It’s amazing what thoughts wander through your mind as you drive for hours across America’s highways. Thinking about your insurance coverage usually isn’t one of those mile-gobbling thought processes you go through. The thought of discussing insurance, much less thinking about it, would put most of us to sleep. Not a good thing to do when maneuvering 40 tons down the road.

But you probably have played the “What if” game; you know, you come across a situation or incident on your cross-country traverse, and the thought that gathers in your mind is “What if that were to happen to me? What would I do and does my insurance cover it?” Suddenly insurance is no longer an insomniac’s cure.

Insurance is a unique relationship between you and your insurance company. You’re betting that something is going to happen that will require financial reimbursement, an insurance company is betting that the incident won’t occur. This is one bet you don’t want to win.

With all this said, as owner-operators, trucking company owners and safety directors, as boring a topic as trucking insurance is, we need to understand where it protects us and where it doesn’t.

This month we’ll cover the insurance a small trucking company or single-pony owner-operator with his own Authority needs to know about:

• Auto Liability Insurance: This covers against loss from risks your company encounters with the operation of your company vehicles and drivers. This insures you for bodily injury or property damage to another party, also called BI/PD insurance.

Auto Liability insurance covers motor vehicles owned by your trucking company and the drivers who operate them. It is also where your lease drivers are insured while under dispatch or operating under your directions. Example: you tell them to go get your trailer washed.

Note: Lease operators will need additional Non-Trucking Use, also called Bob-Tail Insurance, for time they are not under dispatch. As a trucking company owner, whether you own one truck or twenty trucks, you don’t need Bob-Tail or Non-Trucking Use coverage because your Auto Liability Policy covers you and your employee drivers at all times, but you need to require all of your lease operators to have the Non-Trucking Use Liability coverage. We’ll discuss lease operators’ insurance descriptions in next month’s column.

Auto Liability coverage is the foundation of any trucking operation’s insurance package, and is required by Federal regulations before you can begin accepting loads to haul. Regulations require you carry a minimum of $750,000 for non-hazmat operations, $1 million for most hazmat operations and $5 million for specific high danger hazmat like poisons, LP gas, etc.

If any of your company or lease drivers are at fault in an accident, your liability insurance pays for the bodily injury and property damage expenses caused to others in the accident, including your legal bills. Bodily injury coverage pays for medical bills and lost wages. Property damage coverage pays for the repair or replacement of things you or your drivers wrecked other than your own vehicle. The other party may also decide to sue you to collect "pain and suffering" damages. Your Auto Liability Policy pays for your damages up to policy limits. Defense costs are generally in addition to your policy limits, but the insurance carrier’s obligation to defend ends once a claim payment has reached the policy limit.

• Physical Damage Insurance: This covers loss or damage of your insured vehicles caused by collision, fire, theft or vandalism on an actual cash value basis. Regularly review the policy with your agent so you know what coverage you have and what it does and doesn’t cover. You should do an annual review of the market value of all your insured vehicles to make sure you have them insured correctly. You can also control your premium costs by selecting higher deductibles. Remember Physical Damage Coverage pays the lesser of these amounts on a claim:

1. Stated values in the policy
2. Market value of the vehicle at the time of the accident
3. Cost to repair or replace.

• Additional Coverage: Optional Downtime Insurance: Provides extended protection for periods of downtime due to repairs following a covered physical damage claim, other than theft. Most policies have limits of a few hundred dollars per day with a maximum pay-out not to, as a rule, to exceed 60 days. There is usually a waiting period of two weeks before you can make a claim for downtime coverage.

• General Liability: This coverage is to protect your company’s assets against liability claims for bodily injury and property damage arising out of premises, non-vehicle operations, products and completed operations as well as advertising (damage from slander or false advertising) and personal injury liability. The insurance company also covers general damages and the negative costs of an accident (compensatory). Punitive damages (punishment for an insured’s gross negligence) may or may not be covered by insurance depending upon the actual policy language and state laws. Always ask if your policy will cover punitive damages whenever not prohibited by state law. In today's litigious society, even small mishaps can result in large lawsuits. That's why General Liability protects the trucking company and its owners when it is sued for something it did (or didn't do) to cause injury or property damage. This is usually a small exposure for most trucking companies, but a big risk. But the cost of coverage is relatively low.

• Additional Coverage: The Umbrella Policy: Just as the name implies, "Umbrella Insurance" covers or provides extra liability coverage to supplement your existing general liability and commercial auto policies.
1. Pays amounts, which exceed the “per occurrence” or “aggregate (combined) limit, provided by your general liability or commercial auto liability policies.
2. Pays liability losses, which may not even be covered under the base policies – though most policies these days are “Follow-Form” policies, which means they will only extend coverage if the occurrence is covered by the underlying auto liability or general liability policy.

Example: your business has been found at fault in a liability claim, which required $2 million to settle, and the aggregate limit of your general liability policy is $1 million. Here's what would happen:

1. Your insurance company would pay the $1 million.
2. Your business would be responsible for the other $1 million.
3. A $5 million Business Umbrella Liability Policy would have picked up the difference, paid the remaining $1 million and left your business with $4 million in extra liability protection.

• Cargo Insurance: This policy is to guard against loss from legal liability for damage to goods or merchandise in your trucking company’s care, custody and control in the course of transit.

This protection is required under the Motor Carrier Act of 1935. The policy covers the motor carrier if it is legally liable for the damage, destruction, or other loss of the customer's property being shipped. This includes lost packages, broken contents, and stolen articles. Two types of policies are available:

1. Scheduled Based Policy; lists the specific trucks to be covered in which the property may be damaged or destroyed.
2. Reporting Based Policy; covers all of the insured's trucks, with no trucks listed specifically. This coverage is on the Reporting Policy, which in essence covers all operations of a motor carrier.

It is important to remember that there is no standard wording for Cargo Insurance policies. Therefore it is critical to read, know and understand the exclusions, definitions and terms of coverage before you buy, not after you’ve had a claim.

• Additional Coverage: Optional coverage includes debris removal, unattended truck coverage, earned freight and refrigeration breakdown.

• Inland Marine Insurance: This coverage can be used to cover a wide variety of exposures. Typically, you may find this insurance covering items such as tools, forklifts, and personal effects of drivers, generators, and satellite dishes on premises or mounted on tractors. This can be good coverage to have, as it can cover just about any item used in the course of doing business, or items belonging to your company drivers that aren’t covered by your other policies. This includes items like CB radios, satellite radios, cell phones, lap top computers, tools, TVs etc. they would have in the truck during the course of their driving duties. Covering these items could be a driver retention benefit.

• Workers Compensation Insurance: Provides payments to injured workers without regard to who was at fault in the accident, for time lost from work and for medical and rehabilitation services. It also provides death benefits to surviving spouses and dependents.

Each state has different laws governing the amount and duration of lost income benefits, the provision of medical and rehabilitation services and how the system is administered. Be sure to work with an insurance expert knowledgeable in Workers Compensation for the state in which your trucking company is located.

Some challenges in regards to trucking companies and Workers Compensation: Many companies have employees or lease operators who live in states other than the state where the trucking company is located. In most cases, those workers are covered under the workers compensation rules of the state where he/she lives.

Workers Compensation insurance must be bought as a separate policy. Although package policies can be written for most of the previously mentioned lines of coverage, they don't include your Workers Comp coverage. In some states, you may not be required to carry workers compensation insurance if you employ less than a certain numerical threshold. Nevertheless, it is always a good idea to elect Workers Compensation coverage because your employees always have the right to sue for their injuries. But keep in mind when you reach the particular state’s employee minimum, your cost of business will increase significantly. Example: currently in the state of Tennessee when you hire the fifth employee, your cost of doing business will increase by as much as $24,000 per year in Workers Compensation Insurance premiums.

• Additional Coverage: Occupational Hazard Insurance: Is an alternative for your contract drivers and at a greatly reduced cost. This coverage is offered to independent lease operators as an alternative to workers compensation insurance. (Check with your state labor department to see if you are able to offer this to your contract lease operators; some states won’t permit the use of occupational Hazard Insurance.) This type of policy covers: accidental death, dismemberment, paralysis, disability, and medical expenses for injuries sustained while performing the obligations of a leased truck driver under dispatch. Important: While less costly than workers compensation insurance, Occupational Hazard Insurance is a limited benefit policy and generally does not provide coverage equal to Workers Compensation. Workers Compensation Insurance has loss of income possibilities and lifetime medical care benefits.

• Trailer Interchange: This coverage provides basic physical damage protection to non-owned trailers pulled by your tractors. Trailer Interchange is specific to non-owned trailers only. Example: Trailer Interchange: your driver in your tractor pulling a container trailer owned by someone other than your company.

• Bailee Coverage: This is much broader than Trailer Interchange Coverage. This coverage provides basic physical damage protection to non-owned tractors or trailers. Example: your driver driving a third party owned tractor piggybacked with other tractors for a truck manufacturer to deliver to a dealer, or a drive-away operation where your drivers are driving trucks and/or trailers owned by a third party. This policy is your Physical Damage coverage for non-owned vehicles placed in your care, custody and control for transport. It pays for damage caused by collision, fire, theft or vandalism.

• Garage Keepers Policy: If you run a shop where you provide services to your lease operators or service and repair other trucking companies’ or persons’ vehicles, you may be held legally liable for a loss to a non-owned vehicle. This policy provides physical damage coverage for trucks, tractors, trailers or other non-owned vehicles that are in your possession for towing, servicing, repair or storage. The coverage may compensate the vehicle owner in some cases even if you are not responsible for the loss (such as a loss caused by a tornado). This preserves goodwill, a valuable asset in your relationships with lease drivers, customers, partners, and friends.

• Additional Coverage: Property-of-Others Coverage should also be purchased. This would cover you, for example, when you are working on someone else’s loaded trailer and damage is caused to the cargo.

That’s a lot of “What ifs” which can be covered by insurance. As this has been a brief overview of the different insurance coverage for your trucking operation, don't decide what you’ll need until you’ve sat down with a trucking insurance specialist. Most likely, the agent who writes your personal auto policy is not the person to write your trucking business insurance, unless of course they specialize in it.

A good insurance agent is worth more than their weight in gold, so be sure you are working with someone who is an expert in trucking insurance. To underwrite the most effective combination of policies at the most economic rate requires a working knowledge of the industry along with the expertise of trucking insurance. The financial life of your company depends on your relationship with the person who writes your insurance. It requires a constant review of your operation and its risks to be confident you’re correctly covered.

Remember, it’s your company, your truck.

Timothy D. Brady is a 20 + year trucking veteran and AMSA’s 2002 Super Van Operator of the Year HHG. He’s the “Trucker’s Business Advisor” on Sirius Road Dog Network’s “Open Road Café” Wednesday mornings. He has held a Fire and Casualty Insurance License for over a quarter of a century. Brady has authored several trucking business books and is available for speaking engagements and to conduct workshops. Join him for his next “Starting Your Own Trucking Company” I.C.E. (In-Cab Education) Workshop. For a workshop schedule go to www.truckersu.com
Contact him at tbrady@writeuptheroad.com or (800) 292-8072.