I hope that we have closed the recession gap and that 2013 treats us better than the past five years. I have been in the truck insurance business for more than thirty years and have gone through several downturns in the economy, but nothing like the past five years. Our government functions like a dysfunctional family with children addicted to debt – and the debt continues to grow by the second. Each and every taxpayer in the country now owes over $140,000 as their proportional share of the debt. With that said, let’s hope things get better and look toward the future with optimism. Now, let’s discuss some insurance issues.
A large portion of the trucking industry today is made up of owner operators that only own tractors, pulling someone else’s trailer. The following information is geared toward those that pull these trailers, as well as those of you that have your trailers pulled by someone other than yourself. If you own a tractor, the insurance industry considers this an “incomplete” unit without a semi-trailer attached. Your insurance policy will include that trailer as an Unspecified Trailer, a Non-Owned or Unidentified Trailer. This does not cover any owned trailers. Some coverages will be picked up on the non-owned trailer through a Trailer Interchange Agreement, if purchased. Many companies do not provide this coverage so, if it is needed, it will have to be purchased through a separate policy (we’ll look at this later).
Before we get started, law suits in this country are adjudicated by decisions from previous legal actions. One of the more prevalent decisions, covering trailer liability, owned by someone other than the owner of the power unit, is the decision in Travelers vs. Travelers. Basically, this decision assesses liability equally to both the power unit and the trailer. If you are the owner of any trailers, being pulled by someone else, you are liable for your proportion of the suit. With this in mind, always have yourself named as an Additional Insured. This will insure your representation and indemnification in the event of a law suit brought against you through the power unit.
For most of you, your insurance coverage consists of Liability, Physical Damage and Cargo. Each one of these coverages affects the trailers that you are pulling and that you do not own. Liability is that part of the policy that provides insurance coverage to a third party that you are legally responsible to pay. This coverage will indemnify you from law suits brought about by a third party. Liability exists for the non-owned trailer only when it is attached to the power unit. Think about that. If you detach the trailer, no coverage exists. I cannot emphasize this fact enough. But Liability is only one leg of the insurance stool – Physical Damage and Cargo make up the others.
The majority of owner operators that pull someone else’s trailers are required to cover the Physical Damage of those trailers through their agreement by the company that has provided them with the trailer. Non-Owned Physical Damage picks up that coverage. Like the Liability, in most cases, coverage only exists when the trailer is attached to the power unit. Any loss, while the trailer is detached, will not be covered.
Let’s get back to Trailer Interchange for a moment. If you need this coverage, it has to be purchased as a separate coverage. Your insurance company that is writing the package for you may or may not provide this coverage. For the most part, those companies that require it will stipulate it in their contract with you. If you have purchased Trailer Interchange, it will be indicated on the Certificate of Insurance that is provided to the Certificate Holder. This part of the insurance policy, if purchased, will provide coverage for any trailer that is in your care, custody and control – whether attached or not to your power unit.
There are two parts to Trailer Interchange coverage: 1) Liability; and 2) Physical Damage. Both parts must be purchased. The premium is based on the number of trailers you have in your possession, the number of days that you have those trailers in your possession, and the values of those trailers. Broader coverage is provided through the Trailer Interchange part of the policy, if purchased.
The most confusing and potentially the most costly of any loss stems from an unpaid Cargo claim. In order to understand the policy, you should take the time to read the exclusions and conditions of the coverage. I know I am beginning to sound like a broken record, but understanding your policy is critical. An unpaid cargo claim can be disastrous (it can put you out of business). Cargo coverage, for the most part, provided to the owner-operator, is written as a coverage that follows the tractor. Just like the coverages outlined before, coverage does not exist if the trailer is detached from the tractor.
Insurance policies are individual and unique to the companies that are providing the coverage. Take the time and have your insurance agent explain what you have purchased so you have a complete and accurate understanding of your policy. By doing so, you will increase your chances of making 2013 a truly Happy New Year! If you have any questions or comments, I can be contacted through California Plus Insurance Service, Inc. in Modesto, CA at 1-800-699-7101.