My father, who was involved in the transportation of food, had a business rule to never haul watermelons.

Why? If he was unable to deliver the watermelons on July 3, they would lose value for the receiver by the time he delivered them on July 5—prompting the receiver to reject the load.

Like most food, watermelon value depends on market value at the place of delivery. If the market value of my father’s items went down during transportation, the receiver might not want or need the item anymore, and could choose to reject the load for any reason.

Now, new regulations make a food item’s value even less certain than before. If you insure any motor carrier or business that is involved in shipping, transporting or receiving food, you and your insureds need to know about the Food Safety Modernization Act (FSMA). The FSMA gives the Food and Drug Administration (FDA) new authority to regulate the way food is grown, harvested and processed in order to make sure contaminated food does not enter the supply chain.

The FSMA’s rule on sanitary transportation of human and animal food establishes requirements for shippers, loaders, motor and rail carriers, and receivers involved in transporting human and animal food to use sanitary and temperature control practices to ensure the safety of that food.

With some exceptions, the final rule applies to shippers, receivers, loaders and carriers that transport food in the U.S. Specifically, it establishes requirements for transportation company vehicles and transportation equipment, operations, records and training. The provision includes the following directives:

Vehicles and transportation equipment: design and maintenance of vehicles and transportation equipment to ensure they do not cause the food they transport to become unsafe. For example, vehicles must be suitable and adequately cleanable for their intended use and capable of maintaining temperatures necessary for the safe transport of food.

Transportation operations: measures taken during transportation to ensure food safety, such as using adequate temperature controls, preventing contamination of ready-to-eat food from touching raw food, protecting food from contamination by non-food items in the same load or previous load, and protecting food from cross-contact, i.e., the unintentional incorporation of a food allergen.

Training: training carrier personnel in sanitary transportation practices and documenting the training. This training is required when the carrier and shipper agree that the carrier is responsible for sanitary conditions during transport.

Records: maintenance of records of written procedures, agreements and training (required of carriers). The required retention time for these records depends on the type of record and when the covered activity occurred but does not exceed 12 months.

Note that some businesses are not subject to the FSMA. The definition of “transportation operations” does not include transport of foods completely enclosed by a container, except food that requires temperature control; all transportation activities performed by a farm; transport of human food byproducts for use as animal food without further processing, such as those sold directly for farmers to be fed to livestock (these do not include byproducts that are transported to facilities to be manufactured into feed or pet food); and transport of live food animals, except molluscan shellfish, such as oysters, clams, mussels and scallops).

If you insure a business that is responsible for loading or unloading food goods—which could be the transportation company itself or a different company the transportation company uses, commonly known as a “lumper”—some additional FSMA provisions apply. For example, before loading a food that is not completely enclosed by a container, the loader must determine that the transportation equipment is in appropriate sanitary condition. And before loading a food that requires temperature control, the loader must determine that each mechanically refrigerated cold storage compartment is adequately prepared for refrigerated transportation, including precooling if necessary.

The final rule clarifies that the intended use of the vehicle or equipment (transporting animal feed vs. human food) and the production stage of the food being transported (raw materials vs. finished products) are relevant in determining the applicable sanitary transportation requirements. The shipper and carrier can agree to a temperature-monitoring mechanism for foods that require temperature control for safety.

Primary responsibility for determining appropriate transportation operations now rests with the shipper, which may rely on contractual agreements to assign some of these responsibilities to other parties. The FSMA requires shippers to develop and implement written procedures to ensure that equipment and vehicles stay in appropriate sanitary condition. Shippers of food transported in bulk must develop and implement written procedures to ensure that previous cargo does not make current food unsafe. Shippers of food that require temperature control for safety must also develop and implement written procedures to ensure that food is transported under adequate temperature control.

Possible unsafe food must not be sold until an FDA inspector determines it’s safe. The FSMA states that if a covered person or company at any point in the transportation chain becomes aware of a possible failure of temperature control or any other condition that may render a food unsafe, that food must not be sold or distributed until a determination of safety is made.

Rejection of a load calls for an FDA inspection to determine if the food has salvage. The motor carrier must then consider what to do with the cargo while waiting for the inspector to arrive. Once the inspection report is available, it will reflect either that the load is OK to sell; part of the load is not safe to sell, so part can be salvaged; or the total load is rejected, with no salvage.

Note also that small businesses—defined as motor carriers engaged in food transportation that have less than $500,000 in average annual revenue—are not currently subject to the FSMA. Based on industry standards, an interstate motor carrier operating more than 300 miles should average $185,000-$220,000 in revenue a year, which means that a motor carrier with three or fewer trucks would not be subject to the FSMA. But remember, a shipper could require even a small motor carrier to sign a contract that would make them subject to the FSMA.

Are your insureds prepared for compliance with the FSMA? Do they require their drivers to undergo formal food safety training? Do they have formal recordkeeping procedures? Have they signed new contracts that either place additional responsibility on them for the care of cargo during food transportation, or give the shipper/receiver rights of salvage?

Talk to your insurance carriers about how their policies will address a claim when a receiver rejects a motor carrier’s cargo due to an FSMA violation, but the cargo sustained no direct damage. How will coverage address rejection of the total load? Does the motor carrier’s contract with the shipper give the shipper/receiver control of salvage, requiring destruction of even the “undamaged” part? Does the cargo policy include a duty to defend in case of a dispute or a court case? How does the policy address spoilage, contamination and mechanical breakdown, and what duties, if any, does the insured face in order to meet the requirements of coverage?

The FSMA is only one of many government-imposed regulations that affect trucking insureds, particularly cargo coverage. Because there is no standard cargo form, you must pay careful attention to the forms each insurance carrier provides for your insureds, and make certain the form meets your insured’s unique needs.

Tommy Ruke, TRS, CIC, co-founded the Motor Carrier Insurance Education Foundation in 2013 to provide face-to-face presentations, web-based education and other resources for insurance professionals who work with motor carriers.