We can’t discuss Motor Truck Cargo insurance for auto haulers without mentioning endorsements. If you haul — or want to haul — new cars, or have tried to secure a contract with a major broker, carrier, or OEM, you’ve likely heard the terms “constructive total loss” and “diminished value.” These aren’t stand-alone policies, but endorsements added to a standard Motor Truck Cargo policy that modify or expand its coverage.
You may not be surprised to learn that standard cargo policies aren’t designed with auto haulers in mind. Car hauling is a specialized industry, and cargo insurance needs extra features — especially for new cars. That’s where these endorsements come in. Keep reading to learn what they cover and why they’re essential for hauling new vehicles.
What is an insurance endorsement, and which ones are crucial for auto haulers?
An insurance endorsement is an amendment or addition to an existing insurance policy that changes its original terms or coverage.
Endorsements can do a few different things:
- Add coverage: e.g., adding roadside assistance to a commercial auto policy.
- Remove coverage: e.g., excluding a specific driver or location.
- Modify terms: e.g., changing the named insured, deductible, or policy limits.
- Comply with regulations or contracts: e.g., adding a Certificate Holder or Additional Insured endorsement for a broker or client.
They can be added at the time the policy is issued, and some endorsements can be added during the policy term. Once attached, the endorsement becomes part of the policy contract and is legally binding.
Because cargo insurance for auto haulers isn’t standardized across the industry, the endorsements that auto haulers need might be grouped together in an “Auto Hauler” or “Auto Transporter” Endorsement, or you may see some of these coverages named in 2 separate endorsements (one dealing with constructive total loss and diminished value, and another specifying coverage for loading and unloading). No matter what endorsements your insurance carrier provides for auto hauler cargo, these are some words you’ll want to look for and understand:
Constructive total loss
A constructive total loss (CTL) occurs when the damaged cargo can only be repaired to a used-car condition.
Diminished value
Diminished value (DV) means the loss in a vehicle’s market value after it has been damaged and repaired, even if it’s restored to its pre-accident condition. And in case you weren’t already confused, motor carriers, car manufacturers, and insurance companies all use the phrase, sometimes with slightly different definitions depending on context.
Why CTL and DV aren’t included in standard cargo policies
In our last post about Motor Truck Cargo insurance, we discussed the Carmack Amendment, the law that created a standardized, federal guideline that determines who is financially responsible for cargo while in transport (hint: it’s the carrier). Carmack says that the carrier is legally liable to pay for the “actual loss” of cargo that is damaged. In legal land, “actual loss” refers to the direct, measurable financial damage to the shipper/owner of the cargo.
Standard cargo policies are designed to meet the minimum requirements set by law, covering only the direct, tangible loss of property. They aren’t written with the unique risks of car hauling in mind — like vehicles losing value after a repair, or being damaged beyond repair but not technically “totaled.” Because these situations go beyond the scope of “actual loss,” they aren’t included in a standard policy. That’s why CTL and DV endorsements exist: they fill the gaps and provide the extra protection specialized auto haulers need.
What happens if I don’t have these endorsements?
If you don’t have these endorsements as an auto hauler, you may be financially responsible for what’s called “consequential losses”. For example: A car on your load hits a tree branch, and the impact cracks the windshield. The windshield costs $1,000 to replace. The “actual loss” in this case is $1,000.
But if this is a new car, fresh off the production line, that cracked – and now replaced – the windshield has significantly diminished this new car’s value. This car can no longer be sold at the MSRP in new condition from a dealership. Now that there has been damage and repair, it will have to be sold at a discounted price.
The MSRP of this car with the repaired windshield was $85,000, but because it can no longer be sold as “new,” with all of the manufacturer’s warranties, it will be sold at auction for $68,000, a 20% discount.
The difference between what the car’s manufacturer was expecting to make ($85,000) and what they actually made ($68,000) is considered a “consequential loss.” This type of loss refers to additional losses that arise as a consequence of the initial event, not from the event itself. Standard cargo insurance policies only cover the “actual loss” because that is what is required by Carmack, but car manufacturers/OEMs, brokers, and shippers almost always require carriers to accept liability for these “consequential losses” by contract.
Now here’s how it affects the driver. In our example, a standard cargo insurance policy that lacks the endorsements for constructive total loss and diminished value would only pay the insured $1,000 (assuming they had no deductible). Meanwhile, the driver is actually on the hook for $18,000 (the cost of the windshield repair plus the difference between what the shipper expected to make on the sale of the car and the actual price it was sold for).
Now you’re probably starting to see why these endorsements are crucial!
Benefits of having a constructive total loss & diminished value endorsement as an auto hauler
Benefit #1: Guaranteed coverage for partial damage
Having a constructive total loss and diminished value endorsement gives you better and more complete protection. It ensures coverage for partial damage — the most common type of claim for auto haulers, like roof hits, dents, or scratched side panels — so you’re not left guessing if repairs will be covered.
Benefit #2: Helps you qualify for more frequent and better loads with reputable carriers
Many brokers and reputable carriers require this coverage before they’ll assign high-value or frequent loads. Carrying it demonstrates that your trucks are protected, helping you secure more opportunities and better-paying contracts with top-tier carriers.
Benefit #3: Reduces the risk of paying tens of thousands out of pocket
Without this endorsement, you could be stuck covering expensive repairs or diminished value losses yourself. With it, the risk of paying tens of thousands out of pocket for damage — even if your truck is repaired — is significantly reduced.
How to find out if you’re properly covered as an auto hauler
So, now that you understand why having the right cargo endorsements is important, what can you do to make sure you have what you need?
1. Request a copy of your full policy from your insurance agent, including all endorsements
If you ever get pushback when requesting a copy of your policy, this is a major red flag. Your policy belongs to you – it’s what you paid for with that expensive premium! Your agent shouldn’t hesitate to send your policy documents if you request them. Just note that it can take up to a month for policy documents to be sent to your agent after you bind coverage, so if you just purchased or renewed a policy, having a few weeks’ delay before receiving your policy documents is normal.
2. Review your cargo policy for the “constructive total loss and diminished value” endorsement
Different insurance companies have different names for this endorsement. Look for “Auto Transporter Endorsement,” “New Auto Valuation Endorsement,” “Auto Haulers Endorsement,” or other endorsements that specify how coverage is being modified for auto haulers.
3. Compare the coverage you have in your policy to what your liability is for damaged units in your shipper contracts
If you have questions about how a specific type of claim would be handled, ask your agent for details.
4. If reading policy documents feels overwhelming, feel free to skip steps 2-3 and give us a call at Sentinel
We’d be happy to help you determine if you are adequately covered. Being properly covered means more than just having a few extra words on your cert to ensure you can get loads from the top brokers. It means that having one bad day or making one mistake doesn’t shut down your business.
Get the right coverage that lets you haul with confidence
If you don’t have this coverage or if you’re not sure if you do or not, give us a call at Sentinel. Our team has been insuring auto haulers for over three decades, so if you’re looking for an insurance partner that truly knows your industry, you’re in the right place.
FAQs
Is diminished value covered under a standard cargo policy?
Typically, standard cargo policies do not cover diminished value. To be protected against the loss in a vehicle’s resale value after repairs, you need a specific diminished value endorsement added to your policy.
What triggers a constructive total loss?
A constructive total loss occurs when the cost to repair a damaged vehicle approaches or exceeds its actual cash value. Even if the truck is repairable, the insurance company may declare it a total loss because repairing it isn’t economically feasible.
Will CTL/DV increase my premium?
Cargo insurance for auto haulers is typically more expensive than cargo insurance for most other commodities, but that is mainly due to the average value of loads being much higher. The inclusion of the constructive total loss and diminished value endorsements can usually be added at no extra charge or a small fee, but only IF the insurance carrier offers this endorsement.
Do brokers always require CTL/DV for new-car loads?
It’s safe to assume that a carrier brokering loads of new cars is going to require their subhaulers to have coverage for constructive total loss and diminished value.
