Contingent auto liability FAQ for freight brokers
Plain-English answers to the most common questions about contingent auto liability insurance for freight brokers, what it covers, and how to evaluate it.
What is contingent auto liability insurance?
Contingent auto liability is third-party bodily injury and property damage coverage that responds when a motor carrier's primary auto policy fails to pay a claim arising from a load arranged by the broker. The policy is contingent on the carrier's primary failing through lapse, exhaustion, denial, or coverage gap.
Is contingent auto liability required for freight brokers?
Not by federal regulation, but functionally required post Montgomery v. Caribe Transport. Without it, the broker is personally exposed for the entire negligent-hiring verdict above the carrier's primary limit. The federal $75,000 broker bond does not respond to bodily-injury claims.
What limits should I carry?
$1 million single-occurrence is the floor and minimum required by most shipper contracts. $5 million is the defensible mid-tier for brokers running general freight. $10 million+ via excess layers makes sense for brokers handling hazmat, oversize, or high-value loads. Aggregate annual limits typically run 2x-3x per-occurrence.
What does contingent auto liability cost?
For a small broker at $1M limit, annual premium typically runs $3,000-$8,000 depending on load mix, broker size, and underwriting profile. Hazmat, oversize, and refrigerated loads carry higher rates. Brokers who can document their carrier vetting process get materially better rates than those who cannot.
Where do I buy contingent auto liability?
Through wholesale brokers and managing general agents specialized in transportation. Major names include Amwins, Roanoke Insurance Group, R.E. Garrison Insurance, Marquee Insurance Group, and Risk Placement Services (RPS). Brokers access these wholesalers through their own independent insurance agent.
What does contingent auto liability NOT cover?
Vehicles the broker owns (separate primary auto needed), cargo loss (contingent cargo is a separate line), the broker's general liability exposure outside the truck, intentional acts, pollution (typically), and operational errors (E&O is the right line).
How does contingent auto interact with my carrier's primary auto?
The carrier's primary auto liability pays first up to its limit (typically $750K-$1M for general freight). The broker's contingent auto liability responds when the carrier's primary is exhausted, lapsed, or denied. Any excess layers respond next. Past that, the broker is personally exposed.
What is contingent cargo insurance?
Contingent cargo is a separate line responding to cargo loss when the carrier's cargo coverage fails or is insufficient. Standard limits run $100,000 to $500,000 for small brokers, with per-load excess endorsements available for high-value loads. Often bundled with contingent auto from the same wholesaler.
Does the carrier's contract indemnification protect me?
Partially. Indemnification clauses in broker-carrier agreements shift liability between the parties contractually but do not eliminate the broker's direct liability to third-party plaintiffs. The broker still gets sued and still needs insurance to respond; the indemnification provision is a separate recovery mechanism against the carrier (often financially limited).
What is a reservation of rights letter from my insurer?
A reservation of rights is a letter from the insurer saying it will defend the broker against a specific claim but is reserving the right to later deny coverage based on a coverage issue. Most reservations of rights are routine; some signal the insurer is positioning to walk away if coverage facts develop unfavorably. Independent counsel should review.
What is contingent pollution liability?
Coverage for environmental liability arising from cargo released during a covered crash, particularly relevant for hazmat brokers. Standard contingent auto often excludes pollution; the additional line covers cleanup costs, third-party bodily injury from exposure, and regulatory penalties. Limits typically $1M minimum.
Should I get errors and omissions (E&O) insurance?
Increasingly expected by larger shippers. E&O covers operational errors that cost a shipper or carrier money: misrouted loads, billing errors, miscommunication. Not strictly required by FMCSA but commonly required by enterprise shipper contracts. Annual premium typically $500-$2,000.