Freight Broker Liability and Insurance: What Shippers Must Know

When freight is damaged, stolen, or lost, shippers often discover that the protection they assumed they had does not exist. Carrier liability is limited by law. Broker liability is even more limited. Here's the honest breakdown of who pays what — and how to protect yourself.

Carrier Liability: The Carmack Amendment Limits

Under the Carmack Amendment, carrier liability for freight damage is limited to the 'actual value' of the goods at the time of shipment — but carriers can further limit liability in their tariff. Many carriers limit liability to $0.10-$2.00 per pound. A $50,000 pallet of electronics weighing 1,000 lbs could only recover $200 under a $0.20/lb limitation.

What Freight Brokers Are Liable For

Freight brokers are not liable for cargo loss or damage under the Carmack Amendment — that liability rests with the carrier. Brokers can be liable for: negligent carrier selection (choosing a carrier with a known poor safety record), misrepresentation of carrier credentials, and breach of contract with the shipper. This is why carrier vetting matters so much.

Surety Bond: What It Does and Does Not Cover

Every licensed freight broker must hold a $75,000 surety bond. This bond covers broker fraud and financial misconduct — it does not cover cargo loss or damage. If a broker collects your freight payment and never pays the carrier, the bond covers that. If your freight arrives damaged, the bond does not apply.

Cargo Insurance: What You Actually Need

If your freight value exceeds carrier liability limits, you need cargo insurance — either through your freight broker's contingent cargo policy or your own shipper's interest policy. Contingent cargo insurance (most brokers carry $100,000-$1M) pays only when the carrier's insurance fails. Your own shipper's interest policy pays regardless. For high-value freight, always purchase your own.

How IZY Logistics Protects Your Freight

IZY Logistics carries contingent cargo insurance and requires all carriers in our network to carry minimum $100,000 cargo coverage and $1M liability. We vet every carrier before booking and maintain documentation. We also assist with freight claims and do not abandon shippers after a loss event. MC #1615290. Call +1(877)IZY-LOGS.