James F. Mahoney, Attorney

March 2016

You Allow a Shipper to Be an Additional Insured on Your Policy: What That Means

As soon as March 31, 2016, the FDA will issue its final rules on sanitary transportation of food. Implementation will take another year, but shippers will have motor carriers adhering to the rules very soon.

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Naturally our clients who transact in the fresh food reefer world are bound to get a set of rules from their shipper customers. Things to watch for and be ready to enact include:

  • requirements to pre-cool equipment

  • train anyone  involved in the move (lumpers, drivers, dock workers)

  • record-keeping on every load for at least a year

  • a method of transferring shipment records to shippers and consignees

While the risk of contamination of foodstuffs during transportation is – and has been – low, the FDA is going to monitor the process of proper temperature control, driver training, and trailer cleanliness. I see very few food loads mixed with non-food items at all, but load manifests must be kept assuring no mixed loads. Trailer interiors must be cleaned out. Shippers are going to be dictating the process, so it’s advisable to talk to your key customers now.

So, what’s the effect on rate? Higher, maybe. We’ll probably see insurance premium for cargo liability increase; perhaps increased business for carriers who have sophisticated telematics systems, like those made by ThermoKing. But, bottom line, higher per-mile costs, greater control by produce marketers, and more record-keeping headaches and interaction ahead for shippers, brokers, carriers and consignees.

Freight brokers, get your motor carriers to prove their compliance, and revise your load sheets so they indemnify you if they fail. Make carriers provide prior load records for trailers and to provide information on their reefer equipment; carriers with older reefer units are going to be trouble.

Reefer carriers, develop and implement a program that complies with the new regs; get ahead of the game, shippers and brokers are going to demand it anyway, so why not be ready to solicit business based on compliance?

Shippers will be more likely to demand that brokers will be stuck holding the bill for refused shipments.

Anyone want to develop a captive to cover shippers’ interest and contingent cargo insurance? Call me. We’ll talk.