Happy New Year! For most of you, these past few years have been a struggle. The mere fact that you are still in business is a testament to your business sense and survival ability. However, many challenges still face all of us, and we can only go on the assumption that this will be the turn-around year for us, our industry, and, hopefully, the entire national economy.
In my October and December (2010) articles, I spent time reviewing the anatomy of a claim as it may affect you. As an owner-operator, the dangers (in regards to insurance claims) that you are the most susceptible to revolve around three things – third party liability, physical damage (to your vehicles) and/or cargo losses. If you haven’t read those two previous articles, please take the time; it may make your life a little easier to understand the process if or when you have a claim. As I have said in my articles many times before, when you are buying your insurance, price is not always the most important
consideration – coverage is. Take the time to understand the exact terms of your insurance policy and the limits and conditions that the insurance company is agreeing (or not) to cover.
Over the last few months, I have seen more demands placed on owner-operators, by both shippers and brokers, for increased limits of existing coverage or for additional insurance requirements. These all come at a price. If you are put into that situation, you will have to weigh the additional cost against any added revenue that you will hopefully receive by providing these higher limits. Many of these demands for more coverage involve Excess Liability, Cargo and General Liability coverage. Let’s look at each of these types of coverage in detail.
For an owner-operator, the minimum liability limit is $750,000 for both the state and the Feds. Most of you carry $1,000,000 in liability limits, which is usually a requirement by the shipper or broker. But, more recently, I have had several requests for limits up to $2,000,000 for liability. These limits are now being required by some shippers. Most of the insurance companies that you have your coverage through will not increase coverage beyond one million dollars. What that does is put you into a situation of having to add an “excess policy” over your existing or primary policy. That policy has to be shopped for by your agent with the companies that write this type of coverage.
Premiums for an owner-operator for excess liability coverage usually range from $1,000 to $2,000 per year. Many companies have minimum premiums – the last one that I wrote was $2,300 (annually). There are companies that will write primary liability up to $2,000,000 and your agent should have access to them. You may have to consider the cost in adding excess coverage to your existing policy or rewriting the coverage with a new company. In this process, not all companies will write all risks, so you are limited to those companies that offer the protection your particular operation requires.
In regards to cargo coverage, the majority of you carry $100,000 in cargo limits, but it is not very uncommon today for shippers and brokers to require $200,000 or $250,000 in cargo limits. These limits are relatively easy to get through your existing carrier. Limits over those amounts are usually harder to place for the average owner-operator. Like increasing your liability limits, an “excess” policy may be the only option, but it depends on the circumstances.
Your agent is the conduit to the companies that may write these higher-limit policies, and it may take some leg-work to put together limits in the range of $500,000. Your last option might be a Lloyds Market, but there is a lot of stigma regarding coverage through Lloyds by shippers. If this is the only option you have, take the time and discuss this with the shipper or broker before you commit to the purchase of coverage through Lloyds. It may be a waste of your time if your shipper will not accept it.
I am also seeing more requests at my office for the addition of General Liability coverage. In a nutshell, this added coverage provides protection to the insured, to include any additional insureds, in the event of a non-trucking claim. Now, you ask, “Why, if it does not cover the operations of the truck, do I have to carry this type of insurance?” Many shippers have risk managers and/or attorneys whose main job is to merely cover all their bases in the event of a claim. Usually they have created insurance requirements that lump everyone into a single group that provides goods or services for that company. Many insurance companies have the ability to include the coverage on your existing policy. These costs usually range from $250 to $1,000 annually. If your insurance policy will not accommodate this coverage, a stand-alone policy will range from $750 to $1,500 for an owner-operator.
General Liability is a business owner’s coverage. It covers you or your employee’s actions away from the truck, such as an altercation on the dock or the responsibility of running a forklift or any other type of non-licensed equipment. General Liability also covers the yard or shop that you park or work out of. General Liability coverage is similar to your homeowner’s insurance policy, which provides coverage in the event of someone getting hurt on your property. It also covers personal injury such as slander or property damage caused by you, other than from your truck, as well as advertising and contractual liability (or even medical) for someone other than yourself. This type of coverage can be broad and extensive. As an owner-operator, this coverage may never be needed, but it still may be required.
For most of us, 2010 was not a great year. I sincerely hope, for all of us, that 2011 will be much better. And if early indicators are a good sign, I am hopeful. So, work hard and be safe – the best is yet to come! If you have any comments or questions, I can be contacted through California Plus Insurance Service at 1-800-699-7101.