Where we are now
Disaster in Japan; Avalon assists in
aid, BCP reminder
CBP updates: Bond insufficiency, new
address for mailing checks
FMCSA elimination of Cargo Insurance,
BMC-32 takes effect March 21
CSA motor carrier
ratings now in force
New ACORD form changes how logistics
Revised Incoterm rules
UAE joins ATA
FMCSA elimination of Cargo
Insurance and BMC-32 to take effect today, March 21
As originally announced in our
August 2010 Quest, the Federal Motor Carrier Safety
Administration (FMCSA) has issued a
final rule that eliminates
the requirement for most for-hire carriers and freight
forwarders to maintain Cargo Insurance in prescribed minimum
amounts and file evidence of this insurance with FMCSA.
With the elimination of this requirement, effective today,
March 21, the BMC-32 Cargo Liability endorsement will
disappear for most motor carriers. The BMC-32 will be
necessary only for freight forwarders and motor carriers
involved in the movement of household goods. The
Transportation Intermediaries Association (TIA) and the
Transportation & Logistics Council oppose this action.
What is the Cargo Insurance Requirement/BMC-32?
The BMC-32 provided proof of a motor carrier’s Cargo
Insurance policy and was originally required by the
Interstate Commerce Commission after many trucking companies
experienced financial problems. The BMC-32 is an endorsement
to a Cargo Liability policy that guaranteed a minimum level
of coverage for loss or damage in transit at $5,000 per
Why is this important?
Claims submitted under the BMC-32 endorsement were not
subject to deductibles or exclusions and were paid by the
insurance company even if the carrier declared bankruptcy.
This prompted many insurers to financially underwrite their
clients based on this financial obligation. Now, because the
FMCSA is no longer requiring Cargo Insurance coverage for
motor carriers, insurers may choose to no longer financially
underwrite these entities as part of the application
In the final rule, the FMCSA stated that elimination of
the BMC-32 endorsement would make it “less convenient to
confirm the existence of cargo insurance.” Logistics
providers know that verifying insurance is an important part
of the carrier qualification process. With the
implementation of this new rule, however, logistics
providers must find a new method for verification, such as
obtaining certificates of insurance from the carrier. If the
logistics provider obtains certificates of insurance from
the carrier, they must remember to verify coverage limits
and effective dates. This process has become more
cumbersome, however, with the issuance of the
insurance form, as a certificate holder
may not be informed if a policy has been terminated prior to
its expiration date.
With the elimination of the Cargo Insurance requirement,
it’s more important than ever for transportation brokers to
investigate a carrier’s safety record, claims history and
insurance status. If a claim occurs, shippers or injured
third parties could allege that the broker engaged in
negligent selection. Unlike other types of insurance, cargo
policies are unique and include exclusions that vary from
insurer to insurer. If a carrier declares bankruptcy or if
their limits are insufficient or if coverage is excluded,
the logistics provider could be held liable.
What can a logistics provider do?
The TIA and the Transportation & Logistics Council are
urging logistics providers to contact Congress and consider
"Save the BMC-32 Cargo Liability Insurance Requirements"
letter to members of the Transportation and
Infrastructure Committee. A sample letter is also provided
How can logistics providers protect themselves?
Several types of liability insurance policies are available
to protect logistics providers when they are held liable for
claims arising from cargo loss, damage and third-party
Cargo Insurance provides coverage when the motor
carrier’s insurance does not pay a claim and the motor
carrier is unable to pay. Coverage is typically
triggered only in situations where the motor carrier is
Omissions Insurance protects the transportation
broker if an error or oversight in the course of
business causes a customer to suffer a financial loss. A
transportation broker should ideally obtain a combined
policy form with Errors & Omissions Insurance and
non-following form Contingent Cargo coverage. A combined
form is not the same as purchasing separate policies.
Separate policies can create both gaps as well as
overlaps in coverage.
Automobile Liability Insurance is also available to
protect transportation brokers when they are held liable
for death, bodily injury or third party property damage
claims as a result of the motor carrier’s negligence.
Avalon Risk Management specializes in
understanding the complexity of liability issues facing
transportation providers. We’ve designed our Combined
Transit Liability (CTL) program to provide a comprehensive
protection for logistics providers. Avalon’s CTL policy is
the only program of its kind endorsed by the TIA.