Insurance – Page 3 – Learn to Truck

“Bobtail Insurance” 101:

Detailing various available coverages and components of Non Trucking Liability

After my post last month, Basics of Trucking Insurance, Ed asked about “bobtail insurance.” The phrase itself is slang. It is not a legal name for insurance or insurance coverage. As such, bobtail insurance means different things to different people, depending on their perspective. That’s where the confusion that exists among some owner-operators begins.

Most think of bobtail Insurance as insurance to get the truck fixed after an accident. Some owner-operators have been led to believe that bobtail insurance is a form of “Commercial General Liability” (CGL) insurance, addressed in part in last month’s story. Contrary to popular belief, the FMCSA does not require any trucking company or truck owner to have CGL insurance. While it is advisable for a trucking company with a physical place of business (a dispatcher’s office, maintenance shop, warehouse, etc.) to have a CGL policy, it is almost never useful insurance for a one-truck owner-operator, whether leased to a carrier or not.

Some trucking companies see bobtail insurance as a method to attempt to insulate themselves from lawsuits when owner-operators who are leased to them operate their trucks while on their own personal time. Or, put another way, not under dispatch.

When owner-operators, leased to a carrier, say we only want the required bobtail insurance, what we are asking for is something called “Non-Trucking Liability” (NTL) insurance. NTL is the only required part of any set of coverages that might be called “bobtail insurance.” NTL protects us for liabilities while we are driving our truck during personal time and not under the control of the trucking company we are leased to. If we cause damage to someone or someone’s property for which we are liable, this insurance is what pays those damages and claims. In other words, we’ve been in an accident while not under the control of the trucking company we are leased to and we’re at fault. (IMPORTANT: NTL is NOT, nor does it ever “act like” commercial general liability insurance.)

Another insurance coverage available for purchase with bobtail insurance is something called “Physical Damage” and/or “Comprehensive” and “Collision.” This is the insurance that gets our truck repaired when we’ve been in an accident in which we are at fault. Physical damage insurance is for any accident at any time, including when under the control of the trucking company we are leased to and when we’re on personal time not driving for the carrier we’re leased to. This is the only insurance coverage that will get your truck fixed when you are in an accident that you are at fault for. Physical damage is not required by law but is highly recommended for any truck owner to protect their investment. Personally, I would never purchase non-trucking liability and not elect to purchase physical damage.

In some circumstances, physical damage can even protect a truck owner when they are not at fault for an accident. This occurs when the other driver’s insurance company denies the claim. If that does happen, the truck owner’s insurance company can pay the claim (truck repair costs) and then seek to recover those costs from the other driver or the other driver’s insurance company.

I would never reject or decline “Un-Insured” and “Under-Insured” motorist insurance as part of my bobtail insurance policy. These are vital insurance coverages that provide us insurance for both bodily injury and property damage when the other driver is at fault but has no insurance or not enough insurance to cover the cost of the claim.

These two coverages sound easy enough to understand, but oftentimes we don’t realize their true value. That’s especially true when talking about under-insured motorist coverage. Many personal vehicle drivers elect to carry only minimum coverage for their personal auto liability insurance. Coverage amounts are written (illustrated on the policy) this way: Per person/Per accident/Property damage. States’ minimum liability coverages range from $10K/$10K/$0K up to $50K/$100K/$25K. When we are in an accident and the other driver is at fault and only has minimum coverage of $10K per person in bodily injury damage, what happens when our medical expenses are $80,000? That’s when our under-Insured motorist insurance kicks in and saves the day by paying the additional $70,000.00 and thus helping us avoid cumbersome and expensive lawsuits.

In my opinion, this coverage is the most valuable part of un-insured and under-insured motorist insurance.

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Additional Insured

What EVERY truck owner needs know

Customers and/or truck brokers (this includes freight forwarders and freight brokers) requesting to be added to a truck owner’s insurance policy as an “Additional Insured” has become a common practice in the trucking industry.

When a dispatcher for a truck broker asks me to add the truck broker as “Additional Insured” I always ask them, why? Without fail I will get 1 of 2 answers or sometimes both:

1) So we know if your insurance is canceled and when it is due to renew.

2) It’s just what our company requires from carriers and truck owners.

Neither of these answers provide a valid justification for any customer or truck broker to request to be added as “Additional Insured” on a carrier or truck owner’s insurance policy.

When we provide a customer or truck broker a traditional certificate of insurance (COI) with the customer or truck broker listed as the “Certificate Holder” (NOT as “Additional Insured”) they have all the information about the insurance policy they need including:

1) Name Insured (the carrier and/or truck owner)

2) All amounts of insurance coverage (liability, cargo, reefer breakdown, non-owned trailer, etc.)

3) Policy start date and end date

4) Insurance company

5) Insurance Agency

If the customer or truck broker wants to know if a carrier or truck owner’s insurance has been canceled all they have to do is visit the FMCSA SAFERSYS website (https://safer.fmcsa.dot.gov/CompanySnapshot.aspx) to view the status of the carrier or truck owner’s insurance policy. This is public information that is provided by the FMCSA and is available to anyone who wishes to verify the insurance status of a carrier or truck owner. ALL commercial carriers (everyone with an FMCSA operating authority) are required to have liability insurance. ALL insurance companies are required to provide your insurance information to the FMCSA including the start date, expiration date and if your insurance is canceled for any reason they are required to update the FMCSA of the cancellation date immediately.

Now that we have established that there is not a justification for including a customer or truck broker as “Additional Insured” for the purpose of notification of cancellation or renewal date one has to ask why do they want it then? In order to answer that question we have to know what “Additional Insured” really means and how it can be used by a customer or truck broker.

First lets discuss the basics – An “Additional Insured” is an endorsement. An “Additional Insured” endorsement does exactly what it sounds like it would do. It adds another party, in this case a customer or truck broker, to the policy as an insured. When an “Additional Insured” endorsement is added, there is a change made to the policy. It specifically extends insurance coverage to the “Additional Insured” customer or truck broker placed on the policy. It then provides insurance coverage to the “Additional Insured” who can then, without any additional consent (because consent has already been provided by adding them to the policy as “Additional Insured”), submit a claim against the carrier or truck owner’s insurance policy. Now you may ask why would a customer or truck broker file a claim on a policy they are listed as “Additional Insured?” The answer is going to surprise you… because they either don’t have enough insurance or especially in the case of a truck broker, they have no insurance at all! Thus they rely on you the carrier or truck owner to provide them with free insurance.

Even more important, being listed as “Additional Insured” means the customer or truck broker can avoid their liable obligations – The carrier or truck owner’s insurance company can not sue anyone listed on the policy. This includes “Additional Insured.” If the customer or broker is liable for bodily injuries or property damage that the carrier or truck owner sustains they can not be sued by the carrier or truck owner’s insurance company for those damages. Those customers and truck brokers who are given an “Additional Insured” endorsement on a carrier or truck owner’s insurance policy simply want to make certain that if in the event you, the carrier and/or truck owner, suffer a bodily injury or your truck and/or trailer or other property are damaged in which they are liable for (legally responsible for) they don’t have to pay for it!

My solution – When a customer or truck broker asks me to be listed as “Additional Insured” on my insurance policy, I first ask them the above mentioned 2 questions. Then I inform them of what “Additional Insured” really means followed up with: “If your company can’t afford adequate liability insurance or isn’t willing to be responsible for it’s actions, then your company isn’t a company I’m willing to take the risk to do business with.” Then I continue my hunt for my next load.

No customer, truck broker or their loads are worth granting them “Additional Insured” on my insurance policy!

The trucking industry is complex and changing. To learn more check out the entire category Business of Trucking.

Basics of Trucking Insurance

How to get the right trucking insurance at the right price.

Last month a trucking company in Illinois contacted me. They were concerned about the high cost of their trucking insurance and asked if I could help. I reviewed their policy’s declaration pages and noticed they were paying for insurance that was neither required or of any use to them.

They were paying for insurance coverage that they would be hard-pressed to ever find a reason to use. They didn’t have any exposure or risk that would ever necessitate filing a claim under that coverage. I dug deeper into their policy and saved them close to $1,000.00 annually.

As Owner Operators or even fleet owners, we ask our insurance agent for “Trucking Insurance.” However the legal name for Trucking Insurance is “Commercial Auto Insurance.” Commercial Auto insurance is available to all businesses who uses any type of a vehicle for business purposes. Understanding this legal definition is vital when you are shopping for your trucking insurance.

When talking to an insurance agent make certain that he or she understands you are a “Trucking” business. As such you do not need or have any use for several commercial auto coverages that other types of businesses may require. The following are the top 3 insurance coverages most Owner Operators and some small fleets have no use for.

Commercial General Liability – Independent Owner Operators operate their business from their home residence which is NOT open to the public or to their customers. As such, in most cases Independent Owner Operators have no use for “Commercial General Liability” which provides liability coverage for those visiting your place of business such as a dispatchers office or a maintenance facility.

*Note – Not to be confused with “Commercial Auto Liability” which is required by the FMCSA and for most of us is a minimum of $750,000.00 of coverage.

Hired-Auto Liability – Independent Owner Operators & small trucking companies seldom have use for “Hired Auto” insurance coverage. Hired auto Covers liability expenses for accidents involving vehicles that your business uses for “work purposes” but doesn’t own such as employees personal vehicles. “Work Purposes” meaning the auto was hired to perform a job. Since Independent Owner Operators & small trucking companies typically don’t hire anyone with an auto for work purposes this coverage has no use.

Non-Owned Auto Liability – Similar to “Hired Auto,” “Non-Owned Auto Liability” is typically coverage that is not necessary. “Non-Owned Auto Liability” covers the companies liability when the personal vehicle of an employee or temporary staff, whether owned or rented by them, is driven for business. Since an Independent Owner Operator has personal auto insurance on his or her personal auto or pickup truck they most likely have adequate insurance when running errands such as picking up parts.

*Note – Yes “Hired-Auto” and “Non-Owned” auto are very similar. The way I like to think of them is that “Hired-Auto” is more of a formal or contract relationship. Where as “Non-Owned Auto” is more casual such as asking a driver or employee to make a quick run to the auto parts store for a case of oil or a set of batteries.

In the case I mentioned at the top of the story, this is a family owned small carrier of 2 brothers and their sister. The brothers each with their own truck and trailer and their sister filling the duties of dispatcher and safety manager for the company. They asked me if I would be willing to be their insurance agent and remove the unnecessary insurance. I was happy to do so for them. Now they frequently reach out to me with both trucking and insurance guidance which I’m always happy to provide.

Knowing whether or not these coverages are necessary can save any truck owner, especially an Independent Owner Operator, potentially thousands of dollars on their annual insurance premium.

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