The Insurance Report - February 2005

INSURANCE BASICS
FOR OWNER-OPERATORS
By Roland L. Enz - President, California Plus Insurance Service, Inc.

Most everyone considers insurance a sore subject. The high cost of insurance makes it a large percentage of your operating expenses. But it is a necessary evil that you endure to be in business. The insurance product, for the most part, is intangible. For most, the only tangible aspect is the filing, made by the insurance company, supporting your operating authority. The only need for insurance is to protect you in the event of a loss. That protection represents money out of pocket or money you owe stemming from a liability or physical damage loss. Insurance is a simple concept. For a price (premium), you can purchase protection that transfers monetary liability, that you owe, to an insurance company.

This month, we will look at claims arising out of those coverages typical to the owner-operator: Liability, Physical Damage and Cargo. More importantly, I would like to review the mechanics and the process that you might be involved with in the event of a claim.

Liability is third party coverage. It covers any loss, by your truck, to another (third party). This covers both Bodily Injury and Property Damage. Do not consider Property Damage as coverage to your own vehicles, equipment or the unidentified trailer that you may be pulling. In dealing with any loss, but more importantly a liability loss, it is important to get as much information at the time of the accident. Your insurance company and/or agent should be notified immediately. When dealing with a liability claim, especially a serious claim, it is paramount that an adjuster be involved from the very beginning, even if you believe that you are not responsible. Lawsuits happen. Even if you feel that you were not responsible, the suing public, through unscrupulous attorneys, can and will bring suit. Do not at any time admit responsibility. There are many mitigating factors, so let the insurance company and their adjusters deal with the facts. It is also important to review the police report when it is available. Your agent should get a copy for you. Always keep a copy of the police report with your insurance papers. When looking for future insurance, the agent may ask you to provide it for review. If you are served with a lawsuit, it is imperative that it be turned over to your insurance company. A response is necessary. Make sure that you give it to the company that represented you at the time of the accident.

Physical Damage consists of any loss to your own equipment, such as a collision, theft or other causes of loss. This coverage impacts your ability to operate. The most important factor to be considered in the event of a physical damage loss is who is going to be paying the claim – your insurance company or the other party’s insurance company? In any event, the tractor, trailer or both, will be out-of-service during the time that it takes to process the claim and have the repairs completed. If the equipment is stolen, another set of circumstances prevails.

If you were not at fault, and if it was clear that the responsibility was with the other party, still notify your agent. I have seen many claims that started as non-fault get dragged out by the other insurance carrier. Let your insurance company deal with the other party. If the claim is settled in your favor, your insurance company will go after the other party’s insurance company for reimbursement and return of your deductible.

All losses, whether insured or not, will cost you out of pocket. Down time, for the most part, is not covered. In the event that you were not at fault, you have the right to be compensated by the other party’s insurance carrier. The burden of monetary loss is on your shoulders and you will have to provide adequate documentation supporting your claim for down time. If you were at fault and the physical damage loss is to be paid by your insurance company, lost revenue during down time is not covered. To stay in business, bite the bullet and rent equipment so you can continue to operate. In general, you can put the rented equipment onto your existing insurance policy. Liability will be covered, but if you have to provide physical damage on the rented equipment, a charge will apply. Many rental companies will provide physical damage coverage at a modest rate.

Stolen equipment will put you out of business instantly. Thirty (that’s right 30) days will elapse before a theft claim is even considered and more time will be taken up with negotiations as to equipment values. There is much confusion and delay when it comes to establishing value. Even if you are paying for a stated equipment value on your insurance policy, if at the time of loss the insurance company determines that the value is less, the insurance company will only pay what the value was at the time of loss. Be prepared to support the value that you have your equipment insured for with appraisals, receipts and mechanical documentation. In the event of any dispute concerning the value of a total loss or stolen equipment, the insured has the ability to take the insurance company to arbitration. Since this type of loss will take 45 days or longer to process, rent equipment so you can stay in business.

Cargo losses usually create the most ill will toward insurance companies. There are two basic types of policies and the language has to be understood. Of all your insurance policies, take the time to read the cargo policy and review it with your insurance agent. The policy types are Specified Perils and Broad Form. The policies will tell you what is covered and what is not covered. It will outline what has to take place in the event of a loss. It will also outline what your responsibilities are. If you haul specific or unusual commodities, specific endorsements are created for additional coverages, such as refrigeration breakdown.

If your policy has a co-payment endorsement attached to it, make sure that you understand its ramifications as it applies to a loss. At the time of a loss, it is too late to discover any misunderstands of coverage. If you are not insured to value, you may only get a portion of the total loss.

In all cases of any loss, you will be out of pocket, both financially and for the lost time. Even with proper insurance, prepare yourself for this. It is prudent, in your case as a truckman or with any other business, that you have adequate financial reserves for this possibility. I have seen many people go out of business by the mere fact that they could not continue to operate after a loss. Don’t let this happen to you.

If you have any insurance-related questions or comments, feel free to contact me, Roland L. Enz, through California Plus Insurance Service at 1-800-699-7101. Let’s make 2005 the safest and best year ever!