Contrary to what many shippers assume—depending on the freight being transported— most motor carriers are not required by law to have cargo insurance coverage. Even when a motor carrier is covered, shippers may be surprised to learn that there is a significant list of specific commodities excluded from a standard cargo insurance policy and equally surprised to learn that there are also situational circumstances in which these policy coverages may also be denied.
Depending on the specific arrangement with each carrier and the nature of the services being offered, there may be release rates further limiting the carrier’s liability for damage or loss related to the movement of their freight.
Not having a firm grip and understanding of the cargo insurance coverage limitations and exclusions imposed by each insurer affording coverage for each transportation service vendor utilized, has lead to a very tough—and expensive—learning experience for many shippers. Maintaining a vigilant watch over the individual insurance policies of each service provider can be a labor-intensive and risky proposition as well. Because of this, many shippers choose to offset that cost and reduce liability exposure by utilizing freight brokers. With a standard Shipper-Broker agreement, shippers can transfer the risk and burden of qualifying and monitoring insurance policies to those selected transportation brokers.
“Not until they try to file the inevitable claim, do they realize that the insurance certificate they were provided for the carrier is not worth the paper it was printed on.”
Unless you have been the victim of a denied insurance claim related to a transportation scam, you may not be familiar with the term “Chameleon Carrier”. Chameleon Carriers are often an overlooked and equally underreported pitfall lurking in the transportation industry. Chameleon Carriers can fall under a couple of different descriptions, they could be a business front posing as a motor carrier that exists only on paper or a reincarnation of an actual motor carrier that is trying to change their identity. With a number of reasons behind the existence of these false and misleading entities, understanding why these false representations exist can be the key to helping identify them. For example, some carriers will find themselves on the rejection list for shippers and brokers for a number of reasons, creating a need to reinvent themselves to remain in business. Some of the standard reasons that result in a carrier ending up on these rejection lists are unpaid claims, elevated CSA scores, critical violations, negative safety rating, chronic service failures, unethical business practices or any combination thereof. Most carriers operating with a reasonably ethical standard will make the necessary changes to correct these issues, working to improve their reputation and business practices. However, there is a small segment of carriers that will choose to apply for, or purchase a new authority, changing their name rather than changing their business practices. These types of Chameleon Carriers will continue to operate as usual with the same unsavory business practices using their new identity to avoid those service denials. Sometimes they may be operating assets under that new authority while repeatedly applying for a new authority every few months—continuing to ruin the reputation of their most current operation—or they may just use that new authority as a marketing tool to obtain freight that will then be (often illegally) transported on the assets of and under the authority that the shippers and brokers had already denied services from.
The other frequently seen type of Chameleon Carrier is the type that exists only on paper and does not own, lease or operate any assets. Typically these types of Chameleon Carriers are operating as illegal freight brokers without the required authority bond or insurance that would afford a shipper recourse in the event of a loss. These operations use a number of excuses to explain why another carrier ended up transporting the freight, attempting to convince the unsuspecting shipping manager or broker that is only concerned about moving their freight. Not until they try to file the inevitable claim, do they realize that the insurance certificate they were provided for the carrier is not worth the paper it was printed on.
Lastly, a version of this Chameleon Carrier type exists only to remain in business for a few short months while they run scams involving fictitious pickups, theft, payment and extortion scams. These conn-artists are organized and very skilled in the art of social engineering, lulling a handful of shippers and brokers into trusting them over the course of a couple months while they lace multiple scams into motion. Once the authority has become too hot, they simply apply for new authority, repeating the same scam over and over again.
For further insight, check out our post on how to hire the right carrier. Or, click below to learn how the Emerge Digital Freight Marketplace (DFM) can help pair you with verified carriers.