The Insurance Review - January 2010
CARGO COVERAGE REVISITED
By Roland L. Enz - President, California Plus Insurance
Happy New Year! With a little luck, 2010 should be a marked improvement over 2009. I am glad that it has come to an end. In 2009, we witnessed many owner operators hanging it up for something else. With an improvement in the economy, we should see new faces in the industry. All I can say is good riddance! Now, on to the topic at hand (which is related). Theft of equipment and cargo has risen over 500 percent. I have never seen this much activity! I thought that I had beaten the topic of theft to death, but again, I will take this article and try to enlighten you with my thoughts on the subject, as well as the risk that you share with this problem.
Keep this in mind: “In any theft you have a direct responsibility in the event.” You make it entirely too easy for the bad guys to take your property. Unattended vehicles, left without protection, many of them left in areas of high incidents of crime, parked on the street, in shopping center parking lots or on empty lots, invite thieves to look at this as the possibility of their next target. In essence, you have just hung out your welcome sign, inviting a loss. Each weekend I see detached, and often loaded, trailers parked on the side of the road. I understand that there is a problem with parking, but this is just inviting a problem.
This all leads into the discussion of what is and what is not covered in your insurance policy. We will look at coverage for non-owned trailers and cargo. You spend a great deal of money each year on insurance. It’s time that you look at the coverages you have purchased and take the time to understand them. This discussion will be in general terms.
Each insurance policy, while addressing the problem of theft, offers different variations of coverage as well as terms of coverage. The most important thing that I can impart to you, is for you to take the time to understand what you have purchased. It is imperative that you take the time to discuss this with your agent. I’ll take this in two steps: the first as it relates to theft of equipment and second as it relates to cargo. I am assuming that you have purchased physical damage for your equipment, as well as the equipment that you are pulling, owned or non-owned, and cargo coverage. But, what exactly is covered?
Physical Damage for non-owned (unidentified) trailers is purchased to provide coverage for those trailers that you do not own. The policy has a limit of coverage based upon an amount that you request or that is requested of you from the people that own the trailer or who you pull for. This coverage only provides for a loss if the trailer is attached to the tractor that is identified in the insurance policy. If the trailer is detached from the tractor, no coverage exists for the trailer. Think about it - you might be purchasing a trailer that you will never have the use of!
Cargo is the most misunderstood of the coverages that you have purchased. There are many conditions that have to be met before any settlement is made. Many cargo policies have certain terms that are in the policy, but can be altered by endorsement for an additional premium. When reviewing your cargo policy, as with any other policy, take the time to understand the exclusions. Every policy has exclusions. Cargo policies usually exclude coverage for detached or unattended trailers (coverage can be purchased for these types of exclusions at an additional premium). But the purchase of these extensions of coverages also have some certain parameters (terms) that you must understand, and your coverage is limited to these endorsements.
Theft losses usually have to show signs of forcible and/or violent entry. At times, I have had to fight for cargo claims on trailers that have had their locks cut but no physical sign of a forcible entry existed. This usually happens when both the tractor and trailer are stolen together. Many “inside jobs” show no forcible signs of entry because the thieves were (or knew) the owners.
It is important that you insure to the values of the goods that you are actually hauling. Don’t expect the insurance carrier to cover a loss in the event that you are underinsured. As an example, if you are hauling goods worth $200,000 and your insurance policy only provides for coverage of $100,000, do not expect $100,000 for the loss. In this example, you are only insuring to 50% of value, and the insurance company will only pay out 50% of your insurance limit - which, in this case, would only be $50,000.
The most misunderstood coverage in the cargo policy is that of refrigeration breakdown. First of all, the coverage is excluded in most policies. If you need this coverage, you will have to purchase it. This coverage has many strings attached to it. Every Insurance company provides policies that are different, but the intent, generally, is the same. The conditions are outlined in the policy, but, most importantly you, the insured, have specific terms that must be met. Records have to be kept and made available for inspection by any authorized representative of the insurance company. Also, maintenance must be done in accordance with the policy and/or manufacturer’s instructions. Inspections have to be made (at least once a month) by your maintenance shop or one of the manufacturers authorized service representatives.
As you can see, you are an integral part of the insurance process, or partnership, with the insurance company. The insurance company will provide coverage under certain terms and you, the insured, have certain conditions that you have to live up to. Your insurance policy is a contract that lays out these agreed financial obligations, in the terms of a loss, which you have purchased from the insurance company.
If you have any insurance-related comments or questions, I can be contacted through California Plus Insurance Service, Inc. in Modesto, California at 1-800-699-7101. Again, I’d like to wish you all a happy and prosperous New Year - and to 2009, good riddance!