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Intermodal Claim & Insurance Information Outlined

February 14, 2017 Rick LaGore

Cargo Insurance-1


During the vetting process of on boarding a new IMC intermodal provider, shippers typically skip by what is probably the most important aspect of their selection ... cargo insurance coverage.  The result is cargo insurance comes a part of a conversation when it is needed, which is not exactly the best of times.  

The goal of this paint drying blog is to help shed some light on cargo claims and insurance, as it relates to intermodal shipping.  Enough information to ask the appropriate questions.  

  • The Basics on Rail Carrier Coverage 

    • Minimum Filing Requirements = $250.00
    • Maximum Liability for Cargo = $250,000.00 (or $100,000.00 for consumer electronics where the Seal Agreement terms and conditions are not met)
    • Freight Liability = $10,000.00
    • Taxes or Customs Duties on Alcohol = $250.00 
  • Contingent Cargo and Shipper’s Interest Policies 

    • Contingent Cargo Policy – This policy would likely have similar exclusions to the rail carrier, however, the policy should pay any additional value of loss, exceeding rail carrier’s maximum liability, if the loss or damage was a covered occurrence (rail carrier accepted liability).
    • Shipper’s Interest Policy – These policies are superior to Contingent Cargo Policies because the coverage is more comprehensive with fewer exclusions (based on individual policies and underwriter approval).
      • Unlike a contingent cargo policy, a shipper’s interest policy covers the actual cargo rather than the carrier’s liability.


  • Covered vs Not Covered Cargo Claims

    • Claims Covered 

        • Claims will be covered if loss or damage claim that happened while in transit, provided that one of the five defenses listed as “Bill of Lading Exceptions” (listed below) were not the prominent cause of the loss
          • Proper Standard Transportation Commodity Code (STCC) designation was used
          • Container was sealed
          • Association of American Railroad (AAR) approved blocking and bracing methods can be proven
          • The rail will be covered for the repair cost
        • In the event the commodity cannot be restored to its previous condition, the invoiced value at the point of origin (wholesale) will be the value determined for the claim.
          • Shipment deemed a total loss, but maintains scrap or salvage value
            • A salvage credit must be deducted from the total value claimed.
          • Limitation of value as imposed by other contracted parties will be incorporated and the lowest maximum claim amount shall apply 
    • Claims not Covered

      • Most claims that are denied are due to a Bill of Lading Exception. Under this defense the rail carrier must also prove they were free from any negligence. However, in the event that it is determined that both the shipper and the rail carrier could have had some level of negligence; the rail carrier may choose to settle for a percentage of the total value of loss or damage claimed. These defenses are listed below, along with some specific examples:
        • Act of God
        • Inherent Vice
        • Public Authority
        • Public Enemy
        • Act or Default of the Shipper 
          • Includes improper packaging or blocking & bracing
        • *** Claims for shipments in and out of Mexico ***

As with most any cargo claim, claim expenses such as: consequential damages; values in excess of maximum liability; punitive damages; loss of profit; interest or attorney’s fees; and fines for overweight shipments on intermodal containers is not covered 

It is Important to Know and Understand the Differences Between Prohibited Commodities & Restricted Commodities

A prohibited article is any substance that cannot be loaded onto a container under any circumstance.  There are some prohibited commodities that will or will not be considered prohibited based on the owner of the container.

Restricted commodities are acceptable to be loaded on an intermodal container, although with caveats and limits, so while the range of cargo coverage is typically between $100,000 and $250,000, it is not a given for all commodities or intermodal service providers. 

Under the topic of  commodities that are considered restricted, while they can travel via rail their coverage will only be $500 for the entire load.  An example of such a commodity is steel moving via an intermodal service, while an example of commodity that is different by intermodal service providers is Household Goods (HHG).  HHG freight may be restricted with a $500 cargo coverage with one intermodal service provider and prohibited from even moving on the rail by another intermodal provider.

The list of both prohibited and restricted can be confusing, so we recommend working closely with a reputable IMC to ensure your company's commodities are appropriate for intermodal transport.

Not All Intermodal Cargo Coverage Created Equal 

Not all intermodal cargo coverage is created equal and the time to figure it out is before a claim is filed. 

Shippers will find not all intermodal providers have the same type of coverage for their intermodal transportation service. There are a number of different types of intermodal providers: asset truckload intermodal carriers, asset IMC providers, non-asset IMC's, rail retail and brokers. Each type of intermodal provider (asset, non-asset, etc.) could potentially have a different type of cargo liability coverage policy and the same type of intermodal provider (non-asset IMC) could have a different type of cargo liability coverage policy.

For example, many of the non-asset IMC's and broker intermodal providers have contingent cargo coverage for their intermodal service. Contingent cargo is a secondary coverage that only comes into play if the primary carrier's policy did not respond. The limits provided under the contingent policy would be equal to that of the railroad and draymen used. For example, if the primary carrier's policy was for $100,000 and a claim were filed it would cover up to $100,000.

There are some non-asset IMC's that have a more comprehensive coverage that automatically provides cargo coverage on a primary basis and contingent basis.  In this case, if a shipper is under a broker - shipper agreement the non-asset IMC will pay those sums the insured becomes legally obligated to pay as damages as a Motor Carrier, Warehouseman, Freight Forwarder, Logistics Service Provider or Other Bailee for direct physical loss of or damage to Covered Property caused by or resulting from a Covered Cause of Loss.

While cargo liability coverage for intermodal transportation can be confusing to a new intermodal shipper, the key is to align with reputable IMC that can educate and assist the shipper through the process.

If you're ready to take the next step, at InTek Freight & Logistics, we can help. Just tell us what you need and we'll discuss how our expertise can help with the unique shipping challenges your business faces. Rather do a bit more research first? View our Freight Guides for comprehensive articles and eBooks on all things freight and logistics.

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