In the transportation industry, there seems to be insurance for just about anything. Contingent liability transportation insurance is no different. The term itself sounds like something that came straight out of John Grisham novel; probably because lawyers were involved in assigning the name. Notwithstanding, this insurance serves several purposes. Breaking the term in to smaller parts will help understand exactly what it means.
Contingent liability is used to insure the estimated maximum financial obligation that a company may be forced to pay even though the probability of the payment is very low. The liability itself is like a "just in case" scenario. A good example of a contingent liability is a lawsuit that has been filed against a company. While the verdict could go either way, there is the possibility that the company would have to pay restitution. Contingent liability insurance would be calculated as to what the maximum financial payout might be and the insurance would cover that amount.
Adding the transportation factor to the contingent liability usually means that the company transporting the products or payload is insured to cover the loss of the payload if an accident were to happen. Calculating the maximum payout depends on various aspects of what exactly is being transported. Solid boxed goods would have a verifiable amount while other goods, such as oil or perishable products where the price fluctuates, will determine the amount of insurance needed.
What Does It Cover?
More than just the payload is covered under contingent liability transportation insurance. Take the trucking industry: The insurance would cover not only the payload but would also would need to cover the vehicle itself if it was leased or the trucking company uses owner-operators. In the case of leased vehicles and owner-operated trucks, the insurance would also cover any medical expenses and also pay for the other driver's vehicle in case of an "at fault" accident.
How and When to Get It?
Insurance companies can sometimes require that the transportation company place Occupational Accident insurance on leased and owner-operator vehicles. This insurance is like a prerequisite to obtaining contingent liability insurance. The OA insurance would cover accident medical expenses, accidental death and dismemberment and disability income. Most states have laws governing when it is mandatory to have this kind of coverage. In cases where no mandate is in place, most companies should carry the coverage to protect the financial well-being of the company.
Workers Compensation vs. Contingent Liability
In cases where the Occupational Accident insurance was not enough to cover all of the expenses for a contractor such as an owner-operator, Workers Compensation insurance might be available. The statutes that govern this vary from state to state. Usually the state will look at awarding the contractor based upon three main criteria: where the contractor lives, the place of the injury and whether the driver was paid or dispatched. Some states will also take into account whether or not the drivers are considered owner operators or independent contractors.
- Photo Credit Image by Flickr.com, courtesy of Gordana Adamovic-Mladenovic
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