Cargo Insurance Limits: What Your Policy Does Not Cover

A pallet arrives crushed, or a reefer load shows up warm, and the shipper files a claim assuming the freight was insured for full value. Then the denial letter comes back citing an exclusion. This happens more often than shippers expect, because "cargo insurance" is not one standard product with one standard set of terms. Limits and exclusions vary by policy, by carrier, and by who actually holds the coverage.

Why coverage and liability are not the same thing

Motor carriers are liable for cargo loss or damage under the Carmack Amendment, but that liability is not the same as an insurance policy paying out automatically. Liability can be limited by the bill of lading, by released value, or by the carrier's own policy limits and deductible. A shipper who assumes the carrier's liability equals full replacement value of the goods is often wrong, and that gap only becomes visible after something breaks.

What standard cargo policies commonly exclude

Exclusions vary by insurer and by policy, so always read the actual certificate, not a summary. That said, several exclusions show up repeatedly:

• Inherent vice or nature of the goods — spoilage, fermentation, or natural deterioration that would have happened regardless of handling.
• Improper or insufficient packaging — if the goods were not packed to withstand normal transit handling, damage tied to that packaging may not be covered.
• Delay — most cargo policies cover physical loss or damage, not the cost of a late delivery, unless a specific delay endorsement was purchased.
• Mechanical or electrical breakdown of equipment like a reefer unit, unless a temperature-control or reefer breakdown endorsement is in place.
• War, terrorism, and government seizure, which typically require separate endorsements, especially relevant for cross-border freight.
• Unattended vehicle or theft from an unsecured location, depending on policy wording around parking and security requirements.
• Concealed damage discovered after delivery, where proving when and how the damage occurred becomes the carrier's or insurer's main defense.

Where broker contingent coverage fits

A broker's contingent cargo insurance is a backstop, not a substitute for the motor carrier's own cargo policy or for cargo insurance the shipper buys directly. It generally responds only if the carrier's coverage fails to pay for a covered loss. It is not designed to cover exclusions the carrier's own policy would also exclude, and it does not raise the declared value of a shipment on its own.

What this means for a shipper moving high-value or sensitive freight

If the value of a shipment exceeds what a carrier's liability limit or cargo policy would pay out, the practical fix is separate cargo insurance purchased by the shipper for the actual value of the goods, with the exclusions above reviewed in advance. For cross-border loads, ask specifically about war/terrorism and customs seizure language, since those exposures are more relevant on international lanes than on domestic ones.

Where Ellys fits in this picture

Ellys International Logistics is a US freight brokerage and 3PL, bonded under a BMC-84 surety bond and carrying contingent cargo and liability coverage. Ellys also vets carriers in its network against live FMCSA data before dispatch and monitors them continuously, which reduces the chance of working with a carrier whose own insurance has lapsed or whose authority has been flagged. That vetting does not replace the coverage decisions above, but it removes one common cause of claim disputes: a carrier that was not properly insured or authorized in the first place.

If you want to confirm a carrier's authority and insurance status before you dispatch a load, use /verify-carrier.