Don’t be lured into dishonesty to reduce your insurance premiums

The consequences of dishonesty when it comes to the information provided for an insurance policy can be devastating.

Recently a gentleman from Indiana contacted me. He said he was starting his own trucking company and would like a quote for insurance. He said he had prior experience owning a trucking company and was looking to re-enter the industry. We discussed trucking in general and it was apparent that he had significant prior experience in trucking. We even exchanged a few truck driver stories and our individual experiences of the negative impact on trucking the ever growing FMCSA regulations are having on the industry. All in all a very good conversation between two old school truck owners.

We began and completed his application together. He provided his driver’s, truck’s and trailer’s information along with his specific operation details. It was looking very promising. I was optimistic for him and believed he would receive quotes that would be on the lower end of premium rates.

I submitted his application to several insurance companies as I typically do, to see which insurance carrier would provide him the lowest premium for the amount of coverage he was seeking. To my surprise ALL insurance carriers “declined” (a polite word for refused) to offer an insurance quote. I reviewed all the information…. No drivers had any tickets or violations, there was only one insurance claim from the gentleman’s past (not uncommon for most of us) and the trucks and trailers were all newer. I wanted to learn more and see if there was something I did incorrectly that caused all the insurance companies to decline to quote this gentleman. I contacted one of the insurance carriers I had submitted his application to. They informed me that his previous FMCSA operating authority had been revoked by the FMCSA because his insurance had been canceled by the insurance company.

That’s when I learned, as Paul Harvey used to say “the rest of the story.” Everything the gentleman told me about his trucking past was true. But it was what he didn’t tell me that caused all the insurance carriers to decline to quote.

I called him and asked if this was a mistake or if he knew his previous FMCSA operating authority had been revoked because his insurance had been canceled. That’s when he disclosed why he was re-entering the trucking industry with a new FMCSA authority. Remember the one insurance claim? That claim was for an accident that one of is trucks was at fault for and both THE TRUCK AND DRIVER WERE NOT LISTED ON THE POLICY. The gentleman only listed one of his many trucks on his commercial auto policy and purchased a personal auto policy for his additional trucks to save money. As a result he was not able to purchase any insurance to get his previous FMCSA operating authority reinstated. He believed he could simply start a new company and be able to continue his trucking business. That is not the case. Even worse, he will most likely never be able to own a trucking company again.

If you are ever tempted or if anyone (a business partner, friend or even an insurance agent) suggests for you to mislead your insurance company, don’t do it! Some of the most common deceptions (lies) I have encountered are:

  1. Not including all vehicles owned or operated on the policy (this includes trucks and trailers)
  2. Not including all drivers on the policy
  3. Utilizing someone else’s address as a garaging address
  4. Utilizing a P.O. Box address as the physical location of the business

While these deceptions can reduce your premium they are also valid reasons an insurance company can cancel your insurance policy. Once that happens it follows you like a bad smell after hitting a skunk. No matter how hard you try you just can’t get rid of it and nobody wants to park next to you in the truck stop. Similarly, that’s how insurance companies deal with dishonest truck owners.

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“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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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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