COMMON CARRIER

Common Carrier – An Entity Offering Transportation Services to the General Public

Facing the risk of accidents or cargo theft, a common carrier covers these perils—often misunderstood and poorly managed.

TL;DR

A common carrier is a business offering its transportation services to the general public.

Understanding this term benefits insurers by allowing them to accurately assess risks and apply appropriate coverages.

A common pitfall is misidentifying a carrier's status, which could lead to inadequate coverage.

Ensuring proper identification and application of common carrier status and corresponding coverage is a best practice for agencies.

What Is a Common Carrier in Insurance?

To a client, a common carrier would be a company such as FedEx or Greyhound—businesses offering transportation services to the general public, like shipping goods or transporting people. These companies usually operate under a federal or state regulatory body's authority.

On the technical side, common carriers usually appear in auto liability insurance, particularly commercial auto insurance. Their role is often regulated by federal and state authorities who impose specific requirements for liability protection due to the risk associated with their operations.

Key Related Terms to Know

Private Carrier – A company that transports its own goods.

Contract Carrier – A company providing transportation services to specific customers under contractual agreements.

Bus Companies – A type of common carrier that offers transportation services to the public, typically over a set route.

General Public – The individuals or businesses that utilize common carrier services.

Common Questions About Common Carrier

What’s the Difference between Common Carriers and Contract Carriers?

While common carriers serve the general public, contract carriers provide their services exclusively to certain customers based on contracts. This could mean the difference between a bus service for the public (common carrier) and a private school bus company (contract carrier).

Do Common Carriers face Specific Insurance Requirements?

Yes, common carriers often must meet specific liability coverage limits set by state or federal regulations. This is because accidents involving carriers can lead to significant liability claims.

Common Carrier vs. Contract Carrier

Contract Carriers and Common Carriers seem similar but have key differences.

Comparison Area	Common Carrier	Contract Carrier
Primary use case	Processing transportation for the general public.	Provides service to specific customers based on contracts.
Coverage / concept type	Commercial Auto liability.	Customized contracts based on the nature of goods or people transported.
Typical exclusions	Does not cover the carrier’s own goods.	Does not provide service to the general public.
Who is most affected by errors	The general public using services.	The specific customers who have a contract with the carrier.
Common mistakes	Misidentifying a company as a common carrier.	Misinterpreting the nature of the contract.

Real Claim Examples Involving Common Carrier

Scenario 1: A package was being transported by FedEx (a common carrier), but it was lost in transit. The sender filed a claim against FedEx, which their insurance coverage settled after determining the loss met the policy terms.

Scenario 2: An individual was injured due to negligence by a bus driver working for a public transportation company (a common carrier). The insurance of the bus company covered the liability claim filed by the injured party.

Scenario 3: A shipper used a construction company with a private carrier status to move its goods, thinking it was a common carrier. When the goods were damaged in transit, the construction company’s insurance didn't cover the loss, resulting in a hefty out-of-pocket expense for the shipper.

Limitations and Common Mistakes

Oversimplifying the distinction between a common carrier, private carrier, and contract carrier.

Not understanding that common carriers' operations, and thus insurance needs, can significantly differ based on what goods or individuals they are transporting.

Failing to verify a company's carrier status can lead to applying wrong coverage.

How to Explain Common Carrier to Clients

To a homeowner shipping a valuable item: "A common carrier like FedEx or UPS offers services to everyone. If your item is lost or damaged while with them, their insurance covers the claim."

To a small business owner: "As a business, when you ship products using services like USPS, which is a common carrier, they are responsible for your items' safety during transport".

To a risk manager: "When your company uses the services of a common carrier for transportation, their insurance should cover your goods. Always ensure this coverage to mitigate any potential risks".