For small truckers, exceed the minimum

The past few years have not been easy for the U.S. trucking industry. Rising fuel prices, threats of terrorism, new regulations and the daily challenges of simply moving heavy freight from point A to point B, have combined to make 2007 one of the most operationally difficult years in recent history. The dynamics of the industry are compounded for smaller firms — those with 10 or fewer trucks in their fleet.

Independent agents, wholesale brokers and the insurance companies that serve smaller truckers are charged with finding ways to ensure that these companies have the coverage needed to remain viable and profitable business entities. In today’s market, that can be a daunting task. Smaller trucking clients are often unable to benefit from the advantages of the newest trucks and technologically advanced electronic systems. In addition, they may lack the resources necessary to keep up with the continual legal, regulatory and other changes occurring in the marketplace.

But there are answers for both truckers and the insurance industry. Here are some simple steps that can help independent agents, wholesalers and insurance companies help their trucking customers while building their book of business.

Start with the basics.

When searching for a company to haul loads, shippers want to ensure they have minimal exposure — that the trucker they use has all the required coverages. Yet, small truckers may pare coverages to a minimum in an attempt to keep the premium low. In the long run, this can cost the trucker jobs and expose the business to unexpected risks. The key is to find affordable ways for truckers to secure the coverage shippers typically demand.

Two often overlooked insurance options are hired auto and non-owned auto coverage, which typically provide liability coverage up to $1 million for the equipment that a trucker may temporarily lease or use to fulfill a contract. Truckers with this coverage can quickly respond to freight demand and can build a reputation as a quality firm that understands the needs of shippers.

Go beyond government requirements.

Most truckers are subject to government imposed liability insurance requirements. Limit requirements vary depending on what the trucker is hauling (e.g., hazardous materials require higher limits). However, some shippers require limits higher than the government minimum.

Truckers may face similar limits when assuming responsibility for the value of the freight they haul regardless if they are regulated commodities or not. For example, if a trucker is hauling $40,000 worth of building materials, the shipper may require $150,000 to $200,000 worth of coverage to ensure they are fully covered. It is not just the materials, but also the cost of replacement product, penalties, and other factors the shipper must cover in the event of an accident.

Brokers need to look for insurance companies with underwriters who understand the realities of the trucking business and who will work with them to provide affordable coverage that goes beyond basic requirements.

Prepare for the unexpected.

Smaller firms are often called upon to haul a wide range of commodities. Consequently, it’s extremely important for all agents and insureds to be familiar with the coverage provided for whatever commodities are being hauled.

For example, some truckers have experienced unexpected claims due to damages incurred to refrigerated freight. Some firms will cover damages to refrigerated freight and others may hold the trucker liable. Even still, others may charge a separate higher deductible.

Other common misunderstood policy terms include whether towing is covered on a limited or unlimited basis; the presence of a combined loss deductible applicable to all coverages; and coverage for pollution clean up.

Provide pollution clean up protection.

The government requires coverage for pollution clean up protection for loads within the same combined single limit required for bodily injury or property damage. Pollution clean up includes environmental restoration and is provided under the trucker’s auto liability coverage. However, many truckers may be unaware that some insurance companies may be able to exclude certain kinds of pollution protection and clean up.

There are two main instances when this occurs. First, there are insurers that don’t automatically include “broad form” pollution coverage. Insurance companies using Insurance Service Office (ISO) policy forms must also include the CA 99 48 to provide coverage for clean up from whatever cargo is carried.

Conversely, clean up of fuel from an insured’s saddle tanks and third-party pollution generated by an accident are automatically covered by the ISO auto liability coverage forms. What this means is the insurance company can come back at the trucker to try and recoup any payments made above the limit of cleanup provided by their coverage form — potentially a significant expense for a smaller trucking firm. Therefore, all truckers should ensure they have broad form pollution clean up coverage.

Know the policies of manufactured goods providers.

Typically, shippers such as auto manufacturers have very strict insurance requirements in terms of cargo. Truckers must carefully examine these requirements to ensure they are not at risk.

For example, recently several cars on an interstate haul were damaged due to hail. The trucker, an owner of a small firm, did all he could to protect the cargo, but there was some minor hail damage. The insurance company wanted to salvage the load. However, the manufacturer took possession of the cargo before the claims examiner could assess actual damage. The trucker was then held liable for the entire load.

Claims settlements for these types of damages can be difficult. Therefore, it is critical for brokers and insurers to help their policyholders understand how important it is to know what they were signing. To protect themselves, truckers should understand any limitations provided by the cargo policy they are insured by, relative to the agreements they sign with shipper or freight brokers.

Provide temporary replacement coverage.

When large fleets have a truck out for service, there is always an extra vehicle available. Smaller firms often don’t have that luxury. For a firm with only five trucks, when one truck isn’t on the road the missing truck accounts for 20 percent of their business. Options are few for smaller firms. When a truck is disabled, either they find alternate transportation or they don’t work.

Once again, brokers and insurance companies must keep in mind that their goal must be to help keep that trucker on the road. Most policies provide a trucker with auto liability coverage for a vehicle they are using temporarily. However, few offer automatic physical damage coverage for temporary replacements. Affordable coverage that provides liability and physical damage coverage for temporary replacement vehicles will keep a trucker moving freight while their vehicle receives needed repairs and service.

Partner with insurers that specialize in truck claims.

Because of the intricacies and nuances of the industry, it’s important for truckers to work with agents and insurers that specialize in their industry. An important component of a strong insurance program — and one often overlooked — is the claims process.

In the event of an accident, most truckers typically call their agent or may even forget to report minor claims for up to several months. Delays in reporting claims directly to the insurance company can greatly increase the exposure for a trucker’s business. The more quickly the insurance company is involved, the better able they are to assess damages, direct medical treatment and ensure a prompt and fair adjudication of the claim.

Ironically, some truckers have been conditioned to not report claims due to the negative impact on future acceptability and pricing. Good truckers should never be concerned about reporting accidents. Experienced, knowledgeable insurers will recognize that even with highly experienced drivers, over the course of thousands of miles, claims will happen and will not penalize the firm. The key is to be able to examine the types of claims and circumstances. This enables the insurer not only to settle the claim, but also to allocate reserves and to ensure that future coverages are written in a way that provides the best and most affordable coverage for the trucker.

While the trucking industry promises to remain challenging, knowledgeable and committed agents, brokers and insurance companies will find coverages that protect their clients from loss. In addition, they will identify coverages that provide the flexibility needed to expand and go after different types of business. Supported by strong insurance programs, America’s smaller fleets will be able to keep on trucking.

Topics Carriers Auto Agencies Claims Trucking Pollution