In January, the Federal Motor Carrier Safety Administration implemented the first comprehensive revision of driver restrictions in decades.

At the same time, the new North American Bill of Lading came into effect, providing shippers and motor carriers with a standard form for documenting through shipments of cargo that originate in or travel through Canada, Mexico, and the United States.

AAIS will also play a part in this important year for commercial trucking.

In January, AAIS released a comprehensive revision of the forms and endorsements in the Motor Truck Cargo section of its Inland Marine Guide.

This came as part of an overall revision of the Guide, an authoritative insurance industry source for policy forms, rating procedures, underwriting guidelines, and other information for writing the nonfiled classes of inland marine insurance.

As part of the project, Guide forms, including those for Motor Truck Cargo, are being filed in some states that do not exempt traditionally nonfiled classes from filing requirements.

As important as these events may be for enhancing commerce in North America, the most anticipated event--the opening of the U.S.-Mexico border to through truck traffic--is now considered unlikely to happen in 2004.

“In my opinion, the border between the U.S. and Mexico will not open for a number of years,” says Bruce Dalrymple, president and CEO of Marine Solutions Group, Acworth, Ga., an inland marine consultant who was instrumental in developing the newly revised AAIS Motor Truck Cargo forms.

“Issues pertaining to safety, security, maintenance, financial reporting, commercial drivers licenses, motor vehicle records, and environmental issues have been topics of concern among various U.S. organizations,” Dalrymple says. “In addition, the U.S. and Mexico have unresolved issues between them.”

The U.S. Supreme Court has agreed to hear an appeal by the Bush Administration seeking to overturn a district court ruling that effectively prevents the border from being opened, but “that could take time,” says Dalrymple.

When it happens, however, the opening of the U.S.-Mexico border will establish open transit in a market totaling nearly 400 million people.

Hard market; good times

For now, times are good for insurance carriers that write cargo coverage in the U.S. and Canada.

“Generally speaking, it is much easier for a knowledgeable motor truck cargo underwriter to make a profit today than it was three years ago, at the bottom of the soft market,” says Dalrymple, who spent nearly 30 years as an inland marine underwriter and manager with Fireman’s Fund before creating his own firm.

Following years of razor-thin margins in the line, with many companies losing money on it, the current opportune conditions for writing motor cargo result from insurance company mergers, and from decisions by carriers to limit their writings or pull out of the line altogether.

“The combination of these has narrowed the market for motor truck cargo coverage,” says Dalrymple. “These factors have assisted underwriters from the standpoint of having fewer competitors to fight with for the coverage.”

New forms

The new AAIS Motor Truck Cargo (MTC) forms, along with those for other transportation-related classes (Warehouse Legal Liability and Transit) are designed to help insurance carriers make the most of these new market opportunities.

Motor truck cargo and warehouse legal liability insurance are unique forms of insurance in that they provide liability coverage only, but are written and underwritten like property policies. Coverage is only for the property of others in the insured’s care, custody, and control, and only to the extent of the insured’s liability as spelled out in a bill of lading (where applicable).

The new MTC section of the Inland Marine Guide includes two base forms, a broad form with built-in reporting conditions, and a more limited form that can be used to tailor coverage to an individual risk by adding optional endorsements.

Both of the base forms provide coverage for property at terminals described in the schedule of coverages attached to each policy. In keeping with the intent of MTC coverage, the terminal coverage is only for property of others in due course of transit, for no more than 30 days at one terminal location.

In addition to providing built-in terminal coverage, the new MTC base forms provide built-in coverage for loss that occurs during the loading and unloading of freight. This coverage was previously added by endorsement.

To clarify the role of MTC as a liability coverage, a coverage extension has been added to the base form to state explicitly that suits against the insured may be defended, but that a defense does not have to be provided once the full applicable limit has been paid as a result of a judgment or settlement. As in other liability forms, the MTC defense cost sections spell out conditions the insured must follow as well as expenses that will be covered.

Refrigeration breakdown

The motor truck cargo forms now include two refrigeration breakdown endorsements. One can be used to extend refrigeration breakdown coverage to vehicles only, and the other to vehicles and/or terminals identified on a schedule that can be used with either endorsement.

The refrigeration breakdown endorsements provide coverage up to a separate limit shown on the schedule for spoilage of perishable stock while the stock is in transit on a vehicle.

Coverage is provided only if the spoilage results form a sudden and accidental breakdown of the refrigeration unit, and coverage is provided only if the units are inspected at least once a month. There is no spoilage coverage in cases where refrigeration units stop working because of a lack of fuel.

An additional endorsement provides refrigeration breakdown coverage for spoilage of perishable stock at any terminal identified on the schedule of coverages, up to a separate limit for terminals.

Since MTC coverage is underwritten as first-party property coverage, it is no great stretch conceptually to incorporate coverage for property of the insured into the forms.

Nonetheless, it is an innovation in the new AAIS forms to add supplemental first-party coverages with separate sub-limits for:

• Off-board electronic equipment used to communicate with or keep track of vehicles;

• On-board electronic equipment used for communications, navigation, vehicle tracking, and monitoring of refrigeration equipment; and

• On-board expendable supplies, including fuel, oil, and grease.

“Along with fine-tuning the language of various clauses for clarification, we were able to enhance the AAIS forms with new features,” says Dalrymple.