Trucking Insurance is a very sensitive class of business insurance companies write (if they even write it at all). You would know this if you have ever tried applying for an insurance policy for your own logistics firm, hauling company, commercial vehicles of certain types and numerous other circumstances. Applications are generally long and ask a lot of very specific questions regarding your business operations. This can be a very frustrating process for start-up companies, for example, providing a list of the commodities you will be carrying, the average and maximum values of each commodity to be carried, and having to estimate overall annual mileage you will be travelling in Canada and/or the United States.
Insurance companies are concerned with the inherent risk associated with your business. Written policy & procedure manuals (including incident reporting, communications policy, load securement policy, etc.), driver qualification files, equipment maintenance records, and road testing records are examples of good risk management tools insurance companies are looking for before offering an insurance policy to the applicant party. These are also a great way to help your business succeed. But even with the most effective risk management procedures in place things can still go wrong. No matter how careful we are, losses still occur – whether it’s your fault or the fault of another person. This is when your insurance policy reacts. It is designed to be your last line of protection when all other risk management procedures fail. Having an up-to-date and comprehensive insurance policy is a vital component to the longevity of the business.
There are a number of important insurance coverages trucking companies need to carry depending on the operations and services provided. The following describe some of these coverages and what they do:
Automobile Third Party Liability (TPL) Insurance arguably the most important coverage of all. This coverage will protect your business from claims arising from the accidents involving the movement of the automobile causing third party bodily injury and third party property damage. Insufficient liability limits can bring your company to a screeching halt. For example, your truck collides with another truck causing injuries to yourself and to the third party and the saddle tank on the truck has ruptured spilling diesel fuel onto the road and nearby land or body of water. If you are deemed liable in a situation such as this one, not only will your company be held responsible for the costs to repair/replace the damaged vehicle, it will have to pay for accident benefits of the injured third party person, and environmental clean-up costs for the spilled diesel fuel – this can amount to millions when all expenses and damages are added up. TPL can protect you in this situation for the costs involved so long as your liability insurance limits are adequate, and subject to any conditions, limitations, and exclusions on the policy. Our office recommends no less than $5,000,000 Automobile Third Party Liability.
Accident Benefits Insurance will provide coverage for your drivers if they are injured in a motor vehicle accident. Medical expenses, rehabilitation costs, and the drivers loss of income are all looked after by the insurer, subject to conditions, limitations, and exclusions.
First Party Physical Damage Insurance provides coverage for loss of or damage to your trucks and trailers. When you get into an accident your truck or trailer may be in need of repairs or worse yet irreparable. The insurer pays to repair the damage to your truck/trailer or will “write-off” your automobile if the damage cannot be fixed, subject to your deductible. If your truck or trailer is “written-off” your insurer will cash settle with you on an actual cash value or fair market value basis.
Your insurance coverage is generally written on an All Perils form, which combines your collision coverage and comprehensive (fire, theft, vandalism, etc.) coverage. Coverage can also be purchased for Collision only, Comprehensive only, or Specified Perils only.
Motor Truck Cargo Legal Liability Insurance is another important component for any trucking company hauling goods for hire or goods of your own. This coverage is designed to protect your business from loss of or damage to cargo in your care, custody, or control. Insufficient limits or non-existent coverage will affect your relationship with potential long-time customers of yours. For example, your company is transporting a trailer full of temperature sensitive produce for a customer. Your truck and trailer slide off an off-ramp and rolls over onto the highway damaging the truck, trailer and the refrigeration unit on your trailer. Whether the cargo spills out onto the road or suffers from spoilage due to the accident you are likely at fault and will may be held legally liable for the cost of the cargo commodities. Generally, your customer will ask for an insurance certificate proving you have such coverages and insurance limits, but this is only to protect themselves and their best interests. For instance, they may say your $100,000 Cargo insurance limit is sufficient to carry this load of produce, but what they may not notice is that your policy is in Canadian Dollars, not U.S. dollars. Situations like this are an example of how you can find yourself underinsured and responsible to pay out of your own pocket for the remaining balance. Most cargo insurance policies carry sub-coverages and sub-limits for associated cargo claim expenses such as; debris removal costs, which are costs to clean-up the debris from the commodities spilled out onto the road; and earned freight charges, which essentially are freight charges you have earned but are unable to collect from your customer due to the loss which occurred. These sub-limits are not included in the main cargo insurance limit.
Commercial General Liability (CGL) Insurance is a component designed to cover various exposures the Automobile Third Party Liability Insurance does not cover. CGL insurance protects your business from claims arising out of third party bodily injury and third party property damage not caused by the movement of the automobile. For example, a mail courier arrives at your office to deliver a parcel. He slips on some ice outside your front door and breaks his leg. This could result in medical/surgical expenses and loss of income from missing work. Your company may be liable for these expenses and your policy would respond to pay, subject to conditions, limitations, and exclusions.
CGL will also extend to cover the following scenarios (subject to conditions, limitations and exclusions):
Drivers for any potential third party bodily injury or third party property damage they may have caused while on the premises of others (truck stops, warehouses, loading bays, etc.);
Libel, slander, and defamation your company may have allegedly written or said of another company.
Canada & United States Customs Bonding is becoming frequently requested by many trucking companies. Having a Canadian Customs Bond and U.S. Customs Bond will create the opportunity for your company to book loads carrying bonded merchandise across the Canadian border or the U.S. border. These are three party agreements comprised of the Principal (the Carrier), the Surety (the Surety Company), and the Obligee (U.S. Customs & Border Protection or Canada Border Services Agency). When the Surety Company issues the bond they are essentially guaranteeing to the Obligee that if the Obligee cannot collect any money owing to them from the Principal they can collect it from the Surety (up to the bond amount). However, unlike insurance, the Surety has the legal right to collect back from the Principal the amount paid to the Obligee and can use any legal means to do so.
This is only a brief summary and explanation of the insurance coverages offered by most insurers for commercial vehicle operations. Please call us here at Team Insurance Brokers if you are interested in learning more about these coverages or if you would like a free evaluation of your existing insurance policy.