear whether cargo has been accepted by the carrier or actually delivered to the consignee. Delivery by the carrier to the consignee's premises is usually evidenced by a receipt that the carrier takes from the consignee at time of delivery. But what if the consignee's business is closed for the day when the delivery is actually made? Or what if an "impostor" accepts the delivery from the carrier? In short, extenuating circumstances can make the facts unclear.

Liability reduced to that of a warehouse operator The bill of lading may provide that after the carrier has delivered the property to a terminal in the consignee's locality and notified the consignee that the property is there, the carrier's liability then becomes that of a warehouse operator-after expiration of "free time" (usually 48 to 72 hours). It is viewed as reasonable that the carrier's liability be reduced from strict liability after a reasonable period of time if the consignee neglects to pick up the cargo after being notified of its delivery. A warehouse operator is generally responsible only for loss that results from its negligence-that is, its failure to exercise the degree of care a reasonably prudent person would have exercised under the same circumstances. Federal and state insurance and filing requirements The U.S. Code (49 USC 13906) requires motor carriers of cargo operating within federal jurisdiction to show evidence of cargo liability insurance with o minimum limits of $5,000 for loss or damage to the contents of any one vehicle, o and $10,000 for aggregate losses or damage at any one time and place.

Self-insurance is permitted for carriers that have the appropriate level of financial stability. Form BMC 32 Insurers must endorse the carrier's MTC liability policies with Form BMC 32-Endorsement for Motor Common Carrier Policies of Insurance for Cargo Liability. To prove that this endorsement has been attached, the insurer is required to file Form BMC 34-Certificate of Insurance. The BMC 32 endorsement requires that the insurer pay the shipper or consignee for all loss or damage for which the motor carrier is held legally liable, up to the limits of $5,000 (per vehicle) and $10,000 (aggregate) as noted previously. It is important to emphasize that the insurer's responsibility under BMC 32 is not limited by the exclusions or limitations contained in the MTC liability policy.

Subject to its dollar limits, BMC 32 covers any cargo claim for which the carrier is liable. Examples of claims that the insurer would be required to pay in the event the trucker goes out of business, which most MTC liability policies would otherwise exclude, are: o employee theft of cargo; o loss of property that the policy specifically excludes (such as artwork or animals); and a loss that is under the deductible. The reason for the BMC 32 requirement is that many trucking companies have gotten into financial trouble over the years as a result of intense competition brought on by deregulation. Most of these financially troubled companies carried insurance, but many had substantial deductibles. As financial conditions worsened, some carriers were inclined to stop paying claims to reduce the drain on cash. When this occurred, frustrated shippers and consignees began making claims directly against the insurer, which had guaranteed to pay claims under the terms of BMC 32.!

Keep in mind that the cargo carrier must be legally liable before the insurer can be held responsible for paying the carrier's claims. The insurer must conduct an investigation to determine the carrier's liability. The insurer has the right of reimbursement from the carrier for any payments the insurer would not have been obligated to make except for the BMC 32 requirement. However, if the carrier is facing serious financial difficulties, it is unlikely the insurer will be able to recover. Aside from federal filing requirements, many states require that truckers operating within the state make similar filings to those required under federal law.

The Inland Marine Underwriters Association (IMUA) periodically compiles state filing requirements and makes them available to IMUA member companies. Central Analysis Bureau (CAB) The liability assumed by insurers when making cargo filings makes financial strength an important underwriting consideration when writing MTC liability. The Central Analysis Bureau (CAB) was created in response to the need of insurers to have an in-depth evaluation of a motor carrier's financial condition. The CAB is the most comprehensive industry source for financial information on MTC carriers- information that is available to member companies.

Based on information obtained from regulatory agencies, insurers, or motor carriers, the CAB assigns a financial rating to a carrier. The ratings are: o Satisfactory A good financial; o Fair An adequate financial structure; o Barely fair A limited financial structure; o Poor A weak financial structure; o Unsatisfactory An inadequate financial structure; o Dangerous A distressed financial structure. When an account is being quoted or considered for renewal, a financial rating can be obtained by calling the CAB directly. Once an account has been written or renewed, a hard copy of the CAB report can be obtained for a company's files. When the financial strength of a carrier is a concern, the CAB can assist in putting together financial devices that will protect an insurer. These devices can be: 1.

A clean and irrevocable letter of credit from a bank; 2. The establishment of an adequate escrow account; 3. An indemnity agreement with an acceptable parent company or individual. MTC liability insurance provisions Although there are no filed policy forms for motor truck cargo liability insurance, most insurers that write this coverage maintain a standard form for issuing policies. This form can be modified by endorsement to fit the needs of a particular insured. Advisory non-filed forms for this class of business are available from AAIS and ISO.

AAIS offers three MTC liability forms. Coverage can be on an "open perils" or "named perils" basis, but coverage applies only when the insured is legally liable. The three MTC forms are: 1. Motor Truck Cargo Liability Coverage This MTC form is designed to cover all shipments of described cargo during the policy term (i. e., annual), while on any truck, trailer, or semi-trailer or at a scheduled terminal. 2. Motor Truck Cargo Liability Coverage - Scheduled Vehicle Form.

This MTC form is designed to cover all shipments of described cargo during the policy term while on any scheduled truck, trailer, or semitrailer. 3. Motor Truck Cargo Liability Coverage - Named Perils Form. This MTC form is designed to cover all shipments of described cargo for loss caused by a named peril during the policy term, while on any scheduled truck, trailer, or semitrailer. Freight charges due the trucker that become un collectible because of a loss are also covered. It is often difficult, after a loss, for a trucker to go back to the shipper and ask for payment.

Freight charge coverage will reimburse the trucker when it cannot collect these charges. (AAIS also has an owners form that provides coverage for the trucker's property that it is transporting.) Carrier liability insurance- CMR- Romania The carrier liability insurance is intended to provide legal liability coverage for carriers while they are transporting property of others. Under a carrier liability insurance contract, the insurer covers the liability of the carrier that undertakes the transportation of the merchandises by vehicle owned, rented or leased by him. This is done in accordance with the provisions provided by the International Road Transportation Contract of Merchandises- CMR. Insurance Object This type of insurance is valid outside and inside the Romanian territory.

It is concluded with the carrier that is providing for the merchandise transportation, for a single trip or for a whole year. The insurance is valid exclusively for the vehicle mentioned in the contract and only for the transports provided by the insured. For each transport done during the validity period of the insurance the maximum limit of the liability covered is established by mutual agreement between the insurer and insured, according to the value of the merchandise. Insurance premium The insurance premium is fully paid in advance for the entire insured period. For the insurances concluded for one year the insurance premium can be paid in installments, the first installment in advance. The insurance premium can be paid in ROL or other foreign currencies as provided in the insurance contract.

Liabilities of the insured The liability of the insured starts in the moment the goods were loaded in the vehicle and ends the moment the goods were unloaded at the destination point. The carrier is also liable for not meeting the delivery deadline. The liabilities of the carrier are established according to the provisions of article 17 and 23 of CMR. Taking into consideration the provisions of article 18 of the CMR the carrier is exempted from his liability if the loss or the damage of the goods is the consequence of: - utilization of a convertible vehicle, if this was expressively agreed in the contract and stated in the bill of lading; - lack or damage of the package for the merchandise that, by their nature, are exposed to damage if they are unpacked or inappropriately packed; - loading, unloading or movement of the merchandise by the sender, the recipient or their representative; - inappropriate loading or numeration of the parcels; - live stock transportation. If the carrier is liable for the total or partial damage of the merchandise, the amount that is to be offered as indemnity is determined on the basis of the cost of the merchandise at the moment and place of expedition. The amount cannot exceed the maximum limit established by CMR.

The transportation cost, custom duties and the other expenses occurred during the transportation are also reimbursed to the insured. The reimbursement is complete in case of total damage and proportional in case of partial damage. The carrier's liability insurance does not cover: - indirect damages as decrease in the price of merchandise; - damages caused by military operations during war, strike or civil conflict; - expenses incurred in order to transform or improve the goods as compared to their initial state before the insured event occurred; - expenses incurred in order to restore the damages caused by non-insured events; - expenses incurred in relation to unsuccessful repairing..