An accurate, current MCS-150: More important than you realize

Not only is it about compliance with FMCSA rules and regulations, but it can also determine which insurance companies will offer you insurance, the cost of your insurance premiums and in some cases may result in claims being denied.

When I first got my authority in 1999, like so many I thought that once I had authority I didn’t need to do anything outside of maintaining my insurance, single state permits (now replaced with the Unified Carrier Registration system), truck and trailer registrations, truck and trailer safety inspections, and etc. to be compliant with the Federal Motor Carrier Safety Administration regulations. Like most everyone else, as time went along I began to discover just how shortsighted I was – there’s a lot more to it.

That brings me to a very important and all too often misunderstood and overlooked requirement of the FMCSA. The MCS-150.

Most of us are aware that we are required to do a Biennial Update” (every other year) of our MCS-150 form. However, that is not the only time we are required to update the MCS-150. The FMCSA requires, as it states on its website:

Any time a motor carrier or other regulated entity changes its Legal Business Name, address, or other details in their record, they should update their US DOT and Operating Authority records with FMCSA in a timely manner.

Most do not realize, including myself in my early years, just how important the accuracy of the MCS-150 can be. Lets talk insurance, first.

Insurance companies use the information the FMCSA receives via the MCS-150 from those who have been awarded a U.S. DOT and/or MC number. Each insurance company uses that information to assess the trucking company that has applied for insurance, likewise for its existing insureds. All insurance companies look at the basic information (company name, owner’s name, addresses, etc.). However, not all insurance companies look at everything. Have you ever heard the old saying, “They gave me just enough rope to hang myself”? To me that’s an appropriate way to look at it.

However, it’s not the insurance companies who have given us that rope. It’s the FMCSA!

As reported by Overdrive and many others, the FMCSA does little more than rubber-stamp each application it receives for a U.S. DOT and MC number. It doesn’t check the applicant’s addresses, verify the articles of incorporation or even company ownership. They simply accept what is on the application and — PRESTO! — that applicant is now set up to do business, no matter if the company’s legitimate, has a real address or even a real owner. (Is it any surprise that we have a serious run-a-muck broker fraud problem in trucking? But that is a topic for another day.)

If you are not a bad actor, but simply made an error like a typo, or misunderstood a question … now it should be easy to see why “they gave me just enough rope to hang myself” is appropriate here.

In my opinion, the best insurance companies are the ones who do the deepest dive into our information. They are doing their level best to take that rope away from us and clean up the mess as best they can! Let me explain.

In my article about what goes into calculating your trucking insurance premiums, I briefly discussed why insurance companies don’t like information that doesn’t match. For commercial auto (trucking) insurance, the MCS-150 information we provide to the FMCSA is one of the most important resources insurance companies use to compare to our insurance application. Some insurance companies only check what I will call the basics:

    • Company name
    • Company addresses
    • U.S. DOT number
    • MC number
    • Maybe one or two more general items

Other insurance companies will check those, plus even more:

    • Type of operation
    • Commodities hauled
    • Number of trucks
    • Type of trucks
    • Distance trucks travel
    • Number of drivers
    • Carrier miles

And more.

Those same insurance companies will also compare all that they have learned from our application for insurance and the MCS-150 information with other resources to verify the existence of our company (that it’s a legitimate company), vehicle registrations and history.

Insurance companies that take the time to look at the most information are the insurance companies who want to only insure the best trucking companies (that is to say, the lowest risks to insure). As a result, since they only offer insurance to the best trucking companies, they are the insurance companies who offer the lowest premiums.

When one of those insurance companies who has done that deep dive offers coverage to one of my insureds, it can come with a requirement: To correct to the MCS-150 (update the commodities, number of trucks, radius of operation, etc.). When that happens, it means the insurance company is satisfied that the trucking company is a risk (low) they would be willing to insure. That is a good thing! Other times those better insurance companies will simply decline to quote. That means fewer insurance companies I can get quotes from for my insured, reducing the likelihood that the insured will get the lowest possible premium.

Had that MCS-150 been current and accurate, though, they may well have.

There is one specific part of the MCS-150 that is frequently overlooked or not completed or updated correctly. Most of the time I believe it is not intentional, but a simple error. I have personal experience with this for my own authority. After pulling a reefer for more than 20 years, in 2015 I decided to haul flatbed freight again — and cars on my flatbed when needed. On the MCS-150 it was easy enough to update my commodities. However, it also required me to update question #25, pertaining to hazmat commodities. Most do not realize that there are commodities that can be hazmat. Cars are one of those commodities. They are a Class 9 hazmat commodity.

As I have mentioned many times over in several other articles, deception, whether intentional or unintentional, can result in very serious consequences. Imagine getting involved in an accident after failing to accurately and timely report transporting class 9 hazmat on your MCS-150. It doesn’t take much of an imagination to see how this could result in an unbelievable amount of financial and punitive consequences from local authorities, the FMCSA and/or insurance stalkers (aka lawyers). Not to mention the very real potential of the insurance company denying claims for physical damage, cargo, etc. they are not otherwise obligated to settle (MCS-90 endorsement for BIPD liability to others).

In conclusion, I’m going to step up on my soap box. As many of you know, I started driving a truck in 1983. I applied for and got my own U.S. DOT and MC numbers in 1999, which I still have to this day. Just like most others of my generation, we have seen a serious decline in the quality and safety of the trucking industry. To say it’s alarming would be a gross understatement. There are two glaring issues that need to be addressed and corrected.

First, at a minimum, for any application for a U.S. DOT number the FMCSA receives, the FMCSA should be required to verify the articles of incorporation or sole proprietorship of the company and physically verify that both the company’s physical and mailing addresses are legitimate addresses occupied and used by the company. The FMCSA should also be required to perform a physical biennial re-verification to confirm the that the company is still operating compliantly.

Second, way too many are able to obtain a US DOT and MC number and enter into this industry without a clue as to what is required of them. Insurance agents, financial planners, real-estate brokers, etc. are all required to receive a certain basic level of education, take and pass an exam, purchase a license, perform continuing education to keep up with regulatory changes (or the license can’t be renewed). License renewals for those kinds of entities are required every year or two.

If this same standard was applied to those seeking a US DOT and MC number, there would be a dramatic decrease in those who fail to maintain compliance with safety regulations and everything else – IFTA, IRP, UCR, the tax regs of the IRS, labor rules under the DOL.

On more than one occasion, I have seen or witnessed the damage caused by an 80,000-lb. truck and trailer involved in an accident. Physical and financial damage to others is too often the result — much more damage, furthermore, than any insurance agent, financial planner, real-estate broker, etc., could possibly do. Isn’t it about time that some basic safety and compliance training, testing and licensing be a requirement prior to obtaining a US DOT and/or MC number?

I personally think it’s long overdue.

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Yes, you can lower your insurance premium… and I have the customers to prove it!

By exercising good safety practices and being proactive with all insurance policies,four of my insurance customers have all recently been rewarded with lower insurance premiums. Not a one of them had to increase their deductibles, lower the stated value of their trucks, remove coverage or anything else. At renewal, their premiums simply went down!

These four customers represent a very diverse cross section of truck owners in our industry. That is why I wanted to share their stories. Each of them are excellent examples of how to operate a trucking company in such a way as to be safe, compliant and above all, lower insurance premiums!

Before we look at my customers and how each of them lowered their premiums, first we need to discuss the realities of the ever increasing cost of insurance. We all know that insurance companies have been raising their premiums. Most have increased premiums anywhere from 20% to 40%. Now let’s suppose that hypothetical insurance company has raised their premiums 30% from the previous year. So if one of the hypothetical insurance company’s insured receives a lower gross premium (last year’s premium was $15,000.00 and the renewal premium is $10,000.00) it represents a total reduction of 60%.

How does that work? It means that the hypothetical insurance company reduced the risk score (“risk score” is my own chosen verbiage to help explain how insurance carriers rate and consider each application before offering a quote with a premium) by 60% for the insured. If the risk score by hypothetical insurance company had remained the same the insured’s premium would have increased by 30% (last year’s premium was $15,000.00 and the renewal premium would be $20,000.00) to accommodate for the premium increase.

All 4 of my customers we’re going to look at employed the same strategies which most of us are aware of. What they all did the same is:

1. CSA scores did not increase

2. No driving or moving violations

3. No adverse road side DOT inspections or non-moving violations

4. No liability insurance claims payments

5. No physical damage insurance claims payments

6. No cargo coverage claims

Now let me introduce you to my customers and what each of them did in addition to the above mentioned which solidified and improved their premium reductions.

Insurance Customer #1:

Is a 36 year old Independent Owner Operator. He entered into trucking last year as both a driver and as an Independent Owner Operator. As most of us are aware, his chosen and virtual overnight path to being an Owner Operator is one of the most difficult ways to enter into this industry. But like me, he is a very determined individual and has survived his first year in business. Because of his efforts, on December 20th, he was rewarded with a 30% gross premium reduction for his insurance renewal this year from last year’s policy. That means his insurance carrier reduced his risk score by approximately 60%. Talk about a Christmas gift!

First, he had 2 personal auto claims that are no longer being considered. Second, he had a moving violation that is also no longer being considered and lastly, he’s now over the age of 35. When MVR violations or insurance claims become a certain age, typically 3-5 years, they no longer count against our risk score. As for age, there seems to be a sweet spot. Generally speaking, older than 35 and younger than 65. Outside of that 30 year period I have noticed insurance companies apply a higher risk score than those within that 30 year age period.

Insurance Customer #2:

Is a small carrier with 2 trucks and 2 trailers (1 van and 1 reefer). The owner is a driver of one of those trucks. The owner has been a driver for over 20 years and he began his trucking company in 2019. His path to having his own trucking company is far more traditional. This year his gross premium for his renewal decreased 33% from last years policy. That means his insurance carrier reduced his risk score by approximately 63%.

This customer’s reduction in premium for his renewal was improved by taking advantage of a safety program offered by the insurance company. This customer enrolled in a program that measured all trucks driving performance via the insured’s ELDs. This program alone accounted for 20% of this customer’s premium reduction for his renewal.

Insurance Customer #3:

Is a 45 year old Army veteran. He has been driving trucks for the past 17 years. Last year he started his own Independent Owner Operator flatbed company operating OTR. He has 2 teenage sons which I am mentioning for a reason. His gross premium for his renewal this year decreased 30% from last years policy. That means his insurance carrier reduced his risk score by approximately 60%.

This customer’s reduction in premium for his renewal was improved by a very proactive and responsible approach to managing his CLUE (comprehensive loss underwriting exchange). It also served for an excellent teachable moment for one of his teenage sons. On our last call when I shared the good news about his premium reduction for his insurance renewal he shared this story with me.

One of his teenage sons parked a motorcycle next to his pickup truck (a personal auto vehicle) earlier this year. That motorcycle fell over and into the pickup truck causing significant damage. His teenage son said “good thing we have insurance for that dad.”

To which my customer replied to his son “insurance isn’t paying for this. You are. Otherwise it can cause both our personal auto policy and my commercial auto (trucking) insurance premiums to increase.”

The customer was right! He also did the very best thing for both the long run and short term. Over the long run it cost far less for his teenage son to pay for the repairs compared to the total cost of higher insurance premiums for years to come. In the short term it taught both of his sons about responsibility, safety and insurance. That will pay dividends for them both for the rest of their lives.

Insurance Customer #4:

Is a 60 year old who was looking for something to do before he is ready to fully retire. He operates a flatbed what I would consider to be regionally. Why I wanted to include him in this article because he even had a liability claim filed against his policy. Even with that claim, his gross premium for his renewal this year decreased 5% from last years policy. That means his insurance carrier reduced his risk score by approximately 35%.

Some readers may be asking, why is Joel including this customer? Great question. The answer will surprise most of my readers! This customer’s reduction in premium for his renewal is not something we would typically be aware of. So I thought it important and valuable to share his story with you. This customer had a 3rd party (another trucking company) file a liability claim against the customer’s policy. The 3rd party accused the customer of being liable (responsible) for an accident and as such, liable for the damages to the 3rd party’s property (truck). The customer fully cooperated with the insurance adjuster assigned to the claim and the investigation. The customer provided pictures, documents, police report and provided a statement.

In doing so it enabled the adjuster to have enough evidence to deny the claim to the 3rd party. Yes, a claim does impact our risk score. But nowhere near as significant as a claim with a payment (financial settlement)! As a result this customer’s risk score wasn’t impacted enough to cause a premium increase for his renewal.

In conclusion – Be proactive to maintain a low CSA score, avoid moving and non-moving violations, avoid claims even on personal auto policies, in the event of a claim be cooperative with the adjuster, be a defensive driver and take advantage of any programs offered by an insurance company to verify your safe driving practices. Employing these practices and not being deceptive to the insurance company, as I have written about several times before, will all result in insurance premiums that are more affordable than if you don’t.

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What to do when your insurance policy doesn’t provide the coverage you need

If you discover that your insurance policy doesn’t provide coverage for something you need coverage for, there is almost certainly a solution to provide that missing coverage.

If you took my advice in my last article and read your insurance policy(s), I would not be surprised to learn that you discovered that something (a peril, cargo commodity, operation type or location, etc.) is not covered by your policy that you need coverage for. It’s actually not that uncommon. Thankfully there’s almost always a solution available to get the coverage you may be currently lacking. Frequently it is fairly simple to get the necessary coverage added to the existing policy.

Other times however, because of the uniqueness of what coverage is missing, we may need to consider other insurance options that are available.

The most common missing coverages are somewhat obvious. In fact, most all of us are familiar them. Situations where we’ve bought/sold a truck or trailer, hired/fired a driver or moved to a new address. Adding or removing equipment and adding or removing a driver is as simple as notifying your insurance agent. Most agencies, including mine, will require some type of documentation from the insured requesting the change. Typically the only challenge here is when the insured wants to add more trucks or drivers than the insurance policy will allow for.

From time to time one of my new insureds with less than one year in business, will buy a truck or two to grow their company. They will call me up and ask to add the new truck(s) to their existing policy. Unfortunately, some of them had forgotten that their policy does not allow them to exceed 1 truck within the first two years of business.

That leaves them with a difficult choice to make. I can either get them a policy from another insurance company, which will all but certainly have a much higher premium, or they need to sell the extra truck(s) so they are not in violation of failing to schedule all owned and/or operated commercial vehicles on their policy.

An address change isn’t always as simple. If it’s only a mailing address change, or a business address change that is within the same state, it’s typically the same process as adding or removing equipment or drivers. But if it’s a new business address in a different state, it can become quite cumbersome and a bit complicated very quickly. Oftentimes it can require a new insurance agent and/or a different insurance company.

Why? Because every insurance company has to be approved by each state’s Department of Insurance to be able to provide insurance in that state. Many insurance companies providing commercial auto coverage with filings (the BMC91 filing for the MCS90 endorsement required by the FMCSA) only provide insurance to a limited number of states. There are only a few insurance companies that offer commercial auto insurance nationwide. Likewise, that is also true for insurance agents. We are required to be appointed (licensed) in each state in which we have insureds we are a producer (agent) for.

Changing or updating commodities is where things can get dicey extremely quickly. As I explained in my Why won’t an insurance company give me a quote article, insurance companies only insure trucking companies that fit their specific appetite. All insurance companies I am aware of have commodities that fit their appetite and commodities that don’t fit. As such, an insurance company will not provide insurance to any trucking company that hauls those commodities that don’t fit their commodities appetite.

Some of the most difficult commodities that don’t fit many insurance company’s appetite is HAZMAT that requires placards. There are a limited number of insurance companies who will provide insurance to any trucking company hauling HAZMAT. Additionally, the ones I am aware of all require that a trucking company have many consecutive years of safe operations before they will even consider offering a quote for a trucking company wanting to haul HAZMAT.

To make it even more complicated, insurance company’s commodities appetites might seem unreasonable to us truck owners. For example, some insurance companies will insure a trucking company that hauls livestock but won’t insure trucking companies who haul cars. Yet another insurance company will insure a trucking company that hauls cars but won’t insure a trucking company that hauls livestock.

That is the same for virtually all commodities including but not limited to Seafood, Electronics, Grain & Feed (hopper loads), Rock & Sand, Pharmaceuticals, Non-HAZMAT corrosives, Machinery, Oversize commodities… the list is virtually endless. That is one of the most important reason why it is imperative to understand what commodities are covered by the insurance policy.

As I explained in my last article Why every truck owner should read their insurance policies, just because we have “general freight” listed on the cargo coverage doesn’t mean we have coverage for any commodity we haul.

It’s impossible for me or any other insurance agent to detail each and every possible change in your business that you should notify your insurance agent and/or insurance company to make certain you have coverage. The very best thing to do – any time you make a change in your company’s property (new address, office building, shop, add/remove truck/trailer, etc.) or a change in the company’s operation (hired/fired a driver, begun hauling a new commodity or stopped hauling a commodity, changed where the company is operating or radius of operation, etc.)… Always notify your insurance agent and/or insurance company PRIOR to implementing that change.

Otherwise, the change can result in a very difficult circumstance that you regret.

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Why Every Truck Owner Should Read Their Insurance Policy

You might be very surprised to find what is NOT covered that you think you have coverage for & what is required of you to avoid a claim being denied or your insurance being canceled!

In the majority of my insurance articles you may have noticed an underlying theme. The need to understand our insurance policy. All to often, we, including myself before I became an insurance agent, simply assume we know what we have for insurance or we accept and believe our insurance agent has told us everything we need to know about our policy. Assuming is always a bad idea. Especially when it comes to our insurance. Believing our insurance agent has or is even able to disclose all the details of the policy is not realistic either. That leaves us with only one option. We need to read our policy for ourselves.

Will we read our polices? Highly unlikely. As I confessed, before I became an insurance agent, I never read my policies either. So I think it’s very unrealistic to believe anyone else will either (even though everyone should). So if we’re not going to read our policies how about knowing some of what is in our policies so we understand why it is so important to read them. Moreover, I’m going to share some tips to locate certain portions of our polices so we can quickly review anything we may question or want to be certain of.

Commercial Auto Policies:

Terms & Conditions – Policies are not required to (and seldom do they) use the phrase “terms & conditions” or any other variant. Rather, the policy will make statements of fact. For example, in my articles Don’t be lured into dishonesty to reduce your insurance premiums and Deception wreaks havoc … again! the insureds were found to have violated a requirement found in all commercial auto insurance polices with filings I have ever had or provided to a customer. That requirement was to have all owned and/or operated commercial vehicles scheduled on the policy. Another almost certain term & condition is that only drivers who are included or added to the policy are permitted to drive any of the scheduled vehicles. There can be (and frequently are) countless more terms & conditions scattered throughout the policy. Such as driver qualifications, radius of operation, hazmat exclusion, involuntary inspections or audits by the insurance company, equipment standards, equipment exclusions, locations excluded for trucking operations, exclusions for specific commodity types and much, much more.

Scheduled Vehicles – This is a list of all the “autos” (trucks) you shared with the insurance company and are scheduled (listed) on the policy. If you own and/or operated a commercial vehicle and it is not scheduled on the policy it is almost certain you are violating the terms & conditions of the policy and risk a outcome similar to those in the 2 previously mentioned articles.

Drivers – This a list of all the drivers you have disclosed to the insurance company and are on the policy as a driver. It’s not a given that we can add any driver we wish to our insurance policy. On every policy I have had or seen drivers can be approved or rejected by the insurance company. In some rare instances a driver may be listed on the policy but then “excluded” as a driver. One example is a driver who has a less than desirable MVR and yet remains an employee of the company as a dispatcher, mechanic, warehouse worker, etc.

Know the Policy’s Covered Perils – The policy’s list of covered perils determines if the policy will provide coverage in the event of a claim. As I outlined in my last article Not all cargo insurance is created equal if we don’t understand our perils we’ll never actually know if there is coverage. This is true for both the physical damage (comprehensive and collision) of our trucks and trailers and of cargo coverage. Just like with cargo coverage, if the peril which caused the claim is not a covered peril, we the truck owners, may not have physical damage coverage which can result in the cost of repairs being our own responsibility.

Know the Policy’s Coverage Exclusions – Equally as important as knowing what perils are covered we must know which perils are excluded from coverage. In addition to peril exclusions the policy will almost certainly have other exclusions as well. Those other exclusions can be for types of operations exclusions, commodities being hauled exclusions, location of operation exclusions, and countless other possible exclusions. Some polices will have a very small list of exclusions while other policies may have multiple pages of exclusions. If we were to file a claim, including a claim for physical damage of our truck or trailer, and the peril which caused the claim is excluded from coverage or the loss occurred while engaged in an activity that is listed as an exclusion, we the truck owners, once again, may be responsible for the entire cost of the loss (physical damage repair costs).

Motor Truck Cargo Policies:

Verify Cargo Commodities All to often when we truck owner’s answer the question “what commodities do you haul” we only enter “general freight” on our insurance application or we tell our insurance agents something like “I only haul general freight.” Our insurance agents, as they are required to do, in turn only disclose “general freight” on our application as the commodity we haul. This can cause all kinds of issues, and none of them good.

First, and most important, the commodities we haul can determine if the insurance company will provide us commercial auto insurance (trucking insurance) at all! For example, if we say we only haul “general freight” to the insurance company and our customer or broker files a cargo claim for something specific like televisions or perhaps a racecar there is the possibility that claim may be denied. Why? Because some cargo coverage policies “exclude” (see next paragraph) coverage for “electronics” or “autos” and as such may not provide coverage.

Now what if our customer or broker states that “general freight” was the cargo being hauled when they report the claim to our insurance company? Before a claim is settled, the adjuster is required to investigate. During a claim investigation pictures are almost always required. The adjuster will see that the cargo is televisions or a racecar. Thus, as the adjuster is required to do, the claim will most likely be denied if electronics or autos are excluded. Worse yet, if the insurance company does not insure truck owner’s who haul electronics or autos then our policy can be canceled. That cancellation will appear on our CLUE report as deception (we lied about what we haul) and make it virtually impossible to find commercial auto insurance we can afford.

Know the Cargo Perils – Just like with the commercial auto policy, the policy’s list of covered perils determines if the policy will provide coverage in the event of a claim.

Know the Cargo Exclusions – Cargo exclusions are different than the commercial auto policy’s coverage exclusions. Cargo exclusions specifically identify cargo that is “excluded” from coverage. What cargo is excluded from coverage is entirely up to the insurance provider. Neither our insurance agent or our insurance company is a mind reader. Nor do they have a camera monitoring every load we put in or on our trailers and send us a message that the cargo will not be covered. Knowing what cargo is excluded from coverage within our insurance policy is entirely the responsibility of the insured/policy holder (us truck owners)!

Commercial General Liability Policies:

Business Locations – Commercial general liability (CGL) insurance has a nickname. It’s sometimes referred to as slip and fall insurance. It got that nick name because how common claims are made by the businesses customers or the general public while they on the property for slips and falls. How does that relate to us truck owners? It is not uncommon to forget to tell our insurance agent or our insurance company that we have multiple locations. I believe this is mostly an innocent oversight. However, whether an innocent oversight or not, it can be a costly one.

We provide our business address (which should match our address with the FMCSA) to our insurance company via our application. On that application there will typically be a very long list of questions. Many of them requiring a simple “yes” or “no” answer with possibly a few follow up questions depending on the answer. One of those questions will almost certainly deal with locations. If we do not enter all the locations our business owns, rents or otherwise utilizes for business operations, the insurance company believes that the only location they are providing coverage for is the business address that has been provided.

So if we own an empty lot across the street, a few blocks over or across town where we park our trucks it also can have a slip and fall type of claim. It can happen in many forms. Such as someone simply taking a shortcut through the property and falling down, a tool truck vendor selling tools to a mechanic and falls off a set of stairs, or possibly a mobile mechanic who is is injured while working on the truck owner’s truck or trailer. Any of these examples can result in an incident that could result in a claim against a CGL policy. If we do not include this parking lot then any claim from an incident that occurred on the parking lot property may be denied and we could be sued. Then, if found liable by the court, be responsible for entire amount of the court decision.

Know the Policy’s Covered Perils – Just like with the commercial auto policy and cargo policy perils, the policy’s list of covered perils determines if the policy will provide coverage in the event of a claim.

Know the Policy’s Coverage Exclusions – Again, just like with the commercial auto policy and cargo policy exclusions, we must know which perils are excluded from coverage. Besides peril exclusions there will almost certainly be other exclusions you might be surprised to find within your CGL policy. Exclusions such as “total auto exclusion,” “care, custody and control exclusion,” “hired and/or nonowned auto exclusion,” “designated operations or activities exclusion,” and many, many more possible exclusions. Every policy will have exclusions.

Those are just brief summaries of the most common mis-understandings we truck owners have about our insurance policies. I get all kinds of far more complex insurance questions that can only be answered after a very careful reading of the policy. And even then, sometimes the answer can only be provided by the insurance company itself.

The fastest way I know of to learn if a peril is covered, if something specific is excluded or any other detail of a policy is to request a .pdf copy of the policy and perform a key word or phrase search. I prefer to search for the heading such as “Perils,” “Exclusions” or “Auto.” If for example, I search for “Exclusions” I will read the entire list of exclusions completely and carefully including all the details for each exclusion. Only then can I understand every exclusion of the policy I am reading.

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Not all Cargo Insurance is Created Equal

From time to time I, Joel Baker truck driver, have been asked by a customer or a broker if my insurance is from xyz insurance company. When I respond and say: “no, why do you ask?” I typically get a reply that goes something like “our company doesn’t, can’t or isn’t able to do business with any trucking company who has their insurance from xyz insurance company.” Usually what they are politely trying to tell me is that the customer or broker has had a previous bad experience with xyz insurance company in the form of a denied claim. Most of the time it’s a denied cargo claim. Sometimes they will also state something along the lines of “xyz insurance company does not provide broad form cargo coverage.”

So what in the heck is “broad form” cargo coverage and why does it matter? The answer is simple but the details can get us lost in the weeds. To try and keep us from getting lost in those weeds I’m going to stick to the basics.

First of all, when anyone brings up “broad form” cargo coverage they are actually borrowing a term that is most commonly used with Homeowner’s Insurance policies. There are actually 3 forms. Those 3 forms are Basic, Broad and Special. The verbiage used within a policy rarely actually uses these terms. Rather the policy will detail coverage for perils (I’ll explain perils in the next paragraph). What the policy states about the perils determines whether the policy provides Basic, Broad or Special form coverage. The use of the terms Basic, Broad and Special forms is most frequently used between insurance companies, underwriters and agents so they can more easily discuss the policy coverages.

OK, what’s a peril? A peril is the cause of the loss. For example, the scenario in my last article, the loss of my cargo (glass panels) was due to my collision with the dock. So in that scenario the peril for the loss of the cargo was collision.

Now lets look at sample lists. *Important – Each insurance company creates it’s own list of what is and is not a covered peril and what perils are exempted from coverage.

Disclaimer: This table of perils is only a sample and for educational purposes only. It does not reflect any insurance company’s list of covered perils or exempted perils. Please contact your insurance agent or insurance company for a list of covered perils and exempted perils within your policy.

Basic Form
Broad Form
*Special Form
Covered PerilsCovered PerilsExempted Perils
All basic form Perils – PLUS:
Falling Objects
Intentional Acts
Nuclear Hazard

*Special Form covers all perils EXCEPT those which are exempted from coverage

Using the table above, it’s very easy to see why a customer or broker may not be able or willing to accept cargo coverage if the policy provided by an insurance company only provides coverage for a very limited number of perils.

Now this is where the weeds get pretty tall, thick and a bit difficult to navigate. Remember that I mentioned that each insurance company creates it’s own list of what is and is not a covered peril. Sometimes two different insurance companies can have the same list but NOT use the same form verbiage. Lets compare 2 lists of perils for two different and fictitious insurance companies:

Disclaimer: These tables of perils is only a sample and for educational purposes only. They do not reflect any insurance company’s list of covered perils or exempted perils. Please contact your insurance agent or insurance company for a list of covered perils and exempted perils within your policy.

XYZ Insurance Company

Basic Form
Broad Form
*Special Form
Covered PerilsCovered PerilsExempted Perils
All basic form Perils – PLUS:
Falling Objects
Intentional Acts
Nuclear Hazard

*Special Form covers all perils EXCEPT those which are exempted from coverage

ABC Insurance Company

Basic Form
Broad Form
*Special Form
Covered PerilsCovered PerilsExempted Perils

All basic form Perils- PLUS:

Intentional Acts
Nuclear Hazard

*Special Form covers all perils EXCEPT those which are exempted from coverage

Notice that even though ABC insurance company has what it calls “broad form” cargo coverage, the coverage is exactly the same covered perils provided by XYZ insurance company’s “basic form” coverage. So the form title used by an insurance company does not necessarily reflect the coverage that we are seeking or coverage we believe we have purchased.

Now it should be very clear that it is crucial for us as truck owners to ask and be aware of which perils are covered are which perils are not covered by the cargo coverage of our insurance policy no matter what the insurance company has titled it (what form name is being used). Because if we don’t, and we have a cargo loss which is not covered by our insurance policy, we can be sued and held liable in court for the loss of cargo. Being held liable in court means most likely being required to compensate the owner of the cargo for the entire value of the loss.

Because insurance policies are contracts, they are written by attorneys and contain legalese that is hard for most of us to read or make sense of. Insurance companies understand this. So to help, some insurance companies provide some type of a policy or product summary/guide/overview or similar type document for their insureds/customers. Requesting a copy of this document can be the easiest way to find out what perils are covered or exempted within your policy. For the companies that don’t provide such a document, it is best to ask your insurance agent for a list of both covered perils and exempted perils.

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Deception Wreaks Havoc… again!

From time to time I am contacted by a customer about a cargo claim. This year has been no different. Some of those calls include concerns about a letter of declination for a recent cargo claim. Sad to say, my answers to those customers are usually not what they want to hear.

Insurance agents, such as myself, are required to learn the basics of what is known as contract law. Additionally we must pass a licensing exam that may include questions about contract law. The reason I point this out is because an insurance policy is actually a contract between the insured and the insurer. Contracts (the insurance policy in this case) always come with a set of terms and conditions. When one party of the contract violates a term or condition of the contract then the other party is no longer obligated to fulfill their part of the contract EXCEPT where required by law.

Disclaimer: I am not an attorney and this is not legal advice. Please consult an attorney to receive legal advice or guidance pertaining to any of the following.

When discussing commercial auto insurance, the “ EXCEPT where required by law” phrase in the above paragraph is directly related to the required FMCSA filings (form BMC-91 for the MCS-90 endorsement on commercial auto insurance policies). With the exception of brokers, everyone with an interstate authority with a MC number is required to have filings for BIPD (that is, liability to others for bodily injury and property damage coverage). So when a commercial auto policy with filings has been broken or violated by the insured (the trucking company), the only portion of the policy the insurer (insurance company) is required to fulfill by law is the BIPD coverage. That is the purpose of the filings.

Sadly, this relates back to my previous article Don’t be lured into dishonesty to reduce your insurance premiums. When the application is completed and signed by the insured, the insurance company has no reason to suspect or question the integrity of the applicant or the validity of the information the applicant provided. That is the responsibility of the applicant. Once the applicant binds (the legal term for purchasing the policy) it is the insured’s responsibility to notify the insurance company of any changes as stipulated by the policy terms and conditions. It’s been my experience that deceptive or false information is typically discovered when a claim has been filed. There are many ways in which an insurance company discovers deceptive or false information. Including:

  • Accident reports
  • Driver’s statements
  • Witness’s statements
  • MCS-150 information
  • IRP registrations
  • IFTA reports
  • UCR
  • Previous claims reports
  • and many, many more

A claim can be filed by either the insured or by a third party. In trucking that third party is frequently a shipper, receiver, direct customer or a broker. Once the claim has been filed, the insurance company’s adjuster begins their investigation. The investigation is not limited to the details of the claim. Meaning that the adjuster may, and frequently does, verify that no term or condition of the policy (contract) has been broken or violated.

Now that I have set the table, to put this all together lets look at an easy scenario and an understandable conclusion.

Disclaimer: This scenario is for example purposes only. It does not reflect any specific commercial auto insurance company or policy. Rather, this is a general scenario and only to be understood as informational. I strongly encourage readers to contact their commercial auto insurance agent for the terms and conditions of their existing policy and to verify they are compliant.

My trucking company, W. Joel Baker, has 1 truck scheduled on my insurance policy (which is also listed on my broker’s COI and reported on my MCS-150). My insurance company has provided the FMCSA the filing (form BMC-91 for the MCS-90 endorsement on commercial auto insurance policies). My policy only provides coverage for “scheduled autos.” This is the case for the vast majority of policies for trucking companies. Policies which only cover scheduled autos has a term or condition within that policy which requires that all commercial vehicles owned and/or operated be scheduled on the policy.

I accept a load of glass panels from my broker who I do regular business with. I haul the load inside my 53’ dry van trailer. At the receiver, I back into door number 3. When I do, I hit the dock to hard. I damaged the dock door and the load of glass panels were dislodged resulting in all the glass panels being broken.

A claim is reported to the insurance company for both the dock door and the glass panels. One of the first thing the adjuster will do is verify that the policy was not expired. Then the adjuster will review the damage to determine if the damage is covered by the policy. If it is covered, what coverage does it fall within. In my scenario, the adjuster should determine that the damage to the dock is covered by my Auto Liability Property Damage coverage (part of the FMCSA required BIPD). The adjuster should also determine that the damaged glass panels are insured by my Cargo coverage.

During the claim investigation, the adjuster will be passively verifying that I have not been deceptive with my application and that I have honored the terms of the policy (contract). Meaning that during the course of the investigation if the adjuster discovers some piece of information that could suggest I may have been deceitful, the adjuster will now investigate that information as well.

For my scenario, the adjuster calls the receiver to request additional information and pictures of the damaged dock. The receiver was cooperative and willing to assist the adjuster to help settle the claim as quickly as possible. During the call the receiver tells the adjuster “Joel and his other truck and driver are always professional and this was just an unfortunate accident. In fact, I appreciate them so much I’ll keep using them!” This compliment and seemingly innocent piece of information just put me and my business in serious financial peril and most likely put me out of business. Why? Because the receiver just told the adjuster that, potentially, I was deceptive with my application or failed to fulfill the terms of the policy by not adding my other driver and truck to the policy as required by the terms and conditions. Having received this information, now the adjuster is responsible to determine if I have violated the terms and conditions of my policy.

The adjuster uses any number of resources available to either verify the information provided by the receiver or to disprove it. The adjuster discovers that I actually have 3 commercial vehicles with IRP registrations. Only one of them is scheduled on my policy. At a minimum, I have failed to honor the terms and conditions of my insurance policy.

For my scenario, the adjuster will now determine if the insurance company has any legal obligation to settle the claim for either reported damage. Remember those filings (form BMC-91 for the MCS-90 endorsement on commercial auto insurance policies)? The damaged dock (property damage) is covered by the BIPD (auto liability bodily injury and property damage coverage to others) and the insurance company is legally obligated to settle the claim for the damaged dock because of the filings. There is no filing for cargo. As such, because of my deception, there is no legal obligation for the insurance company to settle the cargo claim. The owner of the glass panels which is most likely either the shipper or receiver, will now need to file a lawsuit against me. If I am found liable in court, I will most likely be required to pay for the entire cost of the damaged glass panels.

Additionally, because of my deception, the insurance company will almost certainly cancel my policy and disclosure of my deception will be added to my CLUE (Comprehensive Loss Underwriting Exchange) report. This action will all but guarantee that no insurance company will provide me insurance coverage (except for coverage through what is known as the high rick pool) and in doing so, put me out of business permanently.

Now, back to those customers who contact me about cargo claims. I have seen letters of declination that include some variation of “Insured violating provisions of the policy” as the reason a claim was denied. Not scheduling all commercial vehicles owned and/or operated on the policy is the most common reason I hear for an insurer declining coverage or denying a claim. Any misrepresentation by an insured could be a policy violation and potentially void coverage.

For a trucking company, if the insurance policy does not provide cargo coverage because of a failure to schedule all commercial vehicles owned and/or operated on the policy, the trucking company may be sued by the owner of the cargo. If the trucking company is found liable, they can be held financially responsible for the entire value of the damaged/lost cargo.

I can not stress this enough. Never omit, deceive, or otherwise lie to your insurance agent or your insurance company. The financial devastation, loss of the business and potential legal consequences one typically experiences when they get caught far out weigh any so called premium savings by being deceptive.

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BEFORE Signing a Lease Agreement for a Truck – Check the Insurance Requirements Within the Lease Agreement.

There are pros and cons for both purchasing and leasing trucks as I wrote about several years ago in my Buying vs Leasing article. However, for those who wish to utilize the leasing option, there is a commonly used condition within lease agreements that can be a serious obstacle to overcome.

A significant number of my customers intend to lease their first truck as a way to reduce the initial start up costs for their new trucking businesses. Most of them are aware that the lease agreement they will sign has certain detailed terms and conditions which includes insurance requirements. However, few are aware of what the exact insurance requirements are and simply assume it’s just a “typical” commercial auto insurance policy. Often, that is not the case.

My own commercial auto policies (trucking policies) have always included coverage for “scheduled autos” as well as other coverages such as “cargo,” “medical payments,” “physical damage,” etc. which is typical for most all independent owner operators. For a significant number of truck leasing companies these coverages, while necessary, frequently will not meet all the insurance requirements of the lease agreement. Many lease agreements include a requirement to have “any auto” coverage and possibly “hired auto” coverage included on the insurance policy. The majority of insurance companies I am aware of or work with will typically not be able to provide “any auto” coverage for an independent owner operator or even small to mid-size fleets.

Because of what “any auto” coverage is, providing that coverage comes with an enormous risk for the insurance company. “Any auto” coverage means exactly what it says. It’s easiest for me to explain by using an example…

Hypothetically, I, W Joel Baker trucking, has an insurance policy that includes “scheduled auto” coverage. When I applied for my insurance I included on my application that I own 1 truck. That truck is “scheduled” on the policy. I also requested and was provided “any auto” coverage. 6 months later my customer informs me they will need 4 more trucks to support the increase in loads and they would like me to provide those 4 additional trucks. Great, my business is growing! So I get 4 more trucks. Without me notifying the insurance company, those trucks automatically have applicable coverage without any premium increase because of the “any auto” coverage I have on my hypothetical insurance policy. So what would stop me from adding 10, 20, 50 trucks or more without paying a single penny more for my insurance premium? That’s right, absolutely nothing! Hence, that is why it’s very difficult to find an insurance company who is willing to provide “any auto” coverage.

I know what everyone is asking. Why would a leasing company require “any auto” coverage then? I sincerely believe their motivations are mostly well intended. For example, if the truck you have breaks down they can quickly and easily give you a different truck. Sometimes the lease will be for different trucks for different days, weeks, months, etc. depending on truck availability. I have seen other cases where I believe the intent is less than ethical. I have seen those same leasing companies offer their own insurance policy that meets the terms of the lease agreement. Of course those premiums are typically much higher which completely negates any start up cost savings.

The best way to avoid this challenge is to fully read the lease agreement before you sign it. Do not take the sales person’s “word for it.” If you’re still not sure, share the lease agreement with your attorney or your insurance agent. Finally, if the leasing company has trucks available for lease (especially in the box truck industry) there is a strong probability their lease agreement includes “any auto” coverage.

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Avoid Application Errors when Applying for Your USDOT or MC Numbers

All to often application errors lead to extra start up costs, delays and lost income.

Many who contact me through my website or call for an insurance quote have never applied for or had a USDOT (United States Department of Transportation) or MC (Motor Carrier) number before. It is imperative for anyone who wishes to have a USDOT and/or a MC number to be fluent and understand all the different entities and compliance with those entities they will now be required to meet. To help with that, if they have not already hired an “agent” to apply for their USDOT & MC numbers, I always encourage everyone to complete the application themselves. Avoiding fines and penalties from entities such as the FMCSA, IRP, IFTA, UCR, etc. by using the excuse that you didn’t know or the “agent” made a mistake is the same as trying to use the excuse “I didn’t see a speed limit sign” to avoid getting a speeding ticket. Speaking from experience, it’s typically not going to work in your favor. Not to mention the huge amount of money saved by avoiding these “agents.” I have seen these “agents” charge anywhere from $500.00 to $1,500.00 or more in addition to the fees required by each entity just to get started. Then they will point out a supposed need to continue to use their services throughout the year. What they don’t tell you is that it is just as easy for you to complete all the required tasks by giving the exact same information to those entities directly.

Before applying, it’s important to understand that some of the most insignificant or minor errors and/or deceptions can cause some of the longest delays in getting your “Operating Status” to “Authorized for Property” (the most common authorized status for OTR operations). Until your status is updated by the FMCSA you are not compliant and as such can not begin operations. That is to say, you can’t haul loads and generate income. In the Army we had a saying, “fast is slow and slow is fast.” That saying is applicable here as well. When we do things in haste mistakes typically happen. Always review every entry for typos, accuracy and duplications.

Typos – These are most common errors I see. Some are as simple to see and identify, while others are far more difficult to spot.

  1. Misspelling – Auto correct can be our worst enemy. Always verify the spelling of every entry before moving on to the next field.
  2. Punctuation – Whether or not a comma, period, hyphen, etc. is or isn’t present can cause serious headaches.
  3. Spaces – Even a missing or extra space between words or letters can cause some of the biggest headaches to correct. Mainly because they are very difficult to locate.

Accuracy – These are the second most common errors and can be the most time consuming and down right aggravating to correct. They can be an honest mistake or a misunderstanding of what is being asked on the application or they can be deceptions. NEVER be deceptive! It will cause increases in your insurance premium and can potentially be compliance violations. Since accuracy relates to every entry and selection you make, be sure to go slow and double check your work.

  1. Entity Type – “Motor Carrier of Property (except Household Goods)” is the most common entity type. Occasionally an applicant who is hauling new furniture from a manufacture to a warehouse will incorrectly believe this means they are a “Motor Carrier of Household Goods (Moving Companies)” and select the wrong entity type. Be sure to know which entity type is correct for your operation before beginning the application.
  2. DBA (Doing Business as) – This is the most frequent accuracy error and comes in many forms. The best way to avoid DBA errors is not to use a DBA. That said, here are the 3 most common DBA errors.
    1. The DBA should NEVER be the exactly the same as the company name. If my company was “W. Joel Baker, Inc” I may want to use a DBA of “W. Joel Baker Trucking.” If they are the same name some insurance companies will not even provide a quote.
    2. The DBA should NEVER be a second corporation. If my company was “W. Joel Baker Trucking, Inc” and I add a DBA of “Joel’s Express, Inc” that suggests there could be two separate corporations attempting to use this USDOT and/or MC number.
    3. NEVER enter “same,” “same as company name,” “none,” “N/A,” or any other variation. If you are not using a DBA the field must be left blank. ANY entry you put in the DBA field becomes your “Doing Business as” name.
  3. Company Address – This is the most common form of deception. NEVER use a virtual or alternate address as a company address. This is the legal address for the company where all required company records and FMCSA required verifying documents are to be stored, maintained and ready for inspection by any entity such as USDOT, FMCSA, IRP, IFTA, etc.
  4. Mailing Address – Only use a different mailing address if you utilize a USPS PO Box, local UPS store Box, etc. Otherwise you appear to be hiding something or potentially operating as a chameleon carrier. Especially if you are using an out of state mailing address.
  5. HAZMAT – Most generally, this error usually happens by auto transporters. By both those who only haul cars and by those who haul them occasionally. Autos are a class 9 HAZMAT. Class 9 HAZMAT does not require placards but does require more than the standard minimum $750,000.00 in BIPD auto liability insurance filings for those over 26,001 lbs. Auto transporters, even those who only haul cars 2 or 3 times a year, are required to declare class 9 HAZMAT and have $1,000,000.00 in BIPD auto liability insurance.

Duplications – Address duplications happen multiple times a day. Carefully read the address instructions and verify your entry(s).

Some find it helpful to have a few things written down or in a document on their computer before beginning the application. Such as:

  1. Company name with correct spelling and punctuation
  2. If one is desired, a company DBA
  3. Company address (and mailing address if different)
  4. Commodities (cargo) intended to haul
    1. Identify any possible HAZMAT. Both those that require placards and those that do not (class 9).
    2. Choose more than general freight from the list provided by the FMCSA.
    3. If necessary, using the “other” option, specify any type of unique or special cargo that does not adequately fit into one of the choices provided.
  5. Company address (and mailing address if different)

One way to avoid some of the most-common errors could be to be fall back on tried-and-true filing methods, setting aside the convenience and speed of the agency’s online forms in favor of the printed (or pdf version of the) authority application. Manually filling out the printed form, or the pdf version, means someone at FMCSA itself will be directly involved in entering that information into its system’s central registration system. If they introduce errors, the paper trail back to your original form might even save you money on a name change, for instance, if the error can be proven to be theirs and not your own. (Yes, it’s true that some errors you might have to actually pay to correct.)

Once the FMCSA application is complete, it’s highly advisable to request your new USDOT PIN immediately. With that PIN many of the simple errors such as duplications, typos, address, company name, etc. can all be corrected online quickly and fairly easily.

I have seen just as many application errors by “agents” as by those who complete the application themselves. As I mentioned earlier, I always recommend completing all regulatory and compliance responsibilities as possible. By doing so it significantly reduces operating costs while simultaneously educating the new company owner as to all that is involved to operate and be compliant. That education is vital because of the countless bad actors out there who charge for services under the guise of “compliance.” All to frequently it’s more about how to charge the new company for additional services because the new company is unaware of what is and is not required to be compliant.

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The most under-appreciated insurance coverage in all of trucking

It’s worth its weight in gold!

If we don’t have this coverage, or if we choose to purchase only the minimum of this coverage, we won’t realize the mistake until it’s way too late.

A recent customer claim has solidified my opinion to never overlook or trivialize any of our insurance coverages. My customer was driving their truck and their spouse was a passenger. (Passengers were and are permitted to be in the vehicle.) There was an incident involving another vehicle. That other vehicle is believed to be a personal car. The actions of that other vehicle are believed to have led to the very sad and unnecessary death of the passenger and spouse of my customer.

The other vehicle, the car, fled the scene and the police are searching for this vehicle.

When we complete an insurance application either physically, electronically or over the phone with an agent, eventually we must choose our Uninsured Motorist/Under-Insured Motorist (UM/UIM) coverage amounts. All too often, I have customers tell me one of several things. Typically they sound something like this: “I need to save money so only give me what I need” or “I only want what’s required” or “Just give me the minimum so I can get my business started.” While most of us – and yes, myself included — can well relate to keeping insurance premiums as low as possible, UM/UIM is the one coverage we should never decline or only purchase the minimum available.

UM/UIM is never fully appreciated until it’s needed. Frequently though, because the insured desires to save money, they either request and purchase the minimum amount of coverage or decline the coverage
altogether. Tragically, this money-saving decision can prove to be financially devastating when the worst happens. Most everyone knows and understands what Uninsured Motorist coverage is — it pays our medical expenses, up to the limits of our coverage, when we are in an accident and the other driver is at fault (liable) but has no insurance. However, what’s typically not understood by most insureds is Under-Insured Motorist coverage — this coverage also pays medical expenses, up to the limits of our coverage, when the other party in the crash is liable but doesn’t have enough liability insurance to pay all of our bodily injury expenses for which they are liable.

If you, like me, have been in and around trucking for 40-plus years, no doubt you’ve witnessed firsthand and/or heard about some horrific accidents. Cars and trucks versus other cars and trucks in all kinds of scenarios: truck versus truck head-on at full speed; trucks avoiding other cars, accidents or road hazards; and of course all kinds of single-vehicle accidents. The vast majority of them required some type of emergency services, such as an ambulance ride and a visit to the hospital ER. Way too often those accidents will even require the services of an air ambulance in an effort to save someone’s life. As we are all aware, these accidents frequently lead to surgery (sometimes multiple surgeries), extended stays in the hospital, physical therapy and sometimes even more.

Point being, as I have personally experienced myself, the investigation oftentimes reveals that many of these accidents involving a truck is the fault of another driver in a personal vehicle.

When that other driver is 100% at fault for an accident with us, they are liable for all damages (bodily injury and property) they have caused us. According to the news release dated March 22, 2021 from the Insurance Research Council, one in eight drivers are uninsured. In that same news release, the national average of uninsured motorists in 2019 countrywide was 12.6%. Even worse, the news release points out that 6 states have 20% to 29.4% uninsured motorists among all drivers there, while 26 other states have from 10% to as high as 19.9%. For anyone to assume that they will never have to use UM coverage is both naive and very risky.

Now what if that other driver, who is at fault and liable, does have insurance? In many states minimum coverage for a personal car is $25,000 worth of bodily injury per person. That means the other driver’s
insurance policy will only pay up to $25,000 for each person’s bodily injury he/she is liable for. In addition to the $25,000 per person coverage, personal auto policies typically come with a $50,000 limit of coverage per accident. Most of the personal auto insurance policies I see have these amounts of coverage. If there happened to be three people in an accident all with $20,000 worth in bodily injury expenses that such a driver is liable for, none of those three will have all of their bodily injury expenses paid, because the total of $60,000 worth of expenses exceeds the per-accident limit of coverage.

To bring it full circle, lets first look at just some of the cost ranges associated with bodily injury claims. All but one of these amounts were provided to me by my representative from one of the insurance
companies I write policies for:

  1. Ambulance ride — $400 to $15,000
  2. Air ambulance flight — $28,000 to $97,000 (as reported by NPR on Sep, 26th 2018)
  3. Hospital ER — $3,000 to $20,000 or more
  4. Surgery – varies depending on the procedure, anywhere from $50,000 to $250,000 for the same procedure in some cases
  5. Follow up surgeries — Reasonable to expect the same as the initial surgery
  6. Hospital admission — Once a patient gets admitted the bills can get really expensive, especially if there is time spent in an intensive care unit

It is painfully clear how bodily injury costs could rapidly soar to $250,000-$300,000, or even exceed $500,000 or more almost in an instant. It’s then also easy to understand that not having or only having the minimum of UM/UIM coverage could leave most anyone in an unthinkable financial situation at the absolute worst possible time, not to mention the agony of potentially having to make medical decisions based on the lack of insurance coverage, which could have been completely avoidable.

In Commercial Auto Insurance (trucking insurance) there is frequently (but not always, depending on the insurance company) the opportunity to purchase UM/UIM coverage that costs mere pennies for the
amount of UM/UIM coverage provided. For example, let’s look at a quote I prepared this week, with $100,000 worth of UM/UIM coverage available at a quoted premium of $87 for the entire year.

Sounds great, right? Yet, given the potential cost ranges above, it’s obvious this could leave us hundreds of thousands of dollars short in coverage to pay for all our bodily injury expenses. For that same quote, $1,000,000 of UM/UIM coverage has a quoted premium of $210 for the entire year! That is ten times the coverage for about two and a half times the premium. Why would anyone pass on such a great value and peace of mind!?

For those who operate a small fleet and hire drivers it’s not only a wise decision to maximize your UM/UIM coverage for the above mentioned, but it can be a great business decision, too. The UM/UIM
coverage can help to mitigate claims against your workers’ compensation policy. Considering the significant costs associated with workers’ comp premiums, the more proactive we are to control those costs the better. Utilizing the comparatively speaking premium-friendly UM/UIM coverage to provide appropriate levels of bodily injury coverage in the event of an accident where UM/UIM coverage is utilized could thus be one of the best business and insurance coverage decisions that you make.

Finally, back to my customer. When an accident is determined to be the other driver’s fault/liability and that other driver fled the scene, the insured’s UM coverage pays the insured’s bodily injury claims up to the amount of coverage. My insured’s very tragic and sad incident is a reminder to us all to consider carefully if saving a couple of bucks is really worth it when it comes to insurance.

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Agreements and Contracts

Be on the look out for any requirement to provide Additional Insured and/or a Waiver of Subrogation by any broker or customer.

As Todd Dills and I discussed in his Just say no: One owner-operator’s approach to broker/customer demands to be ‘additional insured’, brokers and customers frequently require to be added to our policy as an additional insured. This is a covert means to gain free insurance from us as well as avoiding financial responsibility when or if they cause us bodily injury or property damage. Personally, as an Independent Owner Operator myself, I choose to never do business with any broker or customer who, as a condition in the agreement or contract, requires to be added to my policy as an additional insured.

A lesser known, but even worse, condition often included in a broker’s or customer’s agreement or contract is something called a waiver of subrogation. Many are completely unaware of the potential adverse consequences of providing a waiver of subrogation to a broker or customer. Subrogation is a legal tool used by an insurance company to recover losses it paid out to an insured (a claim) from a liable third party who is responsible for those losses. I know that is a bit wordy and complicated. So lets first start with the definition of Subrogation.’s definition of Subrogation;the assumption by a third party (such as a second creditor or an insurance company) of another’s legal right to collect a debt or damages.

When discussing insurance, and specifically an insurance policy, a waiver of subrogation is an endorsement. Similar to a COI (certificate of insurance), the insurance carrier will provide a copy of the waiver of subrogation to the broker or customer who has requested and been granted the waiver.

The best way to show the dangers of granting a waiver of subrogation to a customer or broker is by example. So lets use the same example I used in Todd’s Just say no story.

An owner-op checks in at his direct customer’s facility. “They say back into door 37,” Baker said, and “door 37 has an overhang outside of it.” While the owner-op’s backed in, “the overhang collapses and lands on his trailer.”

The customer then claims “hey, we didn’t give you that door,” saying the owner-op misheard 37 instead of 57. “It’s not our fault. You need to contact your insurance company.”

The owner-op submits a physical damage claim to his own insurance, yet manages to provide sufficient proof to the insurance company that the failed dock overhang was in fact the one that the shipper sent him to. The insurance company says, “Hey, ACME Widgets Inc., you’re responsible. Pay up or we’ll sue” for the cost of the loss.

In the case of a broker asking to be added as an additional insured, keep in mind, too, that given possible affiliations that broker has with bigger businesses, you may be giving away more than you think.

For the sake of this article the broker or customer was not added to the policy as an additional insured. However, they did require and were provided a waiver of subrogation. Notice the bold sentences? That is precisely what subrogation is. Now if we give the broker or customer a waiver of subrogation then our insurance company can not force Acme Widgets, Inc. to reimburse them (our insurance company) for the settlement of the claim.

Why does that matter? Because that claim and settlement will now be a permanent black mark on our insurance history by appearing on both our loss runs and CLUE (Comprehensive Loss Underwriting Exchange) reports. Loss runs are a report of claims history on a given policy. A CLUE report is generally a report containing up to seven years of personal-auto and personal-property claims history and up to five-year commercial loss run histories. Insurance companies rely heavily on both of these reports when they determine if they can provide a quote for coverage and if they do provide a quote, what the premium for that quote will be.

The consequence of that black mark will most likely be an increase, which is frequently quite significant, on our future insurance premiums for years to come.

The first thing every truck owner should ask when a broker or customer requires a waiver of subrogation is why? To me the answer is obvious. Either they have a fear that they could be financially responsible for bodily injury or property damage to any truck owner they do business with or they were held financially liable by the means of subrogation and forced to reimburse an insurance company. Both of which are huge, bright red flashing warning lights signaling “ENTER AT YOUR OWN RISK!

So for me, if a customer asks for a waiver of subrogation, my answer is the same as when they ask to be added as Additional Insured. Always, NO!

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