Transportation Blog

As mid-year insurance renewals are finalized, the transportation industry needs to be alerted to certain revisions to the “Notice of Cancellation” provision in the ACORD 25 Certificate of Insurance (“COI”).  The revised ACORD 25 removed long-standing language requiring prior written notice to the certificateholder (often 30 days) of any policy cancellation.  This change has prompted concerns on how certificateholders will be assured they will receive information on the status of cargo coverage.  Also effective March 21, 2011, the FMCSA stopped requiring regulated motor carriers (with the exception of household goods movers and freight forwarders) to file proof of cargo insurance.  Thus, in most common situations, members of the public are no longer able to obtain information regarding the status of a particular motor carrier’s cargo coverage via the FMCSA’s website.

Insurance regulators further recognized that insurance companies may not be able to satisfy the prior written notice requirement in those instances where an insured chooses to immediately cancel an insurance policy.  In this regard, modifying the ACORD 25 cancellation provision and removing the language requiring prior written notice of cancellation was intended to reduce the likelihood that a COI would run afoul of state insurance laws and regulations prohibiting misrepresentations of insurance coverage.

To ease concerns of shippers and others that request a COI, transportation providers may wish to explore various options such as endorsing the underlying policy to include a requirement that the certificateholder receive advance notice of cancellation or including a provision in the shipping agreement confirming that the insured will provide prior notice of cancellation.  Motor carriers confronted with this issue may need to explore these options in order to maintain valuable business relationships and ensure compliance with state insurance laws.  A thorough review of the relevant shipping agreements may also be necessary to ensure that such agreements are consistent with the language contained in the applicable COIs.