Being in the trucking business, there are controllable expenses, and then there are those unforeseen expenses and losses that will hit you between the eyes when you are least prepared. At this point, I am only talking about what if! What if you have a major mechanical breakdown? What if you are involved in an accident that damages your rig to the point that it is placed out-of-service or even destroyed? What if you have a cargo loss that is not covered completely?
We bust our hump to make money, but there never seems to be enough. Each year, I see half of those who enter the trucking business fail. Why? Because they did not have a financial cushion to fall back on when a big loss hit. If you cannot handle 45 days of downtime or loss of revenue, don’t get yourself involved in the trucking business. A financial cushion is hard to do, and it is even harder not to touch the funds, if you have them, when in a pinch. But, having a reserve of cash should always be part of your business plan.
In the event of an accident, even though you have purchased and paid for the various insurance coverages required, maybe you even elected to purchase some extra protection, there will always be a monetary loss. Let’s look at the various areas of losses in the event of a physical damage loss or a cargo loss.
Liability, sometimes called third party liability, pays for any property damage or bodily injury that you are legally responsible for. Your insurance company has agreed to defend and pay those incurred losses. You should not have any financial consequences. You may have a deductible, but for the majority of the liability policies written, there are no deductibles. If your policy has a liability deductible, your insurance agent should have disclosed it and advised you of your responsibility. With the liability coverage, there is no coverage for your equipment or the equipment that you have in your possession and control, like Non-Owned or Unidentified trailers. But, do not confuse Property Damage with Physical Damage.
Physical Damage is the damage done to your equipment. The loss may be covered by your insurance or, if someone else was responsible, that person’s insurance, which should pay the loss. There are, of course, exceptions in everything. The minimum liability limits that California imposes on private passenger autos is very low, so if you are involved in an accident with a car that was at fault, and if they had coverage that provided less than what your damages were, your insurance company would have to make up the difference.
If the other party did not have sufficient coverage to pay for the damage, they certainly will not have the ability to pay for any downtime you may incur. If your insurance company has to pay the claim or if they have to put out any portion of the incurred loss, you would be responsible for the deductible and, for the most part, any downtime and equipment rental fees – even if you were not responsible for the accident. Most physical damage policies do not provide for downtime or rentals. If your policy includes enhancements, like paid downtime, your agent should have told you. Downtime is usually written for a specified time, such as 30 days, with a specified daily rate.
Time is your nemeses. From the time of the accident to the time that you have hooked-up to another paying load, it’s on your dime. That’s the gorilla that has you by the short hairs, and the reason that you should have created a cushion. There are several things that will take money, and it will take time to move the claim process forward in a timely manner, so you must be prepared.
It is your responsibility to manage the accident, to mitigate the loss to your equipment and, if applicable, the property that you are hauling. Towing has become an issue, with some tow companies demanding payment before the vehicle is moved. Your insurance company will pay the towing for an insured loss, but they may not have the ability to respond quickly. It takes time before an adjuster is assigned to the loss, and it may take several days before anyone is in contact with you and/or the tow company. Be prepared to pay the towing bill out of your own pocket until they can reimburse you.
Your adjuster will be in contact with you and the repair shop. If you have not been contacted by the next day, start calling your agent. It is imperative that you communicate with the adjuster and the repair shop. Do not rely on anyone’s interpretation. Avoid any misunderstandings by discussing your concerns with the responsible party. Respond quickly to avoid any unnecessary delays. You will have to approve the settlement prior to any work being done and payment, so any delay in your response will delay the completion date of the repairs – and the date you can get back to work!
Cargo claims are usually the messiest, creating dissatisfaction with both the process and the resulting settlement. A claim for cargo can result from a physical loss (accident) or a loss from another source, such as refrigeration breakdown. Not all losses are covered. With cargo coverage, it is imperative that you take the time to review the exclusions and conditions of the insuring agreement with your agent or broker. Each company writes cargo differently and, as such, each policy should be reviewed for its content and its ability to fulfill the requirement of the person or company that is purchasing it.
With a cargo loss, it is the insured’s responsibility to preserve any recoverable product. Do not expect an immediate response from the insurance company – as I have mentioned, there may be a delay. If you are pulling a reefer, your policy will outline the required maintenance and maintenance schedule that you have a responsibility for.
With a cargo loss, there is a potential for out-of-pocket expenses. You have a responsibility for the deductible. For the most part, it is $1,000. With reefer breakdown, it is usually $2,500. When you buy insurance, you may have several deductible options available. There are financial incentives for choosing a higher deductible. You would have to determine if the higher deductible justifies any savings. You may have a co-pay. This goes back to understanding the policy that you have purchased. Co-pay has to do with underinsuring the load. If the load was underinsured, the claim would be settled as a percentage of what the actual value would be at the time of loss. Many cargo policies have this clause in it.
Understanding your risks and being prepared before anything drastic happens is imperative for your survival in the trucking business. Get these affairs in order now – before it’s too late! If you have any comments or questions, I can be contacted through California Plus Insurance Service in Modesto, CA at (800) 699-7101.