It may not be anyone's idea of beach reading, but shippers who ignore the Federal Motor Carrier Safety Administration's recent 72-page Notice of Proposed Rulemaking do so at their peril. Deep within the notice, which was published in May, is a proposal that could result in the loss of insurance protection they have long taken for granted. That proposal, contained in the agency's "Unified Registration System" for motor carriers, would eliminate the mandatory minimum cargo insurance requirement—commonly known as BMC-32 coverage—for motor carriers and freight forwarders (with the exception of household-goods carriers and forwarders).
The FMCSA, which estimates the savings to carriers at $3.6 million over 10 years, believes the insurance requirement is no longer justified in today's business environment. "These carriers typically have cargo insurance well above FMCSA limits because their shipper clients generally require it as a condition of doing business," it says in the proposal.
But some dispute that rationale. The Transportation & Logistics Council (formerly the Transportation Consumer Protection Council), which represents shippers in legal and regulatory matters, argued in a press release that BMC32 provides important protection for shippers. This mandatory minimum cargo insurance currently provides shippers with protection for loss and damage claims from dollar one, with no deductibles, the council says. Although the limits are low—$5,000 per shipment and $10,000 per incident—the BMC-32 provides a minimum that shippers know they can rely on.
Shippers typically rely on BMC-32 coverage when a motor carrier's insurance cargo policy has a large deductible or when the policy excludes a particular loss, such as theft from an unattended vehicle or reefer breakdown, the council reports. Because the BMC-32 provides a direct action against the insurer, it is invaluable when a carrier is having financial problems and no longer is paying loss and damage claims, or has gone bankrupt. With the frequent bankruptcies during the last few years, the group says, the BMC-32 has often been the only way for shippers to recover unpaid claims.
The council reports that it is organizing a coalition to oppose the move.
Gartner, Inc.
