Federal regulations require that all motor carriers that are regulated on a federal level show proof of minimum financial responsibility. The MCS-90 endorsement to an existing Auto/Truckers policy is the primary means of satisfying this requirement. The MCS-90 is designed to protect the public, not the policyholder. The essence of the potential problem to the policyholder is that because of the MCS-90, a claim could be paid by the insurance company that IS NOT covered by the policy. In the event this happens, the insurance company can and will attempt to recoup what was paid from you - the insured policyholder.
The primary source of trouble would likely involve environmental restoration and clean up. Unless you are a licensed HAZMAT carrier, you may not carry Auto Pollution Liability coverage. To our knowledge, it’s not available from any standard insurance company currently underwriting Auto Liability coverage for courier companies. However, many of you routinely carry things that could be pollutants. For example, you may be carrying a load of plastic parts or goods of some kind. If there is an accident and a fire ensues, melting the plastic onto the highway, it’s highly likely that there will be some environmental clean-up. Due to the MCS-90, your insurance company would be responsible for the costs. Since there isn’t coverage under the policy, the insurance company is entitled to come back to you for reimbursement.
On the other hand, we can help you secure the appropriate, separate Auto Pollution Liability coverage. Let us know if you would like a quote and we will send you the appropriate application.
While this information is geared to those of you with Federal Authority, we advise the same caution to everyone. If you don’t have Federal Authority (and therefore do not have the MCS-90 on your policy) and a situation involving environmental clean-up occurs – there is no coverage. Please be aware of the potential problem, and to the extent you can, try to avoid carrying products that are or could become pollutants.
Use Of “Agents” or Sub Contracted Carriers (i.e. brokering) and MAP-21
More and more the courier industry is subcontracting work to other licensed motor carriers. If you are doing this at all, you are essentially a “freight broker”, and as such are required to register with the FMCSA as a freight broker, to obtain the appropriate operating authority.
This is the case now more than ever since “Moving Ahead for Progress in the 21st Century Act” (MAP-21) was signed into law July 6, 2013. While most of the bill focuses on federal surface transportation spending, a key provision within the bill redefined transportation law. It no longer permits a motor carrier to obtain FMCSA authority as both a motor carrier and a freight broker or freight forwarder. Specifically, it states that there must be a separation of operations, meaning any motor carrier involved in freight brokering (formally or informally) should now separate those operations and seek separate FMCSA authority for each entity. Whether or not you have previously held brokerage or forwarding authority has no bearing on your legal obligations moving forward under MAP-21. Basically, “informal brokering” is not permitted by a motor carrier and operating as a broker unlawfully can result in some serious financial penalties.
If as a motor carrier you are participating in “freight interlining” then you do not need to be licensed as a freight broker. By definition, a broker only manages transportation versus performing transportation.We strongly recommend that if you are involved in brokering or otherwise sub-contracting to other licensed motor carriers, you engage the services of a good transportation attorney to make sure you are doing this correctly and legally. From an insurance and risk management standpoint, we will expect you to have the proper authority and Motor Carrier Agreements in place that specify appropriate insurance requirements. MAP-21 also requires that a broker or forwarder obtain a $75,000 surety bond (BMC 84) or Trust Fund Agreement (BMC 85), versus $10,000 as required previously. Of course, we can assist with the bond. For additional information on MAP-21 go to the Federal Highway Administration Website at http://www.fhwa.dot.gov/map21.
FMCSA Rule Banning Use of Hand Held Cell PhonesYou need to be aware of this rule. Following is a summary of the provisions:
Those of you who operate company owned/leased vehicles driven by employee drivers should be utilizing a driver safety manual. These manuals should be revised to reflect this new rule. Whether you are using employee drivers or IC’s you should formally notify your drivers of this new rule. You can obtain formal notice forms from Scopelitis, Garvin, Light, Hanson & Feary for a $200 flat fee. Contact Allison Smith at 317-637-1777 or email@example.com. Mention that you are a client of Brightstone Insurance Services. By utilizing this notice form you will achieve the goals of providing ample formal notice to the drivers and it memorializes your commitment to compliance. Also, to the extent allowed by law, the employee driver form includes a reimbursement provision for situations where you incur a fine because of the driver’s non-compliance. The IC form references the IC agreement indemnity language for situations where you incur a fine because of the IC’s non-compliance. (NOTE: the $200 fee is for the notice forms only. If you need further consultation, it would be done at the firm’s normal hourly rates.)
CSA 2010 Safety Program
Compliance, Safety, Accountability (CSA 2010) is a Federal Motor Carrier Safety Administration (FMCSA) safety program to improve the safety of trucks over 10,000 GVW and buses and ultimately reduce accidents. It effectively replaces Safestat. It introduces a new enforcement and compliance model that allows FMCSA and its state partners to contact a larger number of carriers earlier in order to address safety problems before accidents happen.
While CSA 2010 is obviously applicable to the trucking industry, there are many courier companies today operating larger vehicles under FMCSA authority; and therefore, will be subject to CSA 2010.
For FAQ’s regarding CSA2010 go to: https://csa.fmcsa.dot.gov/Documents/What-Is-CSA-Factsheet.pdf.
Charging Drivers for Your Non-Owned/Hired Auto Coverage
You must not specifically make a deduction from your driver for AUTO INSURANCE as reimbursement for a Non-Owned/Hired Auto policy. This implies that the drivers are covered – which IS NOT true. You, the courier company, are covered – period!
Driver’s Primary Auto Insurance
Drivers (whether IC’s or employees) driving their own vehicles must understand that they are responsible for their own accidents. Of course, it must be clearly indicated in your IC or Employee agreement that drivers must carry auto insurance with limits at specified levels or higher. The exact type of insurance and the insurance company is something that the driver needs to determine with his or her insurance agent.
You must be sure to monitor all of your drivers’ insurance on a regular systematic basis as you don’t want a claim situation where their insurance isn’t available for an accident they caused. Most personal (non-business) auto insurance policies actually will cover accidents involving delivery work, but some will not. Call us and we can share our knowledge about problematic insurers in your state(s).
Of course, drivers can expect to have their insurance non-renewed and may get a hard time about claims if their insurers become aware they were doing delivery work. That is probably why we see so few drivers volunteering this information to their insurers. Nor must they. It is up to insurers to ask about their customers’ work.
Insuring Driver Vehicles on Your Policy
This is done routinely in the trucking industry in one of two ways, but rarely in parcel delivery, due to the higher costs entailed. Both approaches involve a permanent lease provision in the IC Owner/Operator Agreement.
Either way, it is highly recommended that a good attorney be engaged to prepare the IC agreement to avoid, or certainly minimize, IC status challenges.
We have always recommended that the IC’s not use signage unless it is required under your Federal and/or State Operating Authority. When vehicles under 10,000 lbs. GVW are involved, make sure to use only magnetic signs and require the IC’s to remove them when not making deliveries. If you don’t have or need formal operating authority and are not required to use signage, we strongly advise against it. You may want to use signage in an advertising capacity. From a risk management standpoint, we clearly feel the risk of signage making you a target for lawsuits, far outweighs any advertising benefit. You may have certain customers that require signage to gain access to their property. We suggest that you talk to them about requiring ID badges instead.
Company Vehicles Furnished to Owners/Employees
If this is something you are doing presently or contemplating, you need to be aware of and properly address several things from an insurance/risk management standpoint:
At the end of the day, it is better to insure a company owned unit on the company’s Business Auto Policy. Otherwise, if you want to insure it on a Personal Auto Policy, you should re-title the vehicle to the individual. This can be confusing – call us to discuss further!
Operating Customer Vehicles
While this doesn’t seem to be a big trend in the delivery industry, we have come across it in several potential claim situations. For a host of reasons it makes sense to approach this type of work very cautiously and to coordinate your insurance with your customer’s early on.
Underwriters have not contemplated this exposure or priced for it. It’s questionable as to whether Non-Owned/Hired Auto coverage would apply. The facts in each situation must be closely examined to determine if coverage applies.
Since some of you utilize IC’s, another concern involves the IC status holding up under IRS scrutiny when the alleged IC is not providing his/her own “equipment”.
Also, consider the occupational injury exposure. If the IC is not covered somewhere, an injured driver may make a claim against your customer’s Workers Comp policy. Certainly, that won’t promote good customer relations!
If you intend to or are doing any driver leasing, we need to know about it immediately and you need to make sure that there is a clear, written understanding with your customer that the customer’s auto insurance will apply on a primary basis for any accident involving their vehicle.
The ONLY Pollution Liability coverage you have under any standard auto policy is relative to pollutants that escape from the vehicle’s engine or fuel tank, such as oil or gasoline, as a result of an accident. You DO NOT have coverage for injury or damage caused by pollutants that you are transporting as cargo; however, our standard cargo policy may provide up to $10,000 of Pollution Clean-Up.
At one time or another, you may very well carry cargo that falls into a HAZMAT classification. This can include paint, soap, hair spray, etc. However, most of the time, there are only small quantities of these materials being transported and they are not considered bulk, so you don’t need the HAZMAT placard. Frankly the exposure is likely minimal, but keep in mind, if you are carrying materials that fall into a HAZMAT category in any amount - even if it is not considered “bulk” - you need to think about securing the appropriate coverage. To find out what quantity of HAZMAT material constitutes displaying a placard, go to https://www.phmsa.dot.gov/staticfiles/PHMSA/Hazmat/digipak/pdfs/presentation/Placarding_Requirements(04-07).pdf.
Renting Vehicles Short -Term
Short Term (defined as less than 6 months) vehicle rentals are being utilized by the same-day delivery industry and other transportation companies to a fairly significant degree today, and it appears that this trend will continue.
We have often promoted the purchase of insurance (both liability and physical damage) available from most rental companies because: a) claims are handled by the rental company’s insurance carrier; b) replacement vehicles and repairs are the responsibility of the rental company; and c) claims won’t affect your insurance premiums. We still maintain this position; however, we can provide coverage under the Commercial Auto policy that we provide to you.If you rent infrequently, such as a few days per month and under 30 days annually, you should purchase the insurance through the rental company if available - both $1,000,000 liability and physical damage coverage. If you are unable to purchase either coverage from the rental company, we can provide it via your Commercial Auto Policy. We will know that you need coverage either by giving us an estimate at policy inception or when you or the rental company contact us for a Certificate of Insurance during the policy term.
If there is exposure anticipated up front, you will be charged a premium based on the projected exposure. If there is no exposure anticipated at inception and coverage for short term rentals is not specifically requested, an endorsement will be issued to exclude this coverage. It may be added later if needed. Understand that our rates for this coverage are typically higher than those charged by the rental companies, so again we strongly encourage you to purchase coverage from the rental company.
If you are renting vehicles frequently, perhaps on a rolling monthly basis, premium will be developed that is similar or even higher than “fleet premiums”, due to historically greater loss frequency. You may be required to submit a report regularly, with premium adjustments being made during the policy term.It’s extremely important that you understand the issues involving rentals. Please make sure to talk to us about the appropriate way to handle this exposure for you.
Trailers You Own or Lease
What would seem to be a simple thing, buying or leasing a few trailers and making them available to your IC’s, actually creates a serious coverage issue for both liability and physical damage. If you own or lease the trailer, it doesn’t fall under your Non-Owned/Hired Auto policy. Can you fix the problem by leasing it to the IC? NO! Assuming the IC is driving a one ton pick-up, it’s likely he/she has a Personal Auto policy. There is absolutely no liability or physical damage coverage related to the trailer under that policy. Now, if the IC has a Commercial Auto policy and schedules the trailer, at least you’d have the protection of that policy, but only while the trailer was pulled by the vehicle scheduled on the policy. Hopefully the limits are reasonably high.
The bottom line is that trailers can be a big problem. If you utilize them in any way, we can help give you the proper advice.
Independent Contractor WC Solutions
This topic is one that can be discussed for hours. It is important, misunderstood and often not handled properly. If you have your Workers Compensation (WC) coverage placed through the assigned risk pool, or even a voluntary market, but are covering only your true employees, the good news is that if a driver is injured and claims employee status to be compensated under WC, you do have a WC policy that will have to pay the claim. The bad news is that this situation would absolutely trigger an audit by the carrier and they WILL come after premium on all the IC’s. Even without a claim to trigger it, an audit is extremely likely and they will charge premium on the IC’s because they are “uninsured subcontractors”. If you sub out any work to other companies be sure to obtain a current WC certificate. Otherwise, you could end up getting charged for WC premium on their drivers as well.
There are several ways to deal with this issue efficiently:
All the tiers of coverage (Occupational Accident, Contingent Liability and Workers Compensation) discussed in #3 below are available through the Association for Delivery Drivers, at comparable costs.Partnering with the Association for Delivery Drivers offers much more than just a cost-effective solution to your IC-related WC risks. The Association opens up a whole new road for legitimately dealing with independent owner-operators. Imagine working with drivers who have 24/7 access to the products and services they need to meet professional contract standards affordably. Member benefits include insurance, licensing, trade tools, advertising, work on the side, safety programs, training, etc. Everything is offered buffet-style so you can decide what’s important to setting up a more defensible yet practical IC model. The Association can supply you with all the materials you need to make your drivers aware of them and their unique benefits - and the icing on the cake is the insurance credits you can earn by documenting how ICs are enrolled in safety programs and carrying more of their own insurance. Contact us to learn more.
Staffing Services (PEO, Employee Leasing, Temp. Agency)
Many of you are familiar with this concept. There are clearly advantages gained, such as the IC/WC issue discussed earlier in this document. There are, however, potential problems of which you should be aware.
Injury to a “leased” or “temporary” worker should be covered by the PEO/Temp-Company’s WC policy. However, there could be a problem if the injured worker decides to file suit against you for negligence. Your commercial general liability policy will likely deny coverage due to the “Employers Liability” exclusion. Employee, as defined in the GL policy, includes a “leased worker”. If the worker was a “temporary worker” – a person who is furnished to you to substitute for a permanent employee on leave or to meet seasonal or short-term workload conditions -- the Employers Liability exclusion does not apply.
There are a couple of solutions, so if you are using leased or temporary workers contact us. We’ll help you determine if there is a problem then advise you how to address it.
Stop-Gap Liability (ND, OH, WA, WY)
This coverage provides Employers’ Liability coverage for work-related injury arising out of operations in states that have monopolistic state funds for Workers Compensation, namely North Dakota, Ohio, Washington and Wyoming. The coverage may be provided stand alone or by endorsement to the General Liability policy.
If you have operations in any of these states or regularly enter any of them, you should consider adding this coverage, in addition to purchasing the state’s Workers Compensation statutory coverage.
Privacy Liability and “Cyber” Risk
Nearly any business today has a lot of confidential customer and employee information and as such is exposed to “privacy liability" due to the unintentional failure to safeguard such information. Some of our insurance program policies automatically include a minimal amount of coverage, but we also can obtain more comprehensive policies with more adequate limits. Such policies require separate applications.
As the business world continues to become more dependent on the internet and electronic data, you are increasingly subject to Cyber Risk. Whether you use only one computer in your operation or have several workstations and servers onsite, you have the potential for a cyber loss - particularly if you have a website. Cyber Risk insurance can be categorized into two different coverages -- Third Party or First Party.
Third Party coverage protects your organization from claims arising out of things such as wrongful acts, including any form of defamation or other tort-related disparagement; trade libel; copyright infringement; plagiarism; misappropriation of ideas; liability arising from unauthorized access or use; computer virus transmissions or loss of service; disclosure of confidential information; and denial of service to customers. These claims can be centered around content on your webpage, such as using a link to another company’s webpage without permission, using another company’s logo without permission, defaming a company on your webpage, negligently displaying content or information, false advertising, or framing. Typically, Third Party claims are costly to defend and settle. Paying these expenses out-of-pocket could endanger you and your business. While many companies believe that this liability is covered under the Commercial General Liability policy, a gray area remains as to whether this will be covered by the carriers. The best way to cover your Cyber Liability and the Errors & Omissions associated with this is through a Third Party Cyber Liability policy.
First Party Cyber coverage protects your organization from unauthorized access by hackers, crackers and competitors into your systems (computer network, server, telephone, fax, e-mail, etc.) resulting in damages. The coverage provided includes protection against things like illicit transfer of money, securities, data and tangible property; network based extortion; theft of telecommunications services; loss or corruption of proprietary data; restoration or repurchase expense; computer viruses and other malicious code losses; and loss of Business Income due to intentional network disruption. These situations are not covered by your Property/Crime policies.
Unfortunately, as the Internet continues to grow in popularity, so does the malicious intent of hackers and crackers!
HIPAA and the “Business Associate” Risk
Motor carriers are specifically carved out of HIPAA in terms of being a “business associate” of a “covered entity” (mostly medical providers). That’s the good news! However, when doing work for a “covered entity” you are likely to be asked (or forced) to sign a “business associates” agreement, and you may then be assuming liability for “Protected Health Information.” If PHI gets into the wrong hands, with or without a business associates’ agreement, you may be held liable for it (although not necessarily fines or penalties under HIPAA). The point is that if you are doing work for a “covered entity,” you have exposure for “privacy liability”.
As indicated above, if you are a current Brightstone customer you probably have some minimal automatic coverage under one of our various courier programs. However, if you have a significant exposure, dealing with PHI, you need a more robust privacy liability policy. This can be provided on a stand-alone basis or in conjunction with Errors & Omissions and/or Cyber Liability.
Please make sure to talk to us about any exposure, whether it is current or being contemplated.
Errors & Omissions Liability - Covering Consequences
Your driver makes a delivery late or perhaps to the wrong place and there are either financial consequences or worse. Unless you specifically carry Professional Liability insurance (often referred to as Errors and Omissions) you will not be covered. For example, your driver picks up a bid packet from a contractor that must be delivered by noon that day. The driver is unintentionally delayed; the bid arrives late and is subsequently dismissed. It turns out the contractor would have won the job had the bid been delivered on time. The contractor sues you, but unfortunately, you have no coverage because there was no accident or damage that occurred.
Perhaps a more striking example of an error that would result in significant liability is if one of your drivers unintentionally fails to deliver a soft tissue sample, such as a biopsy, to the intended lab. The entire growth had been removed, so another sample can’t be taken. The result is a major lawsuit by the patient who is experiencing great mental anguish not knowing if he or she has cancer. Again, no coverage applies and it may be very difficult/expensive to obtain coverage specific to this exposure.
A “normal” cargo loss where goods are damaged or destroyed can also result in this type of claim in addition to the cargo claim for the value or cost to reconstruct or replace the goods. For example, if the bid packet or tissue sample mentioned above was destroyed in an auto accident that was your driver’s fault, the consequences are no less severe.
If you think you have any such risks, or similar time-sensitive risks, be sure to talk to us about them.
Liability for “Employment Practices” vs. “Management Practices”
It’s hard to pick up a major newspaper these days without reading about a company being sued by an employee for harassment, wrongful termination, retaliation or discrimination of varying types including sex, race, and national origin. While lawsuits against major Fortune 500-type companies get most of the press, there are an increasing number of law suits being filed against small to medium sized employers. Often, they are groundless, but the legal defense costs alone can get expensive. There are quite a few insurance products available at affordable costs and with reasonable deductibles. Some of these will also extend coverage to allegations made by IC’s and a customer’s personnel. It’s not a bad idea to consider purchasing this coverage
Benefit Plan Administration Risks
This coverage protects the Insured employer against claims by employees or former employees alleging negligent acts or omissions in the administration of the Insured’s Employee Benefit Programs (such as Group Medical/Health Insurance). For example, an employee is denied healthcare benefits due to an error in processing their enrollment. This coverage is inexpensive and should be purchased as an add-on to your General Liability policy.
This insurance covers claims arising from a breach of responsibilities or duties imposed on a benefit plan administrator or a negligent act, error, or omission of the administrator. For example, a claim may arise if a pension plan or 401(k) goes broke based on mismanagement by the plan administrator.
Directors, Officers, and IC Misclassification
This is a form of Errors & Omissions insurance covering the directors and officers of a corporation personally for allegations of negligent wrongdoing. It can also be extended to protect the corporation against lawsuits alleging they committed wrongful acts. However, this coverage does not apply to bodily injury or property damage.
Transportation and logistics companies everywhere face the threat of challenges to their use of independent contractors. We have introduced an add-on to a D&O Policy that offers protection for unintentional misclassifications. It will respond in the event of complaints, lawsuits, or regulatory actions against your company or against your Directors & Officers for any personal liability.
Business Income Loss and Incurring Extra Expenses to Avoid It
For the majority of delivery and logistics operations, insurable Loss of Business Income is not going to be a significant issue. If there is a calamity at your place of operation, you would still be able to operate, but would incur some insurable Extra Expense, such as temporary office space, telephone service, overtime pay, computer equipment, etc. We encourage you to give this some serious thought in terms of planning and what expenses might be over and above “normal” operating expenses. Think in terms of being in this temporary situation a month or so. If utilizing a cross-docking location, give some thought to how easy or difficult it might be to secure similar space in the area. This may be an extra expense you haven’t considered. Under tough availability situations you may even have to contemplate the Loss of Business Income.
For those of you who perform such ancillary services for your customer such as storage/warehousing, and you are indeed generating specific income (i.e. separate from transporting goods for your customer), you need to give some careful thought to how much net income and ongoing expenses you might lose/incur in the event of a calamity at your warehouse. For example, you are generating $10,000/month in storage fees. Would you be able to quickly secure another facility on at least a temporary basis? Consider the customers you are servicing – will they be able to promptly replace the goods to either not interrupt your flow of income or keep it to a minimum? If the income will be interrupted, how long a period would you anticipate and what is the “net” income you may lose, i.e. you may not have payroll, utility expense, rent expense, etc.?
Please give the Extra Expense and Business Income exposures some careful thought, keeping in mind that the limit is Business Income/Extra Expense combined. If you are not sure what the right number is, don’t hesitate to talk to us so we can help you establish a limit that makes sense. This part of your insurance protection is a relatively small percentage of the overall cost; therefore, we recommend that you estimate conservatively on the high side. Let us know if you would like a worksheet to assist in establishing a limit.
Flood, Earthquake, and Windstorm Loss
Most standard commercial property insurance policies exclude flood, earthquake, and in specific regions (coastal property prone to hurricanes) windstorm. If these perils are covered, they will likely have a significant deductible, often expressed as a percentage of the total property insured. For the most part, these perils don’t come into play for the transportation world and/or there is little if anything you can do in terms of purchasing adequate insurance.
Most of you are tenants and do not own buildings, so flood damage to buildings is not an issue. If you do own the building housing your operation you may have a mortgage and the lender is going to require you to carry flood insurance. Basically, we would obtain this coverage for you via the National Flood Insurance Program (NFIP). The maximum coverage available through the NFIP is $500,000 on the building and $250,000 on contents. Business Interruption/Extra Expense is not available. Even if your lender doesn’t require the coverage because you’re not
Most of us are familiar with the areas that are prone to earthquakes, i.e. largely California. However, there are several areas with major faults that are subject to strong quake activity such as the pacific Northwest, (Oregon, Washington), New Madrid (junction of Missouri, Illinois, Kentucky, Tennessee and Arkansas), Salt Lake City, Alaska and Hawaii. Also, remember it wasn’t too long ago there was a quake in Virginia that damaged the Washington Monument! There is no federal government-backed earthquake insurance program. If coverage is desired, it can be obtained through the Excess & Surplus Lines Insurance Market for building, contents and business income/extra expense.
We are seeing more windstorm exclusions and/or separate, high deductibles (often expressed as a percentage of total insured property values), primarily in areas vulnerable to hurricanes and tropical storms. Of course, this means primarily coastal regions. If there is a specific exclusion in your property policy we can usually obtain coverage in the Excess and Surplus Lines Market for building, contents and business income/extra expense. This isn’t normally a significant issue for the courier industry, unless you own the building, have a major amount of office contents or are warehousing significant values for customers and not limiting your liability to negligence. For all three of these perils, the business income/extra expense exposure is problematic. Insurance coverage for all of them is specific to “an insured location” meaning the building/premises in which you are operating. If a major calamity strikes your city or region and virtually affects all your customers’ businesses, shutting them and you down, there is really no Business Income Insurance you can purchase that would adequately cover your inability to generate income. At least, for the vast majority of your industry, there could be a few exceptions. For example, if most your income was derived from the local distribution of pharmaceuticals for major pharmaceutical distributors located in your region, you could purchase Contingent Business Income on the distributor’s location. Understand, though, that it could be difficult to get and expensive. The bottom line is to understand that losses due to flood, windstorm and earthquake are usually not covered by typical Commercial Property Policies. Be sure to ask if you have any concerns and want to pursue coverage solutions, if available.
Our updated Customized Cargo and Logistics Coverage provides coverage for your liability as a carrier for hire, warehouseman, freight forwarder, freight broker, logistics service provider or other bailee. If you are storing property of customers for any extended period and/or charging for storage, we will need you to complete our supplemental warehouse questionnaire, so we can make sure to add the appropriate warehouse limit of coverage.
Excess / Umbrella Liability
Most of you are aware that Excess/Umbrella Liability increases the amount of protection you have for liability claims over your primary General Liability, Auto Liability and Employer’s Liability policies and it may pick up some liability exposures not covered by your primary policies. Limits normally begin at $1,000,000 and can be increased in increments of $1,000,000 to just about any limit you desire.
Let’s face it. A million dollars doesn’t go as far as it used to and serious accidents are more and more likely to eat through most or all of a primary policy’s liability insurance limit. In addition, many of you are seeing contractual requirements for high liability limits for Auto and GL that are most cost effectively handled via an Excess/Umbrella. We are sometimes able to obtain Excess/Umbrella limits on a “contract specific basis” if desired.
Clients also report success in turning their Excess/Umbrella insurance into increased sales. Your competition may not be carrying these higher limits, which can be legitimately be criticized as leaving customers exposed to liability risks incurred on a delivery (such as a serious auto accident).
Finally, you need to be aware that a $1 million policy limit ‘ain’t what it used to be’. Million-dollar limits were common 20 years ago when their purchasing power was double what it is today. Sticking with a $1 million policy today is the same as choosing a $500,000 policy back then, which few would have hazarded. Because of inflation, you need excess/umbrella insurance just to maintain a historically basic level of protection for your business.
Since 9/11/01, many policies began excluding terrorism losses. A few states decided not to allow these exclusions, but generally, they are prevalent.
The Terrorism Risk Insurance Act (TRIA) was signed into law in November 2002, effectively negating all terrorism exclusions. All Insurance carriers licensed to do business in the U.S. must offer terrorism coverage. Often, it’s presented as an optional coverage that you as the Insured can accept or reject. Sometimes the coverage is automatically included in the policy - which is permitted as long as the carriers specifically identify that part of the premium allocated to terrorism. The TRIA applies to virtually all commercial policies.
If terrorism coverage is optional, should you buy it? The first thing to assess is your exposure. From the standpoint of property, if you own your building and are located in a major city, one might strongly consider buying it. Certainly, cost is a factor. If it’s a very small incremental cost, it’s probably a no-brainer.
If your drivers spend a lot of their time in downtown areas of major cities, there’s an increased exposure to occupational injury.
Turning to liability – it’s conceivable that a courier may unknowingly pick up a package containing explosives and inadvertently deliver it to an office building. Even if you ultimately get dismissed from a lawsuit, you’ll incur some defense costs, not to mention a lot of anxiety. Here again, if the incremental premium is small, and it usually is, you may want to go ahead and buy it.
Lastly, if the cargo you’re carrying gets destroyed in a terrorist situation, you could be liable. Again, weigh the costs against the odds and do what makes sense.
We are living in a world where almost everything is governed in some way, shape or form by contracts. These seem to be ever more complex and, from the standpoint of your industry, most of the time they are clearly in favor of the customer.
That being said, it’s downright scary how many contracts are signed without review by an attorney and/or insurance agent/broker. There is often a mistaken assumption that insurance will cover any liability assumed under contract. The fact is that some may be covered, but some won’t be!
You need to thoroughly review any contract you’re being asked to sign and/or give them to your attorney and insurance agent. If you assume liability that insurance doesn’t cover, you should know that going in. Often, you can avoid uncovered liability by getting your attorney and/or your insurance agent to either negotiate on your behalf with the customer, or at least give you enough information so you’ll be able to make an enlightened decision.
Many of you proudly refer to websites in your advertising. Undoubtedly the web is a great way to display your company’s services. However, most advertising, in whatever form, involves varying degrees of hype (translated as “stretching the truth”, “laying it on a little thick”, etc.).
Care needs to be taken with hyping your business online since websites are also a go-to source of information for insurance underwriters seeking to verify application information. When choosing to promote services or capabilities that you either don’t currently provide or only to a very minor degree, keep in mind the potential impact on your insurance costs. For example, if an underwriter goes to your website and sees you “operate in 48 states” and have “200+ drivers” – compared to your insurance application which states you operate 98% within 100 miles of your office with 50 drivers – there’s a credibility issue. Your insurance application is likely accurate, but the 48 states and 200 drivers sound good. Technically, you can arrange transportation for customers virtually anywhere by sub-contracting work to other courier companies.
The point is, while websites can be very positive and help generate business, they can also send conflicting messages to insurance underwriters. Just be careful!