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Court Affirms Contingent Cargo Policy Limiting Coverage to the Amount Available Under Primary Policy Rob Green | rob.green@smithmoorelaw.com Contingent cargo policies issued to brokers often have a much more limited scope of coverage than brokers or shippers expect. Some brokers believe that if the primary cargo insurer denies coverage or refuses to cover the value of the lost or damaged cargo, its contingent cargo policy will step into fill the void. In reality, the coverage may be much more nuanced and limited. Case in point is a recent decision in the case of MGN Logistics, Inc. v. Travelers Property Casualty Company, et al, No. 16 CV 4301, (N.D. Ill. Aug. 31, 2017). The District Court for the Northern District of Illinois held that the language of a contingent cargo policy validly limited coverage to the “actual limits” of the primary policy. Thus, where a provision in primary cargo policy limited certain thefts to $5,000, the contingent policy also limited the coverage for those thefts to $5,000 even though the policy’s declarations page listed $200,000 in coverage.
In that case, MGN brokered a load of copper wire worth more than $130,000 to a motor carrier insured under a primary cargo policy with a general limit of $250,000. However, the carrier’s cargo policy reduced coverage to $5,000 for certain high value cargo, including copper, if certain security precautions were not taken by the carrier. Those security precautions were allegedly not taken by the carrier, and the copper wire was stolen. MGN paid the shipper for the loss and received an assignment of the claim. It then sought recovery under both the primary and contingent policies. MGN first submitted a claim to the primary insurer, who offered only $5,000 on the claim in light of the high value theft provisions. MGN rejected the offer and turned to its contingent carrier, Travelers, for full payment under the contingent cargo policy. Travelers rejected the claim
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