The Importance of Obtaining Certificates of Insurance

Roanoke Trade has published a number of articles and white papers and held webinars on the importance of freight forwarders and property brokers obtaining certificates of insurance from their carriers. A recent Court of Appeals case in North Carolina reinforces this topic in a case holding the property broker liable for a workers’ compensation claim made by an employee of the carrier.

In the case of Atiapo v. Goree Logistics, Inc. et al., a truck driver was injured in a vehicle accident while transporting goods on behalf of the motor carrier, as per an agreement between the carrier and the property broker.  The motor carrier did not carry workers’ compensation insurance. It alleged that the trucker in question was not an employee but an independent contractor*. This argument was denied, and the motor carrier was held primarily responsible for the workers’ compensation claim.

However, the property broker was also sued. The court found that by hiring the motor carrier, they acted as a “principal contractor”, and according to law the contractor is responsible for acts of its subcontractors. By failing to carry workers’ compensation, the liability of the motor carrier was transferred to the property broker. The property broker was required to pay a portion of the claim.

A simple certificate of insurance obtained from the motor carrier would have prevented a lawsuit against the broker. In this case, the absence of insurance should have caused the property broker to rethink working with that carrier.

If the property broker carries workers’ compensation, its policy may have responded to this claim, provided the claim was reported promptly to the insurance company.  Even if the claim was not covered, the insurer has the right to charge an additional premium at audit for the costs of all “subcontractors” used by the broker. The broker’s only recourse against these charges is to produce certificates of insurance from all of its carriers showing that proper insurance is provided elsewhere.  Furthermore, the insurer may well choose to cancel or non-renew the property broker’s insurance because of this potentially undisclosed exposure.

Roanoke Trade specializes in providing comprehensive insurance programs, including workers’ compensation insurance, designed for logistics service providers and transportation intermediaries, including assisting with the procurement of the appropriate coverages and amounts to respond to today’s market and exposures. Please contact us at 1-800-ROANOKE (800-762-6653).

*Courts determine employee vs. independent contractor relationships based on the control the employer has over the activities of the individual, not on whether the individual is paid by 1099 vs. W2.