You’ve probably noticed an underlying theme in the majority of my articles here on Overdrive: The need to understand our insurance policy. All too often, we simply assume we know what we have for insurance or believe our insurance agent has told us everything we need to know about our policy. That includes me before I became an insurance agent.
Assuming, though, is always a bad idea, especially when it comes to insurance. Believing our insurance agent has or is even able to disclose all the details of the policy is not realistic, either. That leaves us with only one option. We need to read our policies ourselves.
Will we read our polices? Highly unlikely. As I confessed that, before I became an insurance agent, I never read my policies, I think it’s very unrealistic to believe anyone else will either (even though everyone should). So if we’re not going to read our policies, how about knowing some of what is in our policies so we understand why it is so important to read them. Lastly, I’m going to share some tips to locate certain portions of our polices so we can quickly review anything we may question or want to be certain of.
The following are summaries of some of the most common misunderstandings we truck owners have about our commercial auto, cargo and commercial general liability insurance policies.
Commercial Auto Policies
Terms and Conditions
Policies are not required to (and seldom do they) use the phrase “terms and conditions” or any similar variant. Rather, the policy will make statements of fact. For example, in my articles “Don’t be lured into dishonesty to reduce your insurance premiums” and “Deception wreaks havoc ... again!”, the insureds were found to have violated a requirement found in all commercial auto insurance policies I have ever had or provided to a customer. That requirement was to have all owned and/or operated commercial vehicles scheduled on the policy.
Another almost certain term and condition is that only drivers who are included or added to the policy are permitted to drive any of the scheduled vehicles. There can be (and frequently are) countless more terms and conditions scattered throughout the policy: driver qualifications, radius of operation, hazmat exclusion, involuntary inspections or audits by the insurance company, equipment standards, equipment exclusions, locations excluded for trucking operations, exclusions for specific commodity types and much, much more.
Scheduled Vehicles
This is a list of all the “autos” (trucks) you shared with the insurance company and which are scheduled (listed) on the policy. If you own and/or operated a commercial vehicle and it is not scheduled on the policy, it is almost certain you are violating the terms and conditions of the policy and risk an outcome similar to those in the two previously mentioned articles.
Drivers
This a list of all the drivers you have disclosed to the insurance company and who are on the policy as a driver. It’s not a given that we can add any driver we wish to our insurance policy. On every policy I have had or seen, drivers can be approved or rejected by the insurance company. In some rare instances a driver may be listed on the policy but then “excluded” as a driver. One example is a driver who has a less than desirable Motor Vehicle Record and yet remains an employee of the company as a dispatcher, mechanic, warehouse worker, etc.
Know the policy’s ‘Covered Perils’
The policy’s list of covered perils determines if the policy will provide coverage in the event of a claim. As I outlined in my last article, “Not all cargo insurance is created equal,” if we don’t understand our perils, we’ll never actually know if there is coverage. This is true for both the physical damage (comprehensive and collision) of our trucks and trailers and of cargo coverage. Just like with cargo coverage, if the peril which caused the claim is not a covered peril, we the truck owners may not have physical damage coverage, which can result in the cost of repairs being our own responsibility.
Know the policy’s ‘Coverage Exclusions’
Equally important, we must know which perils are excluded from coverage. In addition to peril exclusions, the policy will almost certainly have other exclusions as well. Those other exclusions can be for types of operation, commodities being hauled, location of operation, and countless other possible exclusions. Some polices will have a very small list of exclusions while other policies may have multiple pages of exclusions. In the event we filed a physical damage claim and the peril that caused the claim is excluded from coverage, or the loss occurred while engaged in an activity that is listed as an exclusion, we the truck owners, once again, may be responsible for the entire cost of the repair/loss.
Motor Truck Cargo Policies
Verify cargo commodities
All too often, when we answer the question on our insurance application, “What commodities do you haul?”, we only enter “general freight.” Or we tell our insurance agents something like, “I only haul general freight.” Insurance agents, as they are required to do, in turn only disclose general freight on our application as the commodity we haul. This can cause all kinds of issues, none of them good.
First, and most important, the commodities we haul can determine if the insurance company will provide us commercial auto insurance (trucking insurance) at all. For example, if we say we only haul “general freight” to the insurance company and our customer or broker files a cargo claim for something specific like televisions or perhaps a racecar, there is the possibility that claim may be denied. Why? Because some cargo coverage policies “exclude” (see next paragraph) coverage for “electronics” or “autos,” and as such may not provide coverage.
What if our customer or broker states that “general freight” was the cargo being hauled when they report the claim to our insurance company? Before a claim is settled, the adjuster is required to investigate. Pictures are almost always required during the investigation. The adjuster will see that the cargo is televisions or a racecar. As the adjuster is required to do, he/she will most likely deny the claim if electronics or autos are excluded by the policy. Worse yet, if the insurance company does not insure truck owners who haul electronics or autos, then the policy can be canceled.
A cancelation like that will follow us around on what’s known as a CLUE report as deception (we lied about what we haul) and make it virtually impossible to find insurance we can afford.
Know the cargo perils
As with the commercial auto policy, the cargo policy’s list of covered perils determines if the policy will provide coverage in the event of a claim.
Know the ‘Cargo Exclusions’
Cargo exclusions are different than the commercial auto policy’s coverage exclusions. Cargo exclusions specifically identify cargo that is “excluded” from coverage. What cargo is excluded from coverage is entirely up to the insurance provider. Neither our insurance agent nor our insurance company is a mind reader. Nor do they have a camera monitoring every load we put in or on our trailers and notify us that the cargo will not be covered. Knowing what cargo is excluded from coverage within our insurance policy is entirely the responsibility of the insured/policy holder (us truck owners).
Commercial General Liability Policies
Business locations
Commercial general liability (CGL) insurance has a nickname. It’s sometimes referred to as slip and fall insurance. It got that nickname given how common claims are made by businesses’ customers or the general public while they are on the property for slips and falls. How does that relate to us truck owners? It’s not uncommon to forget to tell our insurance agent or our insurance company that we have multiple locations. I believe this is mostly an innocent oversight. However, whether an innocent oversight or not, it can be a costly one.
We provide our business address (which should match our address on file with the Federal Motor Carrier Safety Administration) to the insurance company via our application. On that application there will typically be a very long list of questions, many of them requiring a simple “yes” or “no” answer with possibly a few follow-up questions, depending on the answer. One of those questions will almost certainly deal with locations. If we don’t enter all the locations our business owns, rents or otherwise utilizes for business operations, the insurance company believes that the only location they are providing coverage for is the business address that has been provided.
If we own an empty lot across the street, a few blocks over or across town where we park our trucks, it also can have a slip and fall type of claim. It can happen in many forms. Someone taking a shortcut through the property and falling down, a tool truck vendor selling tools to a mechanic and who falls off a set of stairs. A mobile mechanic who is is injured while working on the truck owner’s truck or trailer. Any of these examples could result in a claim against a CGL policy. If we do not include the parking lot, then any claim from an incident that occurred on the parking lot property may be denied. Then, we could be sued. If found liable by a court, we’ll be responsible for entire amount of the court decision.
Know the covered perils
Just like with the commercial auto and cargo policy perils, the GLC policy’s list of covered perils determines if the policy will provide coverage in the event of a claim.
Know the coverage exclusions
Similarly to commercial auto policy and cargo policy exclusions, we must know which perils are excluded from coverage. Besides peril exclusions there will almost certainly be other exclusions you might be surprised to find within your CGL policy. Exclusions such as "total auto," “care, custody and control,” “hired and/or nonowned auto,” “designated operations or activities,” and many, many more possible exclusions. Every policy will have exclusions.
Again, these brief summaries are aimed to help you address some of the commonly misunderstood or overlooked elements of our insurance policies. I get all kinds of far more complex insurance questions that can only be answered after a very careful reading of the policy. And even then, sometimes the answer can only be provided by the insurance company itself.
The fastest way I know of to learn if a peril is covered, if something specific is excluded or any other detail of a policy is to request a pdf copy of the policy and perform a keyword or phrase search. I prefer to search for headings like “Perils,” “Exclusions” or “Auto.” If, for example, I search for “Exclusions” I will read the entire list of exclusions completely and carefully, including all the details for each exclusion. Only then can I understand every exclusion of the policy I am reading.
[Related: Not all cargo insurance is created equal]
Need help with your own insurance? Call the author of this story, W. Joel Baker -- if you have questions about insurance you'd like to see addressed by Baker here in Overdrive, drop a comment under this story or get in touch with him directly via his websites.
Find more information on the ins and out of trucking insurance in the Overdrive/ATBS-coproduced "Partners in Business" manual for new and established owner-operators, a comprehensive guide to running a small trucking business. Click here to download the 2023 edition of the Partners in Business manual free of charge.
