Like many other years, 2017 will bring more challenges to the trucking industry. Premiums will continue to rise, underwriting will tighten and claims will be a major concern for the owner-operator. I touch on claims almost every year that I write this article because you and your actions have the most direct influence in any claim that you have. I am not saying that all claims can be avoided, but they can be reduced
This month I will discuss the three parts of your insurance coverage that you, as an owner-operator, will be concerned with. Your insurance policy is divided into three parts – Liability, Physical Damage and Cargo. You may have other coverage but, for the majority of you, this is what you have.
Auto (Truck) Liability. This coverage provides indemnity for a loss to bodily injury or property damage that you are obligated to pay in the event of an accident resulting from the operation of the insured vehicle. This is commonly referred to as “Third Party Liability” or “Tort Liability” coverage. The coverage does not cover damage to your equipment or injury to you or your employees.
The minimum required for most of you by both the State of California and the DOT is $750,000 – higher limits are required for hauling passengers, autos (if going out of state) and hazardous materials. The majority of all policies written are for $1,000,000. This, for the most part, is required by your shipper or broker.
Higher limits may be required from those that you haul for. Most insurance companies will only write $1,000,000, some will go as high as $2,000,000, while a few will write even higher limits. But, for the most part, if higher limits are required, a separate policy will have to be written to satisfy those higher requirements.
Physical Damage. This covers your equipment and/or the equipment that you have a responsibility for (if you purchased the coverage). This coverage can be written as a “Stated Amount” or as “Actual Cash Value” (ACV). In any case, the amount that the insurance will pay at the time of loss will not exceed the value(s) at the time of the loss, less the deductible.
Extreme caution has to be given to the values that you have insured your equipment for. In the case of Stated Value, if you over-insure, the insurance company, in the event of a total claim, will only payout what the actual cash value is at the time of the loss. As you can see in this, you can be paying premium that you will never be compensated for. Do not over-insure! Always insure to the equipment’s current value – no more, no less.
At the time of your renewal, readjust the values, because it will save you money. Do not try to low-ball the values, either. If you have a $75,000 tractor and you insure it for $50,000, in the event of a total loss, you will only receive the value that you have put on the equipment, less your deductible. “Actual Cash Value” depreciates the value from the original cost. This coverage has its benefits and sets the value of the loss at the time of the event.
Most of you pull someone else’s trailers. The insurance to cover these other vehicles will fall under “Physical Damage for Non-Owned or Unidentified Trailers”. Another coverage that may be required from some of the prime carriers that you pull for is a coverage called “Trailer Interchange” – this covers trailers that you have in your care, custody and control. You cannot cover a trailer that you own, with this coverage. If you own any trailer, it has to be named in your insurance policy.
Cargo (Inland Marine). With the three parts of the insurance policy discussed, a cargo loss creates the most confusion and dissatisfaction with the results of a claim, from the standpoint of the insured or the claimant (you). A claim for cargo can result from a physical loss or a loss from another insured source. Not all losses are covered. With this coverage, it is imperative that you take the time to review the exclusions and conditions of the policy – ask your insurance agent or broker to review these with you.
For the most part, cargo coverage follows the tractor and no coverage exists if the trailer is detached from the tractor. In many situations, a theft of a load from an unattended vehicle would not be covered. In some policies, you have to show forcible entry. It may take several days for an adjuster to respond to a claim and provide assistance in its disposition. But, with a cargo loss, it is the insured’s responsibility to preserve any recoverable product.
Some policies are written with a co-insurance clause in it. You have to depend on your agent or broker to inform you of the coverage and the consequences of a loss. The following is a very simplified example. If you have coverage for $100,000 and you are hauling a load worth $200,000, you are only insuring to 50% of the load. In the event of a total loss, the insurance company will pay out only $50,000, since you are insuring only to 50%.
Your policy may include debris clean-up and unearned freight. This would provide for the clean-up after an accident, such as the services of Cal Trans. The coverage would also provide for the loss of the revenue that you would have had if you had delivered the shipment. To fully understand your Cargo coverage and all its parts would require a day-long seminar. Please take the time and have it properly explained to you so you fully understand it – before you have a claim.
Here’s hoping that 2017 is a safe and profitable year for you. Drive safe, work hard and understand your coverages – these are the best ways to protect yourself in the New Year (and always). If you have any comments or questions, I can be contacted through California Plus Insurance Service in Modesto, CA at (800) 699-7101.