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Cline Wood Truck Broker Insurance Presentation
Presented by Ben Armistead, Partner
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Current Logistics Overview
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Logistics Providers
• Transportation Intermediaries: Non-asset based providers of transportation services
• Help tens of thousands of shippers each and every day
• One in three shippers uses an intermediary to arrange movement of their freight
• Multi-Modal: highway, rail, air, sea
• Logistics: $7.5B payroll & 126,000 employees
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Logistics
• Creates efficiencies in the supply and distribution chain
• Acts as an outside sales force for carriers looking for freight to haul
• Meets shippers’ needs by finding carriers for freight
• Offers other services in the supply chain such as warehousing, loading, and more
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Logistics - Entities
• Truck Brokers (Freight Brokers)
• Freight Forwarders
• Third Party Logistic Providers (3PLs)
• Fourth Party Logistic Providers (4 PLs)
• Non-Vessel Operating Common Carrier (NVOCC)
• Ocean Transportation
• Customs Brokers
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Quality of Insurance Is An Integral Part of Enticing A Shipper’s Interest in Doing Business with a Truck Broker
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Best in Class Insurance:
• Truck Broker Liability/ Third Party Liability versus Contingent Auto Liability
• Contingent Cargo that includes Difference-in-conditions, identity theft, and dishonest acts of the carriers
• Professional Liability
• General Liability and the Freight Bond
• Pollution
• Excess
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Truck Broker Risk Management Goals with Their Insurance Carriers- The Necessary Partnership
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• The Truck Broker should be willing to do all they can to lower or mitigate risk acceptance at both the shipper and carrier level. This should insure the insurance company’s profitability and create premium continuity
• Insurance Companies should be willing to offer the best products that feature comprehensive asset protection to truck brokers and their customers, the shippers, thereby facilitating greater commerce for the truck broker
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Risk Management Strategy and Objectives
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The Contractual Objective
• Greater Liability- Truck Brokers are continually be asked to assume greater contractual liability that they are challenged to pass the liability seamlessly from the shipper contract level to the carrier contract level
• Legal Review- If there has not been legal review and assessment and review of contracts, and having counsel review contractual liability versus their insurance coverage, the truck broker is managing their business in a dark risk management cave
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The Customer Objective
The Sales Dance Between The Truck Broker and The Shipper
• Limiting Liability Assumed- The strategy is to the Shipper satisfied while limiting the liability assumed and making sure cargo claims are paid by the cargo insurance company or the carrier
• Cargo Liability Issues- With the burden to prove cargo liability on both the shipper and the carrier, issues relative to unpaid cargo claims have put the truck broker as the diplomat/negotiator in cargo losses- especially in the food business.
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The Truck Broker Insurance/Risk Management Endgame • The Algebra:
Risk Management for the Truck Broker = Risk Transfer to the carrier - lack of contractual assumption of liability + best-in-class insurance
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The Notion of Insurance “Best Practices”
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What Does “Best Practices” Mean
Definition:
Best Practices are generally accepted, informally standardized techniques, methods or processes that have proven themselves over time to accomplish positive results.
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Examples of Critical Best Practices
• Broker carrier agreement with all carriers- defines the relationship, elaborates on specific insurances, and requires full indemnification irrespective whether carrier’s insurance pays. The goal is to relate to the carrier and the general public that the truck broker is an independent contractor in the supply chain
• Prequalification of carriers- establishing guidelines relative to current authority, DOT safety rating, years-in business, CSA violations, AM Best rating, minimum insurance limits
• Bill of Lading- the legal issue relative to DOT and the reality of the supply chain- the determinate of legal liability for your insurance carrier and in the courtroom
• Firewall of operations- between carrier, distributor, and affiliate operation
• Carrier insurance quality and minimum insurance limits and coverage
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The Insurance Underwriting Strategy
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• Organizational
• Contractual
• Insurance
• Carrier Selection
• Control
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How Do Insurance Underwriters of Truck Brokerage Evaluate Prospective Insureds?
Best Coverage Available Requirements
The best operations get the best coverage- period. And those that are willing to make exceptions to risk management best practices end up with inferior coverage and gaps in protection
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Carrier Selection- The Ultimate Determinant on Legal Liability
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Data- Get The Data and Formulate A Strategy • It’s about the data- and the lack of data nationally
that you should be concerned with
• It’s not about the carriers and the what to do when they do not fit your criteria for acceptability- Carrier Search Engines
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Cline Wood Truck Broker Insurance Presentation
Presented by Ben Armistead, Partner
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