The Insurance Report - August 2007

PREPARING FOR A LOSS
By Roland L. Enz - President, California Plus Insurance Service, Inc.

Even with the most cautious of drivers, chances of an insurance loss are inevitable. For those that are average, the chances go up. For those of you that are more aggressive, the chances of a loss are increased by the square. No one wins, no matter how much insurance you carry or how much the other person has, if that person is at fault.

There are three types of loss that you may encounter while operating as a trucker – third party liability, physical damage and/or cargo. Any loss, no matter what the circumstances are, will create a financial hardship. You have purchased insurance for protection. The concept is very simple - by contracting with an insurance company and paying a premium, you have transferred the financial responsibility to a third party. Not all loss is covered, and in the event of an exclusion or a condition, there may be no coverage.

Losses take time out of your production, they create animosity, and they always have out of pocket expenses. For years I have preached the idea of having a fund set aside for non-occurring expenses such as accidents or breakdowns. It is easy to preach, but I have seen many of you go out of business because of your inability to survive even a brief loss of the use of your equipment.

Third party claims are those that you inflect upon another. This coverage protects you in the event that you were the responsible party. Physical damage on your equipment is not covered. Usually, there is no deductible associated with this type of loss. There are exceptions and some companies offer or require a deductible for either or both property damage or bodily injury. Make sure that you have a complete understanding, from your broker, in the event that your policy has such a deductible. Many of you that haul rock or dirt may have a property damage deductible. Your insurance company is trying to get away from those constant broken windshield claims. What money is lost in the event of a third party claim if you are at fault? The most glaring is the increase in your insurance rate at the time of renewal. If you were not at fault, make sure that you get an accident report and keep all of your insurance records for at least four years.

Physical damage is a loss to your vehicle or vehicles. Do not confuse this coverage with property damage. This coverage protects you in the event of damage to your vehicles, whether you were at fault or not. In the event that the damage was caused by someone else, and if that person did not have insurance, your insurance company would pay for these damages, less the deductible. Some policies provide for downtime, but this is usually not considered for 30 days. Most truck policies do not provide this type of coverage.

Your insurance policy will cover the liability insurance on a rental vehicle, but it usually does not cover the cost of the rented vehicle. Check with your broker to see if your policy covers physical damage on rented vehicles. Even with insurance, out of pocket expenses occur that could include time, deductibles and the loss of earnings. In the event of a loss that has damaged both your tractor and/or trailers, some companies may give each vehicle a separate deductible. But most policies that are written as a package may only have one deductible if there is damage to more than just one of your vehicles or if the loss includes a cargo claim.

Cargo losses have their own quirks associated with them. You should take the time to read and understand your policy. Do not rely on anyone other than your broker to explain the coverage. Each policy has its own set of exclusions and conditions. One unpaid cargo loss could put you out of business. You have a responsibility to protect and preserve the load in the event of a loss or a potential loss at your expense until the insurance company takes responsibility. You have a responsibility to maintain your equipment. Most evident in this area is the maintenance of the refrigeration unit, if you haul refrigerated products. Most policies that provide reefer breakdown coverage outline what has to be done as to maintenance to provide coverage. Many cargo policies have a co-insurance clause. This co-insurance restricts payment in the event of a loss if the load is not insured to value. If you underinsure, in the event of a loss, you only receive a percentage and not the full value of the product that you were hauling. On the upside, most broad form cargo policies provide for the unearned freight revenue and debris clean up.

Prepare yourself in advance for possible losses. You cannot always depend on your insurance to pull you through a loss. If you have any comments or questions regarding insurance issues, I can be contacted through California Plus Insurance Service at 1-800-699-7101.