Without transportation companies, stores would have a difficult time stocking their shelves with merchandise. The owners of this freight would find it difficult to get their goods to those merchants. But the shipping companies are saddled with a huge responsibility for delivering these goods on time and unscathed.
Policies are available to protect the goods while in transit to the warehouse or while at the warehouse itself. Texas Cargo Liability Coverage, a type of contingent cargo policy, is just one good example of the type of policy these freight forwarders need. Cargo insurance policies can be endorsed to cover all types of instances, or a policy can be purchased individually to provide cumulative coverage for any and all locations of goods.
Are there legal requirements for freight brokers?
Freight brokers or freight forwarders aren’t actually legally required to carry contingent cargo insurance. But carriers are often reluctant to work with anyone that doesn’t carry this policy. This tends to place economic pressure on freight brokers, as well as freight forwarders, to obtain and carry insurance. Furthermore, should a shipper’s cargo suffer damage and the carrier refuses the claim, the shipper will look to the freight forwarder to make good on the claims. Although not strictly liable, the forwarder’s reputation will suffer if he does not pay.
Shippers, as a means of protecting their own interests, should ensure that their freight forwarder carries contingent cargo insurance before entering into an agreement for the carriage of cargo. Shippers may hold freight brokers, the one who negotiates transportation contracts on behalf of shippers, liable should the cargo be lost or damaged in transit.
To guard against this potential exposure, freight brokers will carry contingent cargo insurance to insure them against claims made by the shippers for damage to cargo. Texas Cargo Liability Coverage comes into play in those situations when the carrier refuses to honor a claim. This can happen when the circumstances surrounding the loss is out of their control and they no longer feel obligated to pay. Most disputes can be settled because the reputational damage is such that no one wants their business to suffer for failing to honor a claim.