The Law Office of Seaton & Husk, LP

Insurance and Bonds

MOTOR CARRIERS: The DOT has not changed its rules and still issues both common and contract carrier authority. Evidence of liability coverage (Form BMC-91X) must be filed for common and contract carriers.

In this firm's opinion, a new applicant need not pay for both a common and contract carrier application to get complete operating authority. It is recommended that new applicants file for "common" carrier authority and file evidence of liability insurance to obtain the broadest operating freedom.

HouseHold Goods Carriers are required to file evidence of both liability insurance (BMC-91X) and cargo insurance (BMC-34).

LIABILITY: Depending on the commodity an applicant intends to haul, there are 3 authority commodity descriptions which corresponds to 3 different insurance requirements.

(1) $750,000 in coverage for non-hazardous commodities;
(2) $1,000,000 is required for hazardous materials defined at 49 C.F.R. §171.8; and
(3) $5,000,000 is required for hazardous materials as defined in 49 C.F.R. §173.403

Unless they intend to transport hazardous materials requiring $5 million in coverage, most carriers file for the authority which requires $1 million in coverage. The grant which corresponds to $750,000 can limit a carrier's ability to haul certain household items which, while possibly hazardous, do not require placarding.

Remember, a carrier can be sued for far more than then minimum limits of liability it is required to have. Many carriers purchase umbrella coverage as high as $5 million to $10 million per occurrence.

PROPERTY BROKERS: Property brokers and freight forwarders are required to file a surety bond (Form BMC-84) or a bank trust agreement (Form BMC-85) in the amount of $75,000. The purpose of the bond or trust agreement is to ensure that there is a minimum of $75,000 available for distribution to shippers or carriers in the event of broker malfeasance. While the broker regulations require that brokers segregate freight charges from their other business endeavors and that they assume the shipper's obligation to pay the carrier upon receipt of funds, frequently these rules are not followed. When misfeasance or malfeasance occurs, carriers and brokers have recourse to the exhaustible bond. Contact us if you have any questions concerning bond claims. Remember that any delay in filing a claim can cause you to lose any chance of recovery.

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