The Insurance Report - June 2007

BACK TO THE BASICS
By Roland L. Enz - President, California Plus Insurance Service, Inc.

When our office writes coverage for a trucking client, we provide a copy of a pamphlet that I have developed over my many years in business. Truck insurance has many nuances that have been developed and established over the years, mostly due to various laws initiated by state government and/or the federal government. In California, trucking is regulated by the Department of Motor Vehicles (DMV) or the Public Utilities Commission (PUC). Federal regulations are through the Department of Transportation (DOT), which is regulated by the Federal Motor Carrier Safety Administration. The following “basic” information is from the pamphlet I have put together for my clients.

Every truck operated in California with a gross vehicle weight (GVW) in excess of 10,000 lbs. must have an operating authority issued by the DMV. If you haul for hire, regardless of the GVW, you will have to have operating authority from either the DMV or the PUC. If you haul interstate commodities for hire, and if you are not exempt, you must have authority from the Federal Motor Carrier Safety Administration (FMCSA). If you haul exempt commodities, you will have to have a DOT Number. You can view both the state and federal applications on the internet.

Your authority is only valid when there is a current Insurance Certificate on file with the appropriate government agency. A major issue arises out of the termination or cancellation of policies by your insurance carrier. It is a requirement that the government agency that authorizes your authority be given a 30-day notice of either the expiration and/or cancellation of the policy. This is also a requirement if you elect to cancel your policy. The insurance company has to give a 30-day notice to the governing agency. There are some ways that are available to shorten this time and if you are electing to cancel your policy, for whatever reason, discuss this with your agent.

Most all policies are financed by an outside premium finance company. As you can see by the fact that it takes so long to cancel a policy, the finance company is out on a limb for premium. This is the reason that premium payments have to be made on time and that cancellation notices go out so fast. There is a time lapse from the notice of cancellation by the finance company to you and to the notice given to the insurance company. In some cases, 45 or more days may go by before your authority is actually terminated.

Since we are discussing cancellation notices, it is important that you understand the events that take place in this process. In the event of non-payment to the finance company, the finance company will send you a notice (usually this notice includes a predetermined date for possible cancellation). This is not the date that the insurance policy will cancel – this is the date that the finance company will request cancellation to the insurance company. As soon as the insurance company receives this notice from the finance company, they will issue a cancellation notice to the various government agencies and any additional insured’s that you may have on your policy (including any lean holder that may be on your equipment).

This cancellation can usually be rescinded by making payment to the finance company, but it is important that you understand that it will probably take two payments to bring your account current. Rescinding the cancellation is totally at the discretion of the insurance company – they may choose to not reinstate the insurance policy at all. Discuss this with your agent to find out your insurance company’s policy on this topic. Most companies will not reinstate after three notices of cancellation are sent.

Since your insurance company makes a “blind” representation of insurance to either the state and/or federal government, it is necessary that you insure all of your owned equipment – even the trucks just sitting in your yard. The only way that you can circumvent this is to put those vehicles into Non-Operational status with the DMV. That is not easily done, since the DMV will not issue a “Non-Op” registration until the expiration of the current annual registration. At that time, you can pay a small fee for the Non-Op registration. Unfortunately, as with everything else, your insurance company may not accept this. The insurance company’s policy on this subject should be discussed with your agent.

Adding and deleting of equipment during the policy year creates some problems if the policy is financed through a premium finance company. Additional premium can be added to the finance agreement if there is time left on the contract, but when it comes to deleting some equipment, many insurance companies drag their feet when returning premium. If your insurance policy is financed, any return premium has to go to the finance company. Understand that if you have deleted a piece of equipment and your policy is financed, you still owe the premium payment that is on your contract until the finance company receives the return premium from the insurance company. When the returned premium is received by the finance company, the finance company will adjust the payment reflecting the payment received.

It is important to report all of your drivers to your insurance agent. Your insurance premium is based on the information that you gave at the inception of the policy. Each insurance company has its own requirements as to the qualification requirements of the drivers that they will accept – point count, age and driving experience are all considered. Some companies name the driver on the policy while others may have such conditions as higher deductibles or exclusions for any non-reported drivers. We have some companies that rate each driver individually, which often causes the premium to rise.

Your insurance premium is also based largely on the radius of your operation. Most insurance companies will allow occasional trips out of the radius, but some companies have strict radius endorsements attached to the policy. Before running a load outside your normal radius of operation, talk to your insurance agent. In the event of an accident occurring beyond your normal radius, indicated in the policy from the point of garaging, no coverage may exist.

We have touched on just some of the information that should be considered and understood as it relates to your insurance package. If you would like a copy of this pamphlet, please give my office a call and we will forward it to you. If you have any questions regarding this or any other insurance matter, I can be reached through California Plus Insurance Service in Modesto, CA at 1-800-699-7101.