Red Flags in Carrier Proposals: Questionable Exclusions and Hidden Limitations

In trucking and logistics insurance procurement, a low premium can be a trap if the carrier’s proposal contains exclusions, sublimits or obscure definitions that hollow out coverage when you need it most. This guide — aimed at U.S.-based carriers, fleet managers and brokers (with a focus on hubs like Texas, California and Florida) — shows the red flags to spot, how they affect common trucking exposures, and practical negotiation and evaluation steps you can use during an RFP or renewal process.

Why reading proposals line-by-line matters for trucking and logistics

Trucking insurance is complex: liability, cargo, physical damage, trailer interchange, hired & non‑owned auto (HNOA), motor truck cargo, and specialty endorsements all interact. According to FMCSA safety and industry data, losses remain a principal driver of commercial auto underwriting change — and subtle wording changes are where carriers limit their payout exposure in high-severity claims (e.g., multi-million-dollar bodily injury suits) (FMCSA). For an owner-operator or a regional fleet operating in Los Angeles, Houston or Miami, an exclusion that appears minor on page 7 can mean denial of a multimillion-dollar claim.

External resources

• Federal Motor Carrier Safety Administration (FMCSA): https://www.fmcsa.dot.gov/
• Industry cost context (market ranges for commercial truck insurance): https://www.valuepenguin.com/commercial-truck-insurance-cost
• Check carrier financial strength on A.M. Best: https://www.ambest.com/

Top red flags: quick checklist

• Ambiguous definitions (e.g., “accident”, “occurrence”, “covered auto”)
• Narrowed coverage territory (policy restricts to interstate only; excludes intrastate routes in CA/TX/FL)
• Hidden sublimits (e.g., cargo theft sublimit, temp‑sensitive goods sublimit)
• Broad exclusions (pollution, punitive damages, employee theft, punitive damages)
• Unfavorable deductibles by exposure (higher PD deductibles for trailers or refrigerated units)
• Per‑vehicle vs. per‑occurrence limits mismatch (creates inadequate limits for multi-truck incidents)
• Restrictive driver hiring or MVR wording (exclusion for drivers with certain violations without clear cure period)
• Ambiguous trailer interchange wording (limits on liability when non-owned trailer is attached)
• Limits on legal defense / no duty to defend or consent-to-settle clauses that shift litigation costs to the insured

Questionable exclusions you must challenge (with examples)

1. “Limited pollution” or “sudden and accidental only” language

   • Why it matters: Many cargo claims (fuel spills, loaded trailer leaks, refrigeration discharge) can be denied if the pollution wording is narrow.
   • Ask for: Broad pollution wording or a clear pollution extension for motor truck cargo and auto liability.

2. Cargo theft sublimits and per‑truck aggregate

   • Why it matters: High-value freight routes (e.g., I‑10 corridor — LA to Houston) face theft exposures. A $50,000 sublimit on cargo when shipments are worth $200,000 is a major gap.
   • Ask for: Per-shipment limits that match your maximum load value and a theft sublimit that reflects your cargo mix.

3. Hired & Non‑Owned Auto (HNOA) carveouts

   • Why it matters: If independent owner-operators or rented equipment are in play, policies that carve out HNOA for certain driver categories leave holes.
   • Ask for: Explicit HNOA coverage for all drivers used under your authority and definition of “insured” to include leased operators.

4. Temperature-controlled cargo exclusions

   • Why it matters: Refrigerated loads are highly sensitive. Sublimits or exclusions for spoilage can be catastrophic.
   • Ask for: Explicit temperature-controlled cargo coverage with appropriate time‑in‑transit and spoilage thresholds.

5. Cyber-IDs or data reliance exclusions

   • Why it matters: Telematics disputes, dispatching errors or cyber events that disable ELDs can trigger denials if wording ties liability to telematics integrity.
   • Ask for: Wording that doesn’t condition coverage solely on telematics data unless you can meet strict vendor controls.

Hidden limitations that reduce limit availability

• Aggregate limits that erode quickly — an “annual aggregate” shared across multiple coverages (cargo + liability) can leave no limit for a single catastrophic event.
• Per‑unit caps — carriers sometimes cap payout per trailer rather than per loss.
• Claims‑made instead of occurrence wording — rarely used for auto liability, but small carriers may slip in claims‑made provisions for certain endorsements.
• Diminishing defense costs — policies that apply defense costs against indemnity limits rather than as supplementary payments.

How to evaluate proposals (practical steps)

1. Start with an RFP and scoring matrix

   • Use an objective Bid Evaluation Matrix (score carriers by coverage clarity, exclusions, sublimits, service and cost) to compare apples-to-apples: Bid Evaluation Matrix: Scoring Carriers on Coverage, Service and Cost for Trucking Insurance.

2. Check carrier financial strength

   • Prioritize carriers with strong capital and claims-paying ability (check A.M. Best, S&P or Moody’s). Example carriers often used in trucking: Progressive, Liberty Mutual, Travelers and certain Berkshire Hathaway subsidiaries — review their current ratings on A.M. Best before awarding risk. See: https://www.ambest.com/ and our deeper guide: How to Evaluate Insurance Carriers: Financial Strength, Claims Service and Specialty Expertise.

3. Model worst-case scenarios

   • Run sample claims through the policy language: multi-truck pileup, cargo theft involving refrigerated freight, pollution release. Score how limits respond.

4. Request endorsement language, not summaries

   • Compel carriers to provide exact endorsement text (ISO or manuscript) you would sign. Don’t rely on bullet-point summaries.

5. Negotiate or seek endorsements

   • Request named endorsements: primary pollution coverage for cargo, increased cargo limits, non‑owned trailer coverage, or deletion of “sudden and accidental” pollution wording.

6. Leverage your broker effectively

   • If using a broker, ask targeted questions about claims handling, subrogation success and litigation support: Questions to Ask Brokers About Claims Handling, Subrogation and Litigation Support.

Example carrier comparison (illustrative market ranges)

Sources for market ranges: ValuePenguin and industry insurer guides; verify carrier-specific quotes through your broker for fleet-by-fleet accuracy: https://www.valuepenguin.com/commercial-truck-insurance-cost and check carrier ratings at https://www.ambest.com/.

Note: numbers above are illustrative ranges for the U.S. market as of 2024 and will vary widely by state (e.g., California and Florida often produce higher premiums due to loss severity and regulatory environment).

Specific negotiation language and sample requests

• “Delete ‘sudden and accidental’ pollution limitation for motor truck cargo and replace with ISO pollution extension or named peril wording for cargo spills.”
• “Increase cargo per-shipment limit to $250,000 with a $500,000 aggregate for refrigerated freight; remove theft sublimit to full policy limit.”
• “Affirmative HNOA coverage: ‘Hired and non‑owned auto coverage shall apply to any auto used by the Insured for which the Insured has contractual responsibility or which is used in connection with the Insured’s operations under its DOT authority.’”
• “Defense costs shall be payable in addition to the limit of liability and not reduce the limits available for indemnity.”

Final steps before award

• Run a comparative “worst-case” claim through each final policy draft in your Bid Evaluation Matrix.
• Verify endorsements in hand, not promised.
• Confirm carrier A.M. Best rating and recent financial statements for casualty reserves. (Use A.M. Best and rating reports: https://www.ambest.com/.)
• Use our RFP template and checklist to ensure all key exposures and service expectations are covered: RFP Template and Checklist for Trucking and Logistics Insurance Procurement.

Protecting your fleet starts with reading the fine print. When price looks attractive, use the tools above — matrix scoring, endorsement language checks, financial-strength verification, and targeted negotiation — to make sure coverage truly protects your bottom line in high-severity losses.