Canadian Accredited Insurance Broker (CAIB) Two Practice Exam

What defines the liability of contract carriers?

1. Standard insurance policy limits

2. Terms established in a contract with the owner

3. State regulations governing all carriers

4. Market rates for transportation

The correct answer is: Terms established in a contract with the owner

The liability of contract carriers is primarily defined by the terms established in a contract with the owner. This means that the specific obligations, limits, and responsibilities of the contract carrier, such as the scope of services, coverage of damages, and any stipulations regarding liability, are all explicitly outlined in the contractual agreement between the carrier and the owner of the goods being transported. Contract carriers operate under a mutual agreement that dictates how they will conduct their services and what their responsibilities and liabilities will be in various scenarios, such as loss, damage, or delay of goods. This contractual nature is what primarily differentiates contract carriers from common carriers, whose obligations are defined more by existing statutes and regulations rather than individual agreements. Market rates for transportation, standard insurance policy limits, and state regulations do play roles in the broader context of the transportation industry, but they do not specifically define the liability for contract carriers, which is governed primarily by the contract between parties.