Cargo and Warehouse Insurance: Coverage Gaps

Last week, we discussed the importance of reading over your cargo and warehouse insurance policy. These “tailored” policies can be tricky and if you are not careful about reading and understanding them, you may fall victim to a coverage gap.

To open your eyes to this issue, let’s take a look at a possible scenario…

ABC Moving and Storage receives directions for Product Company to pick up an outbound seafaring container that is heading to the local shipping port valued at $159,000. ABC sends a driver to Product Company and who then signs for the container. However, he realizes that he will not make it to the port in time, so he asks to leave the container in a remote section of the facility. He moves and unhooks the container and heads home for the weekend without thinking anything of it. Once Monday morning arrives, the driver returns to Product Company only to find out that the container has been stolen.

Product Company initiates a suit seeking reimbursement for their loss of $159,000. However, the motor truck cargo insurance policy ABC has purchased states that only loads hooked up to vehicles are covered as well as terminals and drop yards listed on the policy. Consequently, the insurance company denies the claim, stating that the load was unhooked from the tractor and the Product Company’s yard was not listed as a terminal on the ABC motor truck cargo policy.

In this case, ABC is now left to pay legal fees, related court costs and any judgment or settlement out of the income that ABC earns. This is just one example of a case where the exposures from operations of the company did NOT mesh with the coverage they have obtained. The bottom line: ABC should have read and understood their policy before making such a careless mistake. This is the horrible consequence of a coverage gap.

We get it; no one likes to read paperwork, never mind the fine print at the bottom. Massachusetts residents and Americans across the country are known to just sign on the dotted lined. While it may be easy to assume that all the language in the document is there to help and protect, this may not always be the case. Instead of taking a leap of faith, take a moment to stop and read over your policy. Failing to understand may just have you taking a leap of faith off of a high cliff, with nothing but financial woes to break your fall.