Moving Words – Insured: Part 2

“Since the 17th century, insurance agents have been the foremost experts on risk.”  – Charles Duhigg

As boring a topic as trucking insurance is, we need to understand where it protects us and where it doesn’t. In the first Insured Article, I covered details on Auto Liability Coverage. While auto liability is required by federal regulation to be carried by every motor carrier, it’s only one of several needed to operate a successful moving company. Here are descriptions of the next four types of insurance coverage:

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

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

• Additional Coverage: Optional Downtime Insurance – Provides extended protection for periods of downtime due to repairs following a covered physical damage claim, other than theft. Most policies have limits of a few hundred dollars per day with a maximum payout not to exceed 60 days, as a rule. There is usually a waiting period of two weeks before you can make a claim for downtime coverage.
• General Liability: This coverage is to protect your company’s assets against liability claims for bodily injury and property damage arising out of premises, non-vehicle operations, products and completed operations as well as advertising (damage from slander or false advertising) and personal injury liability. The insurance company also covers general damages and the negative costs of an accident (compensatory). Punitive damages (punishment for an insured’s gross negligence) may or may not be covered by insurance depending upon the actual policy language and state laws. Always ask if your policy will cover punitive damages whenever not prohibited by state law. In today’s litigious society, even small mishaps can result in large lawsuits. That’s why General Liability protects the trucking company and its owners when it is sued for something it did (or didn’t do) to cause an injury or property damage. This is usually a small exposure for most trucking companies, but a big risk. However, the cost of coverage is relatively low.
• Additional Coverage: The Umbrella Policy – Just as the name implies, “Umbrella Insurance” covers or provides extra liability coverage to supplement your existing general liability and commercial auto policies.

1. Pays amounts which exceed the “per occurrence” or “aggregate (combined) limit,” provided by your general liability or commercial auto liability policies.
2. Pays liability losses, which may not even be covered under the base policies – though most policies these days are “Follow-Form” policies, which means they will only extend coverage if the occurrence is covered by the underlying auto liability or general liability policy.

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

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

“Before, it was always, ‘Oh, no, here comes Clancy, that insurance agent.’ Now it’s, ‘Oh, here comes Tom Clancy, bestselling author.’ But I’m still the same basic middle-class slob.”   -Tom Clancy