The Insurance Review - September 2008
ADDITIONAL COVERAGES
By Roland L. Enz - President, California Plus Insurance
I am convinced that 2008 will be remembered as the year of “Challenge”. Staying in business has to be the most important item on your agenda. The Democrat’s are touting “Change” and the Republicans “Ready from Day One”. What I do not understand is where has government been throughout all these years leading up to 2008?
We are consumed with greed and deception. Take into consideration the latest problems we have had with outsourcing, Enron (fraud and corruption), derivatives, hypothecated loans, oil profits and the mortgage industry, just to name a few. Free trade and the world economy - that’s a joke. What’s free about it? Guess who’s taking it in the shorts? George Sr. was the principal architect of this “world economy” we now have. Within his watch, 1989 to 1993, California lost over 300,000 high-paying technical jobs. What about the value of the dollar? We are supposed to be the most sophisticated and enlightened society on the planet, yet we have a government of knee jerk reactionists, dictating policy that has no other function than to put off the consequences until the next administration and/or the next legislature convenes. Point: the Economic Stimulus Package. Did anyone really believe that a few hundred “extra” dollars in their pocket would change our economic outlook? How about tapping into our strategic petroleum reserves? Am I out of step, or have we completely lost our minds. Let me get back on track and talk about insurance issues before I go completely insane!
Lately we are seeing more requests for higher liability limits and the added coverage of General Liability from several shippers and brokers out there. The required liability limits for both the State of California and the Federal Motor Carrier Administration is $750,000, not taking into account any consideration of higher limits due to hazardous commodities or passenger operations. Most shippers and brokers require $1,000,000 in auto liability. Now, I have seen requests up to $2,000,000 in auto liability for general trucking. This may or may not create a problem. If you are in the need of higher limits and your current insurance company will not provide the additional coverage, your only alternative is to purchase Excess Liability. Excess Liability is a separate policy which provides an additional layer of protection above and beyond your existing limit, which in this case would raise your limit to $2,000.000. Most of the insurance carriers that provide coverage for the trucking industry only provide primary limits up to $1,000,000.
If you are put into the situation of needing higher limits, here are some items you should consider. Will your present insurance carrier provide these limits, and if so, at what cost? If not, what is the cost of purchasing the excess coverage from a separate source? Usually the cost for this coverage, for one vehicle, is in the neighborhood of $2,500. That number is significantly less if the additional coverage can be written with your present carrier. You might consider shopping for a carrier that can provide the higher limits. At that point, you can make a calculated decision on terminating your present insurance and rewriting it with a carrier that can provide the higher limits at a lower cost.
But the most important thing to consider, before making a final decision, is if the increase in business from the shipper requiring the higher limits will pay for the increase in your insurance expenses? At this point, from what I have seen, there have been very few people opting to pay for that additional expense. And without any guarantees of future business from the shipper requiring the extra coverage, it can be hard to go out on that financial limb.
Another thing we are seeing out there is that more and more shippers are requesting General Liability coverage. This coverage protects your business operations and does not involve the truck or transportation of goods. You can equate it to the liability part on your homeowner’s policy which covers third party bodily injury and property damage. Here are a few examples of things that would be covered to illustrate the concept: 1) You use equipment such as loaders or lifts and loss is caused to property or personal injury; 2) You have an employee that takes a poke at someone; 3) You slander someone; or 4) Someone is hurt on your property (slip and fall). For the most part, this additional coverage is provided to protect you and your business from many situations that are not covered by your regular truck liability policy.
The costs for General Liability coverage vary. Some trucking policies have the ability to include General Liability as a package and can be added for as little as $250. If your insurance policy will not allow the coverage to be added, a separate policy would have to be purchased. The premium for a stand alone policy ranges in the $1,500 area. These costs are based on an owner-operator and would change if the risk had multiple units and or if the risk had a higher potential of risk. For risks with multiple units, premium can be based on the number of units owned and operated or on the payroll. These details should be discussed with your insurance broker or agent, because each company approaches this in their own way.
So hang on, face the challenges, and do what you have to do to survive. Just be sure to make good, educated decisions. If you have any comments or insurance-related questions, I can be contacted through California Plus Insurance Service at 800/699-7101.