Most companies insure their shipments. Transportation contracts for cargo insurance can be confusing and it can be difficult to understand the policies. Therefore, many companies use a freight broker to help them get the proper rates and the correct coverage.
In the event that the insured cargo is lost or damaged and the insurance company denies the claim, the freight broker can be held liable for the cost of the cargo. Any size of missing or ruined shipment can be very costly and can potentially bankrupt a broker if they are found to be the responsible party. That is why it can be wise to have contingent cargo liability for brokers.
While it is not a legal requirement for brokers to have contingent cargo liability, the vast majority of brokers choose to invest in this type of insurance. Many companies will only work with brokers that have contingent cargo liability because it offers them an extra layer of insurance for their shipments. If a broker doesn’t have this type of liability insurance and therefore refuses to pay for a claim, they can quickly earn a negative reputation and lose clients.
Whenever you are potentially responsible for the shipments and ultimately the money of another company, it is crucial to make sure that you are prepared for any eventuality. Contingent cargo liability for brokers can make the difference between a broker who is thriving and one who is bankrupt.