Freight Forwarders: Complex Services with Complex Coverages

What Is A Freight Forwarder? 

The meaning of the term “freight forwarder” will vary depending on who you ask. Even the Federal Motor Carrier Safety Administration (FMCSA) and the Federal Maritime Commission (FMC) have different definitions for the term. Let’s start by comparing these definitions:

According to the FMCSA: (A freight forwarder is) A company that provides transportation of property or household goods, for compensation, in interstate commerce.

According to the FMC: (A freight forwarder is) An entity that arranges cargo movement to an  international destination.

Regardless of which definition you prefer, there are important distinctions based on where freight forwarders operate. Freight forwarders dealing with transportation of goods within the United States are considered carriers and are liable as such, while freight forwarders dealing with international transportation are considered intermediaries and, in some cases, may or may not be considered carriers.

It’s also important to understand that there are many types of freight forwarders, both domestically and internationally, and they are defined by the types of services each provides.  Types of freight forwarders include:

  • Freight Brokers: Freight brokers only arrange domestic or international transportation and do not take possession of the goods or appear in the bill of lading (in-house or master) as a carrier.

  • Customs Broker: Customs brokers provide services (mostly to importers) by clearing goods through customs obstacles, as well as calculating taxes and duties, completing necessary paperwork, communicating with government authorities, and arranging inland transit to the final destination.

  • Non-Vessel Operating Common Carriers: Since they assume some of the traditional roles of an  ocean carrier, non-vessel operating common carriers (NVOCC) are considered the carrier to the shipper and the shipper to the carrier. Their responsibilities include issuing a house bill of lading and arranging the efficient and cost-effective transportation of the consignor’s goods directly with the ocean and inland carriers. In assuming this role, the forwarder is exposed to liabilities and positive limitations carried by common carriers.

  • Indirect Air Carrier: Indirect air carriers assume some of the traditional roles of air carriers, such as issuing house air waybills and arranging the efficient and cost-effective transportation of the consignor’s goods directly with air carriers. The exposure to liability is similar to that of an NVOCC but is based on different generally accepted conventions.

  • Motor Truck Carrier: Owning and operating trucks or rails is not required to be considered a motor truck carrier; issuing freight receipts or bills of lading can turn a freight broker into a legally liable carrier. Motor truck carriers are legally required to have a minimum limit of cargo liability; however, these limits under-represent their daily exposure.

  • Warehousemen: Warehousemen provide storage at owned (or leased) warehouses. The warehouseman is liable to the owner for the stored goods to the extent described on the warehouse receipt or contract.


Determining Coverage Based On Services

With the understanding that no two forwarders are the same, the only way to analyze a forwarder’s exposure is based on the services it provides.  Many policies exist for these exposures; some are standard, non-malleable forms, some are directed to individual services, and some are designed on a case-by-case basis to better protect the forwarder’s operations (which is usually the case for forwarders performing multiple services).


Standard Forms:             

  • Motor Truck Cargo Legal Liability Forms

    These forms are designed specifically for motor truck carriers. Most of these forms are standard and do not permit any deviation from this one service. They can be used for trucking companies without brokerage or international divisions. Coverage includes defense costs.

  • Contingent Motor Truck Cargo Legal Liability Forms

    These forms are designed only for domestic freight brokers. Most of these forms are standard and do not permit any deviation from this one service. They can be used for freight brokering companies without international divisions. Coverage includes defense costs.

  • Cargo Legal Liability

    These are broader standard forms for which the underwriter may or may not include limits depending on services. Coverage is contingent upon the insurance carrier and may or may not include international shipments. It does, however, usually cover both shipments as a carrier (Issuing B/L) and a broker (contingent). Coverage may include defense costs.

  • Marine Contingent Liability

    These forms are designed only for international freight brokers. Most of these forms are standard and do not permit any deviation from this one service. They can be used for broking companies without domestic brokerage services. Coverage may include defense costs.


Non-Standard Forms:

  • Shipper’s Interest

    This coverage provides the forwarder with the ability to offer all-risk cargo and warehouse insurance to their clients on a per-shipment basis. The premium paid comes from the forwarder’s client once coverage is accepted. The form should be a broad ocean cargo form inclusive of inland transit and warehouse coverage (when applicable). This facility gives the forwarder a competitive edge; it makes the forwarder a “one-stop shop.”

    (Read more about shipper’s interest).

  • Carrier’s Legal Liability

    This form is designed to cover the forwarder while acting as a carrier on truck, rail, ocean vessel or air shipments. It also includes legal representation, legal expenses, uncollected freight, debris removal expenses, suit and labor expenses, and temporary storage, among other coverages. It also provides the carrier with the ability to subcontract shipments under the terms of the policy.

  • Freight Broker’s Legal Liability (or “Forwarder’s Legal”)

    This form is designed to cover the forwarder while acting as a broker on truck, rail, ocean vessel or air shipments. It includes legal representation, legal expenses, debris removal, temporary storage, suit and labor expenses, among other coverages.

  • Freight Forwarders Errors & Omissions

    This form is designed to cover the forwarder while acting as a carrier or broker for breach of any obligation, negligent act, error or omission, including but not limited to incorrect instructions, faulty arrangements or clerical errors. It defends the insured, covers expenses taken upon by the insured at the insurance carrier’s request, and includes debris removal.

  • Warehousemen Legal Liability
    This form covers the forwarder if, as part of their operation, they store or warehouse goods of others under their own warehouse receipt or scheduled contract.


Key Factors To Consider

  1. Having multiple coverages with multiple carriers may put you at risk for gaps in coverage or divisional loss situations. It’s important to review all policies carefully and to consider comprehensive options that place all coverage “under one roof.”

  2. Standard forms work for simple operations but likely aren’t adequate for forwarders who provide multiple services.

  3. Each forwarder must be analyzed in detail by an experienced underwriter capable of identifying gaps in coverage and understanding industry nuances.

  4. Selecting an insurance carrier with a reputation for service, expertise and flexibility, as well as specialized knowledge of this complex space, will put you on the right path for acquiring the coverage you need.



Given the continual rise of e-commerce and the global supply chain that has ensued, understanding freight forwarder services will be paramount to protecting the future of business.


AmWINS Specialty Logistics Underwriters (ASLU), an AmWINS Group company, is a managing general agency specializing in the complex risk factors of the logistics and cargo industry. ASLU is dedicated to offering a high level of service to their clients through a unique balance of industry knowledge, responsiveness and technology. To learn more, visit amwins.com/aslu



About the Author

This article was written by Alex Rosas, Executive Vice President of AmWINS Specialty Logistics Underwriters (ASLU).

Contact Us

To learn more about how AmWINS can help you place coverage for your clients, reach out to your local AmWINS broker.  If you do not have a contact at AmWINS, please click here.

Legal Disclaimer. Views expressed here do not constitute legal advice. The information contained herein is for general guidance of matter only and not for the purpose of providing legal advice. Discussion of insurance policy language is descriptive only. Every policy has different policy language. Coverage afforded under any insurance policy issued is subject to individual policy terms and conditions. Please refer to your policy for the actual language.

(c) 2017 AmWINS Group, Inc.

Most Popular Insights

Four Key Additional Insured Endorsements for Contractors


Construction contract negotiations, which determine the kind and amount of insurance required for a construction project, can be time-consuming, complicated and frustrating. Project owners require contractors on a project to name the project owner as an additional insured on the contractor’s casualty insurance program. It's important that both project owners and contractors understand the coverage provided by these additional insured endorsements. This article discusses four common ISO additional insured endorsements related to commercial general liability policies purchased by contractors, including their limitations, conditions and exclusions.

Claims Reporting: Better Late than Never?

A common complication during the claim process is the late reporting of claims. In some cases, a late claim can put the agent or broker's own E&O policy in jeopardy. There are many reasons for missing a reporting deadline; however, in most cases, they will not matter to the insurer or the courts. This article discusses typical claim reporting requirements, common causes of late reporting, and recommendations to mitigate the risk of late notice claim denials.

Understanding Property Theories of Recovery and Ensuing Loss Clauses

​The theories of recovery, as well as the ensuing loss provisions, contained in property insurance policies are often complex and, at times, seemingly in conflict. Although a policy may not directly address these theories, their application by courts plays a significant role in the coverage determination process after the claim. It is essential that brokers understand the primary theories of recovery – Efficient Proximate Cause, the Concurrent Causation Doctrine, and the Anti-Concurrent Causation Doctrine – in order to navigate the challenging post-claim process and effectively serve their clients.

Insurance Commissioner Orders Carriers to Pay for Mudslide Damages

The Thomas Fire, the largest fire in California's history, subsequently led to a mudslide on January 9, 2018, which caused a massive amount of damage in Santa Barbara and Ventura counties. The California Insurance Commissioner has issued a formal notice reminding carriers to pay for damage, citing the "efficient proximate cause doctrine." This article takes a closer look at the doctrine and how it has been challenged in court over the years.

Ordinance or Law Insurance Coverage

Ordinance or Law insurance coverage provides limited protection for costs associated with repairing, rebuilding, or constructing a structure when physical damage to the structure by a covered cause of loss triggers an ordinance or law. Compliance with ordinances and laws after a loss can add 50% or more to the cost of a claim. This article will help you educate your insureds on exclusions and limitations and help them take a proactive approach to their insurance program.

Employment Practices Liability in the Age of #MeToo

In 2017, the issue of sexual harassment – especially in the workplace – gained greater awareness as accusations of harassment by high-profile individuals were constantly in the news. In many cases, sexual harassment lawsuits seriously impacted businesses and their respective insurers. Employment Practices Liability Insurance not only provides protection against employee lawsuits, but can also help your clients mitigate their sexual harassment risks.

Sign Up For Our Monthly Newsletter

Sign Up