Risks in Shipping Contracts

Transportation industry lawyer Gordon Hearn from Fernandes Hearn sharing why your business model matters in the trucking industry

The movement of goods presents risks to every business included along the distribution chain. Whether you are a shipper, load broker, carrier, or freight agent awareness on specific contract risks is important.

Why does my business model matter for my trucking company?

Along with his colleague, Carole McAfee Wallace, Gordon Hearn joined us to go in to much greater detail in our Webinar: The Hidden Pitfalls in Shipper Carrier Contracts. With changes to the language in carrier contracts, it has never been more important to be aware of what your business is signing.
Webinar for Trucking Professionals on Shipping Carrier Contracts

~ Transcript ~

My name is Gordon Hearn and I’m a transportation lawyer with Fernandes Hearn LLP in Toronto in the transportation area. One of the areas that we’re routinely advising our clients on is the need to be deliberate with the business model that you have.

What are potential risks of stepping outside the business model to serve a shipper?

Pretend that you are servicing a shipper and that shipper wants to move goods from A to B. In a conventional way you might be the carrier where you issue the bill of lading and you are hauling goods from A to B. That of course involves specific contract and considerations. That’s a different discussion. But what if you as the carrier can’t perform the move but you want to service the needs of your shipper by facilitating or arranging a third-party fleet to perform that move? You now are, arguably, a broker and where you need to be deliberate is from the standpoint of the shipper customer.

Big Rig Truck Peterbilt

What is your legal liability for cargo loss or damage being in the middle?

Are you a freight agent where you’re simply arranging the carrier to be liable directly to the shipper, with the bill of lading being the relevant contract of carriage or, are you contracting to be responsible for the safe delivery of that cargo to destination? You need to be deliberate about what your business model is. Are you a contracting carrier? Some of our clients who are brokers say that we can’t possibly be liable for that cargo loss or damage because we don’t own a truck. Our answer is “you don’t need to own a truck”. It would be a carrier law; it’s a question of what you have undertaken to the shipper.

So, it’s important to be deliberate with what your business model is and it’s important to use the words in a contract or what you say to the shipper delicately and deliberately to set up what that role is.

Have additional questions? Email Gordon Hearn here

Linda started her career in the insurance industry in 1979 and gravitated toward the niche market of transportation insurance in 1986. Linda has been active in the transportation community since her beginnings and is a Board Member with the Durham Region Transportation Association. Since 2006, Linda has been contributing relevant industry articles in Ontario Trucking monthly periodicals

6 Methods for Preventing Cargo Theft

Transportation truck on highway primed for cargo theft as sun sets

Cargo theft in the transportation industry is on the rise in Canada. In 2017, there were reported losses totaling $46.2 million. The industry is on pace to surpass that number in 2018.

So, how do we go about minimizing the chance of suffering cargo theft? It starts with drivers and the organization working together – drivers need to act responsibly and the company needs consistent work practices to ensure loads are delivered to their final destinations.

Here are 6 methods for minimizing the chance of cargo theft:

Route Routines

Drivers who transport the same types of goods to the same destinations on a regular basis can get into a habit of stopping at the same stops and rest areas. Frequenting the same areas can make the situation predictable and easier for thieves. We recommend stopping at different stops and rest areas. As a bonus you will get to discover new things and keep your ride more interesting.

Lock it Up

This is an easy one but can be overlooked. Physical barriers definitely help to prevent theft. Air brake locks, king pins and locking bars are a few additional anti-theft features to consider. 

Stay in Communication

It is good practice to stay in communication with dispatch so they know where you are travelling. We also recommend sharing your route plans with a family member, friend or co-worker. If the person doesn’t hear from the driver at an agreed upon time, he or she will know the driver may be in trouble. Being at this level of communication also keeps those in your life in the loop and part of what you are doing.

Be Alert and Aware

Thieves seek easy targets. At a stop, minimize the time your truck is unattended. The less time the load is unattended the better. If there are two drivers, it is best practice for someone to always stay with the load.

Can You Keep a Secret?

Your company hopes so! It is best practice not to talk about the cargo you’re carrying. Whether you are at the truck stop, on the radio or anywhere else, drivers should avoid talking about the content of their load. Thieves prefer certain types of cargo so keeping that information private minimizes the chance of thieves even being interested.

It is Just Cargo

If you are a driver and find yourself in a cargo theft situation, do what you can to protect yourself. No amount of cargo is worth dying over. Cooperate, follow direction, and keep present. Drivers should concentrate on remembering details that can help maximize the chance of investigators locating the cargo safely.

Reducing cargo theft opportunities increases driver safety, delivery consistency, client happiness and overall profitability.

If you have questions, reach out to us today.

Neil has quickly become on of the top trucking insurance professionals in Ontario. His love for his wife and daughter is the only thing higher on his priority list then providing great service for those he serves.

Coverage, Contracts and the Currency Difference

Canadian insurance policies are written in Canadian dollars.

It is common knowledge that the U.S dollar holds more muscle compared the weakened Canadian currency. This means that business conducted over the border has a very dramatic impact on the payment and settlement of claims.
With the strength of the U.S. dollar repairs, towing, storage are settled at a higher amount while in the United States. Converting currency places additional strain on the limits provided by the insurance policy.

For the most part vehicle repairs will not be affected by coverage limits however the final loss settlement will have an impact on the overall loss ratio. Simply a claim in the U.S will cost the insurer/carrier more.

Many transportation companies carry minimum liability limits while travelling south of the border. Although insurance Brokers discourage this practice it now is more of an alarming concern as we watch the erosion of limits just by the dictation of the currency difference.

A Canadian carrier who maintains minimum liability of $2,000,000 does not have the parallel limits once the border is crossed. It is encouraged that elevation of limits be considered in order to maintain the original comfort of the policy limits to cover the exposures at hand.

Ever consider cargo contracts?

Many shipper contracts are generated in the U.S. The language of these contracts speak in U.S. currency. If a carrier is required to uphold a specific limit for liability and cargo, the onus of responsibility befalls upon the carrier to uphold sufficient limits and abide by the terms of the contract.  Claims in the USA cost more than in Canada. This is a person in a suit holding us a US dollar.

With the erosion of the Canadian dollar increased limits must be accommodated to advocate the binding agreements with shippers.

In Ontario, freight is governed by the Highway Traffic Act unless a carrier has bound themselves to a written contract that supersedes the boundaries of the HTA. Carmack applies to inbound freight and thus once again binds the carrier to the terms of the U.S. contractual agreement for the transportation of goods.

In summary respect the limits of the policy and any terms that could be breached by currency differences and adjust the coverage limits accordingly.

Linda started her career in the insurance industry in 1979 and gravitated toward the niche market of transportation insurance in 1986. Linda has been active in the transportation community since her beginnings and is a Board Member with the Durham Region Transportation Association. Since 2006, Linda has been contributing relevant industry articles in Ontario Trucking monthly periodicals