Professional Liability is a very interesting insurance product that has recently received much more notice for truck brokers. Which raises the question: why would a truck broker need Professional Liability coverage when it is not offered for truckers? In my view, we will eventually see truckers required to have Professional Liability. But let’s not get the trailer in front of the tractor….
First, let’s go back to what coverages truck brokers are buying today (in order of popularity):
· Broker Bond for $75,000.
· Contingent Cargo- most look for coverage that includes excess, difference in conditions and sublimits for Identity Theft and Earned Freight.
· Truck Broker Liability- this provides primary coverage versus contingent auto coverage for best practices brokers. Most brokers need and many shippers require this coverage.
· General Liability- this is for premises and incidental exposures normal to truck broker operations.
So why the sudden need for Professional Liability? Both shippers and truck brokers have figured out that, while there has been a vast improvement over the years, truck broker insurance coverage is still in its early days- meaning that the case precedents against truck brokers have not been completely assessed, examined or assimilated in the marketplace. In reviewing the aforementioned coverages, we will then be able to identify the coverage gaps that Professional Liability can fill. Contingent Cargo covers the property or cargo loss that results from the failure of the trucker’s policy to provide coverage. Truck Broker Liability covers the legal liability of the broker for bodily injury, property damage, and pollution for negligence in the supply chain. General Liability covers the premises and can include miscellaneous operations like sales out of the office.
So here is the gap. Could a truck broker be legally liable for a loss that does not result in bodily injury, property damage, or pollution that is not covered in a TBL or GL policy? Could a truck broker be liable for financial loss that is not the property of others? You bet.
A Professional Liability policy covers errors and omissions that are committed during the course of a truck broker’s business day. A truck broker may make mistakes while undertaking their work (overlook a critical piece of information, incorrectly state a fact, etc.) and could be sued by their clients. The fact that a truck broker is in essence a middleman between the shipper and the carrier can create a completely different exposure than for a carrier dealing directly with a shipper. To be more specific, a truck broker needs Professional Liability coverage to cover the following exposures:
· Misdelivery- the truck broker instructed the carrier to deliver the goods to the wrong place.
· Miscommunication- the truck broker told the consignee the load would be delivered on Thursday when he meant Tuesday.
· Regulatory Errors- the truck broker did not know the rules and the load was impounded by a civil authority.
· Discrimination- the truck broker was seen to discriminate against a long standing carrier in favor of another one.
· Negligent Hiring- the truck broker hired an incompetent carrier whose deficiencies resulted in financial loss other than bodily injury, property damage or loss of cargo.
· Negligent Acts
· Negligent Omissions
Although we at GTU are able to sell the only three occurrence forms in the marketplace, most Professional Liability coverage forms are claims-made. Deficient programs only offer coverage on claims-made & reported versus pure claims-made. GTU not only offers claims-made and occurrence coverage, but can also cover punitive damages (where permissible by law), personal injury, disciplinary proceedings, loss of earnings and expense reimbursements.
Aside from normal policy terms and conditions and exclusions, it is important to understand that a Professional Liability policy does not cover:
· The cargo or property lost or damaged in transit (that’s what Contingent Cargo policies are for).
· Bodily injury or property damage (that is what the TBL and GL policies are for).
One last fact to know when dealing with a prospective truck broker. The truck broker business is thriving and averaging 15-20% pretax profit. So if you have a broker doing $5 million in revenue, he is making usually $750,000 to $1 million. If they have any retained earnings, their business is worth way, way more than that pretax profit. So when you are discussing something that seems as insignificant as Professional Liability, the question is: if your business is worth as much as the average truck broker, why would you not have Professional Liability coverage that may pick up the coverage gap?
We hope this offers a clear overview of Professional Liability coverage. Don’t have an E&O by failing to sell Truck Broker Professional Liability/E&O coverage.