What Freight Brokers Need to Know about the Certificate of Liability Insurance Form

  • What is Certificate of Insurance?

  • What is ACORD?

  • Standard for Certificates of Insurance

Last time we discussed how not having a Certificate of Liability Insurance from a potential trucking company business partner can itself be an unexpected form of liability. Now that we’ve established why a certificate is effectively required to carry out a freight transportation partnership without surprises, let’s take a moment to examine what the Certificate of Liability Insurance form is, exactly. This deep dive includes  the liability insurance and certificate formats most commonly used in freight transportation and how to ensure your specific needs are met.

What Is Certificate of Insurance?

ACORD is widely known across the industry for the publication and maintenance of an extensive archive of standardized forms. ACORD has also developed a comprehensive library of electronic data standards with more than 1200 standardized transaction types to support exchange of insurance data between trading partners. ACORD is headquartered in Pearl River, NY and maintains an office in London, U.K.

According to Acord, a Certificate of Insurance is:

[a] document that provides information about insurance policies. Millions of insurance certificates are issued every year, primarily in the United States. The majority of certificates are issued upon policy renewal to provide this information to third parties. These third parties are known as certificate requestors/holders. Generally speaking, certificates list one or more lines of insurance, the limits associated with those coverages, and the insurer providing coverage.

The Certificate of Insurance should be issued by the insurance agent or insurer and include contact name, phone and address, policy number, limits, effective and expiration dates.  

To unpack the definition a bit, the certificate is not intended to stand as the insurance policy, or offer any additional rights on top of the existing relationship to either company involved in the partnership. In freight transportation, policy terms and conditions do not belong on the certificate.  All the certificate is intended to do is serve as mutual reassurance that the trucking company hauling the freight has an active auto (BIPD) and cargo insurance policy. Although the certificate may include worker’s compensation and commercial general liability policy information, this definition can work in a general sense, effectively as a baseline standard for the relationship between the freight broker and the insured (trucking company).   

It’s important to also notice that, under this definition, the broker does not assume legal liability (include care, custody, and control) of or for the freight except in cases of negligent hiring or Errors and Omissions, unless they specifically sign a contract with their shipper accepting legal liability, or if they act as an employer of their carrier, or mislead their customers into believing they are the carrier’s employer.

What is Acord?

We mentioned Acord in our last discussion, and just brought them up again in the context of defining a Certificate of Insurance. It might be useful now to talk about just what Acord is, and why we’re using them as a resource.

Acord is a non-profit organization that provides forms created by every state’s Department of Insurance that meet the legal insurance requirements of the specific state. It is the trucking industry standard provider for the certificate of insurance form.

The convenience of having one insurance form that is accepted in every state cannot be overstated, nor can the importance of having all terms clearly defined for both parties. A common misconception is that the Certificate of Insurance Form in any way amends, changes, or alters the policies–it does not.

The certificate is just a form for the broker to prove that they’ve done their part to validate that auto and cargo insurance can be found on file for the specific dates of the shipment. Nor does it confer special privileges or responsibilities to either the certificate holder or receiver. Rather, it lists the certificate holder as nothing more or less than someone on the mailing list to receive updates per the terms and conditions as stated on the Acord form.

While other major companies may offer similar information to that found in Acord’s forms, the specificity and applicability of Acord’s forms and resources are their most important feature. Acord provides exactly what a broker needs, in terms of information, though individual considerations may mean that Acord isn’t a perfect fit in every situation.

If you opt to use a different form, though, be aware that there are a number of third-party software monitoring companies and freight transportation brokers who will claim that certificates of insurance(Acord or other) are useless in the grand scheme of things, since they aren’t any kind of contract, and they aren’t actually part of the insurance policies they describe. This claim is disingenuous, and can even be dangerous looked at from a risk management or negligent hiring perspective. While it’s true that the form is not a contract, consider how things would play out in the worst case scenario without a certificate–imagine appearing in court, accused of negligence, and not having any proof of liability insurance (Cargo or Auto Insurance) because you elected not to do the due diligence.

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Transportation Industry Standard for Certificates of Insurance

The industry standard is that contracts with shippers require brokers to confirm that the carrier has Cargo and Auto Insurance. A certificate of insurance, being the only way to reasonably confirm Cargo coverage, is therefore the industry standard, and because the FMCSA’s public information only reports the “Minimum Liability” limit of Auto, and does not provide any information regarding Cargo, there is an enormous liability for the broker who does not use a certificate of insurance as part of their carrier onboarding and ongoing due diligence protocol. Brokers can be expected to pay compensation, attorney fees, and ultimately settlements if their own policies don’t offer enough of an umbrella of insurance coverage against bodily injury or cargo loss, or the inevitable unexpected accident.

Looking at it another way, not having a certificate of insurance is a decision to rely on the best practices and internal policies of the carrier, whose system may in turn rely on your best practices and ability to check back in on them. Neither of you can afford to put the same time or expense into keeping insurance forms current and therein lies one of the biggest benefits of hiring a  third party monitoring service for whom that is their only job.

By now hopefully we’ve also articulated how standardized insurance certificates, (particularly the certificate of liability insurance form), can streamline your day-to-day procedures, whether searching for capacity, vetting and onboarding new carriers,  or brokering a load. At the center of all of your business concerns is the desire to find the right trucking company, with the right coverage, and sign them on for the right load, a process you can make much easier for yourself with a consistent procedure for managing  Certificates of Liability Insurance.