From time to time I am contacted by a customer about a cargo claim, and some of those calls include concerns about a letter of declination for a recent cargo claim. Sad to say, my answers to those customers are usually not what they want to hear. Insurance agents, such as myself, are required to learn the basics of contract law. Additionally, we must pass a licensing exam that may include questions about contract law. The reason I point this out is because an insurance policy is actually a contract between the insured and the insurer. Contracts (the insurance policy in this case) always come with a set of terms and conditions. When one party of the contract violates a term or condition of the contract then the other party is no longer obligated to fulfill their part of the contract except where required by law.
Disclaimer: I am not an attorney and this is not legal advice. Please consult an attorney to receive legal advice or guidance pertaining to any of the following.
When discussing commercial auto insurance, the “except where required by law” phrase in the above paragraph is directly related to the required FMCSA filings (form BMC-91 for the MCS-90 endorsement on commercial auto insurance policies). With the exception of brokers, everyone with an interstate authority with a MC number is required to have filings for BIPD (that is, liability to others for bodily injury and property damage coverage). So when a commercial auto policy with filings has been broken or violated by the insured (the trucking company), the only portion of the policy the insurer (insurance company) is required to fulfill by law is the BIPD coverage. That is the purpose of the filings.
Sadly, this relates back to a previous article: “Don’t be lured into dishonesty to reduce your insurance premiums.” When the application is completed and signed by the insured, the insurance company has no reason to suspect or question the integrity of the applicant or the validity of the information the applicant provided. Once the applicant binds (the legal term for purchasing the policy), it is the insured’s responsibility to notify the insurance company of any changes as stipulated by the policy terms and conditions. In my experience, deceptive or false information is typically discovered when a claim has been filed. There are many ways an insurance company discovers deceptive or false information. Including:
And many other areas, besides.
A claim can be filed by either the insured or by a third party. In trucking that third party is frequently a shipper, receiver, direct customer or a broker. Once the claim has been filed, the insurance company’s adjuster begins their investigation. The investigation is not limited to the details of the claim. Meaning that the adjuster may, and frequently does, verify that no term or condition of the policy (contract) has been broken or violated.
Disclaimer: The following scenario is for example purposes only. It does not reflect any specific commercial auto insurance company or policy. Rather, this is a general scenario and only to be understood as informational. I strongly encourage readers to contact their commercial auto insurance agent for the terms and conditions of their existing policy and to verify they are compliant.
