Cargo Coverage Sub-limits: Why are these important?
September 24, 2015
Author: Lynn Schmidt, Account Administrator
Imagine: you are on your daily route where you run a trailer full of plywood from Chicago, Illinois to Milwaukee, Wisconsin. You are driving by the local nature preserve when all of a sudden you are side swiped and your trailer full of plywood is now scattered all over the road and some of the pieces have landed in the pond on the nature preserve. You call your agent to confirm that you have coverage for the loss; they say you do, but are you covered for everything?
In this article I’ll be focusing on a few important sub-limits and why they are important to your operation. I will define what each sub-limit is and then explain how they come into play in my example above.
Pollution Cleanup Pollution cleanup covers the cost to cleanup or remove pollutants from the air, land, or water as a result of a direct physical loss or damage where the insured is legally liable for the freight, as long as it was a covered cause of loss occurring during the policy term. Each insurance carrier will outline on its policies what limits apply to this line of coverage.
Debris Removal Debris Removal covers the cost to remove the debris or damaged freight from a direct physical loss caused by a covered cause of loss occurring during the policy term. Debris removal will not cover removal of pollutants from land or water or the removal, restoration, or replacement of polluted land or water. Most policies provide this coverage, as long as it’s reported to them in a predetermined amount of days after the accident. You will have to reference each individual policy for exact number of days.
Earned Freight Charges Earned Freight is reimbursement for the freight charges that are uncollectable due to the shipment being lost or damaged during a covered cause of loss within the policy term. Each insurance carrier will outline on its policies what limits apply to this line of coverage.
You may wonder how these coverages come into play in an actual claim. If we circle back to my example above and to the defined sub-limits, it would provide coverage in the following ways:
Pollution Cleanup Cleaning up the plywood that has landed in the nature preserve would be covered under the pollution cleanup portion of your policy as it has become a pollutant to the pond and its inhabitants.
Debris Removal Cleaning up the plywood that has scattered all over the road would be covered under the debris removal portion of your cargo insurance policy as it has become a hazard to the travelers on the road.
Earned Freight Charges Coverage would be provided for the lost freight charges from not being able to deliver your load. Payment would most likely be prorated based on how far along you are in your trip.
While each cargo claim situation is different, the above example will help give you some insight into the basics of each sub-limit in your policy. It is always best to consult your insurance agent or your insurance policy to see what limits you currently have.
|Lynn Schmidt is an Account Administrator is the Transportation – Small Fleet Division and has been with Cottingham & Butler for 4 years. She graduated from the University of Northern Iowa with a degree in Psychology and remains an avid Panther fan. She enjoys gardening and photography in her spare time.|
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