October 17, 2012
We wish to make our Michigan clients aware that due to the recent passing of House Bill 5362, the Michigan Mini-Tort limit has now increased from $500 to $1,000.
For those unfamiliar, the mini-tort law (also known as limited property damage liability), was developed in response to Michigan’s no fault insurance laws. No fault laws limit the instances in which an individual can be sued for being at fault in an accident. The mini-tort exception allows individuals to sue the party who was 50% or more at fault in an accident to recuperate those physical damage losses not covered by the injured party’s insurance.
The recent increase from $500 to $1,000 reflects the growing trend among consumers to take on higher insurance deductibles. While it is not mandatory that insurance carriers offer mini-tort coverages to their clients, most do as standard practice. However, not all have increased their policy limit from $500 to $1,000 in time to meet the October 1, 2012 enactment of House Bill 5362. This means in the event of an accident, consumers may (depending upon their insurance company’s position) be liable for an addition $500 in the event they are more than 50% at fault in an accident.
We have been discussing this recent change with the insurance companies we represent, and have received a number of different responses. Some companies plan to automatically honor the increased limit for the remainder of the policy term at no additional premium and without issuing an endorsement amending the policy verbiage. Others will be offering the increased limit, priced accordingly, at policy renewal once the endorsement has been filed with and accepted by the State. And a number will be reviewing this development in the New Year.
If you have questions regarding this recent legislative change or wish to discuss your policy’s mini-tort limit, please call us at (800) 596-TRUCK (8782). At the Navigator Truck Insurance Agency we work hard to be accessible, helpful and result oriented.
April 15, 2012
We commonly encounter clients who wish to “self-insure” their low value equipment, including tractors and trailers, for physical damage. When asked why clients often respond that they assume it will save them money. While it may be correct that rejecting physical damage coverage for older equipment will create a small savings in terms of monthly premiums, it is also important to consider the costly payout you may face in the event of an accident.
Let’s take an example of a tractor that is not insured for physical damage. In the event of a disabling loss, i.e. one where the tractor cannot be driven away from or the trailer cannot just be hooked on to another rig, in addition to the costs to repair or replace the tractor, an insured should expect to pay costs and associated with the following:
1.) Towing the equipment to the nearest repair facility
2.) Storage of the towed equipment until it is determined whether you will repair or simply replace the damaged equipment
3.) Extraction of pollutants that leaked from the uninsured equipment at the scene of the accident.
4.) Downtime or equipment rental while your tractor or trailer is being repaired or you are looking for its replacement
5.) Removal of debris removal and to clean up the scene of the accident.
If you take a tractor that is valued at $7,500 and apply a four cent physical damage rate to it (note: physical damage rates do tend to be higher for older equipment) you could expect to pay an annual premium of $300 for that particular vehicle. In the event of one loss, this premium will easily recouped just in the cost to tow (let alone hook up for towing or store) the tractor.
While insuring lower valued equipment might not be the right decision for every company, it can be very much in the best interest of a company who faces cash reserve challenges or does not have spare equipment on hand to use when their primary vehicle is out of service.
Would you like to weigh the costs of insuring your low value equipment? Call our office today at (800) 596-TRUCK (8782) to request your free quote. All of us at the Navigator Truck Insurance Agency work hard at being accessible, helpful and result-oriented.
March 15, 2012
The following article was written by Bill Wilson, CPCU, ARM, AIM, AAM and is condensed from a larger white paper called “Certificates of Insurance: Issues and Answers”.
A certificate of insurance is an informational document issued by, or on behalf of, an insurance company. The certificate indicates that an insurance policy exists of a certain type and limits. Certificates are simply snapshots of basic policy coverages and limits at the time of issuance of the certificate. Certificates are not intended to modify coverages or change the terms of the insurance contract and they convey no contractual rights to the certificate holder.
Transportation industry contracts often include certain liability or motor truck cargo insurance requirements that must be evidenced by a certificate of insurance. If the certificate holder desires status as an additional insured under a policy, this can only be done by an endorsement to the policy, if at all. A certificate alone will not change the policy.
Problems often arise when a contract makes demands that are, for all practical purposes, virtually impossible to meet. Examples include requests for insurance for losses or damages that are uninsurable, requests that agents do not have authority to execute or cannot legally comply with, requests that require inappropriate certificate wording, and requests that are impractical from a market standpoint.
As a result, insurance agents are sometimes asked to provide a certificate of insurance that cannot comply with the contract you may have already signed. The purpose of this article is to illustrate how such problems can arise and what solutions are available, if any, to address the most common problems. As the Rolling Stones put it, “you can’t always get what you want, but if you try sometime, you just might find, you get what you need.”
Sometimes contracts will attempt to transfer risks and liabilities that are largely uninsurable. For example, the contract may require you to be responsible for “ANY negligent acts, errors, or omissions” or “any and all liabilities” that result in “ANY claim, cost, expense, liability, penalty, or fine.”
Commercial general and auto liability policies typically cover bodily injury, property damage, and perhaps personal and advertising injury liability that arise from “occurrences” or accidents. They typically do not cover “errors and omissions” or fines and penalties. In addition, the word “any” implies there are no exclusions when, in fact, these policies have many exclusions ranging from pollution liability to faulty work.
It is advisable to have an attorney review contracts on your behalf. In addition, prior to signing any contract, have your insurance representative review the insurance specifications, preferably in conjunction with your attorney. He or she can advise what requirements may be impossible or difficult to insure. It is important to know the costs before bidding on the contract and it’s possible that truly onerous insurance requirements can be deleted from the contract.
Often contracts will require your Commercial General Liability (CGL) insurance to be “primary and noncontributory.” The “ISO standard” CGL policy does say that it is primary with regard to the certificate holder’s general liability policy IF the certificate holder is an additional insured on your policy. So, the first order of business is to make sure that the appropriate additional insured endorsement is attached to your CGL policy.
However, the undefined term “noncontributory” is meaningless in isolation. The term may just be used to reemphasize that your insurance is primary and the additional insured’s is excess, or the intended meaning may be that a waiver of subrogation endorsement is desired. However, it may mean that the certificate holder’s CGL policy will not contribute in any way to a loss even if that policy otherwise covers it. This could mean that you will have to pay out of your own pocket any claim that exceeds the limit of your CGL policy without contribution from the certificate holder’s CGL policy.
It is in your best interest to attempt to clarify and, if necessary, strike the “noncontributory” wording from the contract. If that’s impossible, consider increasing your own policy limits or be prepared to assume a potentially large uninsured loss. Keep in mind that, with regard to auto and truckers insurance, primary vs. excess provisions may be governed by state or federal law.
Certain contracts require that the certificate holder be given additional insured status under a specific endorsement number and edition date. It is not uncommon for a contract to request an “ISO standard” policy form that is over 20 years old. Since later editions may have superseded earlier editions, it could be impossible to provide a form that is 20+ years old and has been withdrawn by insurance department filing.
Your insurance agent can often provide a later edition form with comparable coverage. In some cases, two endorsements might be necessary to replace a single older form, one providing ongoing operations coverage, for example during unloading, and the other completed operations coverage after unloading is finished.
If your insurance representative is an independent agent, he or she will represent more than one insurance company, making it more likely that your insurance can be offered to another insurer who is better able to meet your needs.
Also, contracts frequently mandate that coverage be extended to the additional insured’s sole negligence. In some states, sole negligence cannot legally be transferred to another party. Increasingly, even where insurance transfer is permitted, insurers are using additional insured endorsements that prohibit assuming the additional insured’s sole negligence. The current “ISO standard” endorsements do just that.
If you are in a state that has anti-indemnity statutes or case law, then this should not be an issue. Otherwise, you will want your insurance agent to determine if the insurer is still willing to assume sole negligence under an additional insured endorsement. If not, the contract will need to be modified or compliance will be impossible.
Contracts often specify that the certificate of insurance provide for a notice of cancellation to the certificate holder. The problem is that all “ISO standard” additional insured endorsements make no provision for cancellation notice to an additional insured, much less someone who is only a certificate holder. Perhaps acknowledging this, some contracts settle for the more hopeful “endeavor to” provide notice of cancellation provision.
Keep in mind that, unless the additional insured endorsement provides for cancellation notice, the insurer is usually under no contractual obligation to provide such notice. Even if an attempt is voluntarily made, mistakes happen. In some cases, due to regulatory decree by the state department of insurance (New York is an example), a certificate of insurance cannot make a promise of notification unless notice of cancellation is provided for in the policy or endorsement.
Some organizations and government entities use their own certificates of insurance in lieu of the more standardized “ACORD” certificate of insurance forms. These may create problems for insurance agents because some states have laws or regulations prohibiting the use of such forms unless approved by the state department of insurance.
These forms may include wording implying coverages or rights that don’t actually exist under the policies being provided, again violating the law in many states, and may lack disclaimers designed to protect you and the issuer. These certificates may sometimes be almost exact duplicates of the “ACORD standard” form(s), creating copyright violation possibilities.
Be very wary of these non-ACORD certificates of insurance. Rely on your independent Trusted Choice® insurance agent for guidance on how to handle these forms. In many cases, they can be issued, but require referral to the insurance company which can cause delays. Again, it is important to involve your insurance representative in the process as soon as possible.
The transportation contract may specify that certain coverages be provided or that certain exclusions be removed. Many insurers are unwilling to remove certain exclusions and the cost to purchase the coverage separately may be prohibitive.
Be sure to give your insurance representative ample time to search for insurers willing and able to provide the coverages required by your construction contracts. If coverages are available, the premium costs need to be included in your contract bid. If coverages are not available, you may be able to negotiate such requirements from the contract or pursue another source of coverage.
It is not uncommon for your insurance representative to be unable to meet every requirement of the contract you’re being asked to sign, from the standpoint of coverages, policy rights, or completion of a certificate of insurance. The other party to the contract may then inform you that they can provide a list of agents who claim they can comply with the contractual requirements in full.
While it’s possible that the person requesting the certificate is aware of agents who are better able to comply with their requests, be cognizant that fraud and misrepresentation with regard to certificates is not unheard of. If you are requiring certificates from subcontractors, be aware that bogus certificates do exist.
While it is rare, there are unfortunately some insurance agents who will issue certificates that do not accurately reflect coverages and policy terms just to allow a contractor to get a job and for them to keep their business. Since certificates are rarely legally enforceable against insurers or agents, you may be incurring significant liability if a certificate is issued that does not accurately reflect contract terms. It is important to do business with insurance professionals you trust implicitly and that you verify the accuracy of the certificate.
December 15, 2011
Reading cargo policies does not normally top our clients list of “things to do”. They trust me or another one of our agents to provide them with the details they need in order to select the proper cargo policy to meet their business’ needs. But are you aware of just how much coverage can vary from policy to policy? Having some familiarity with common coverage exclusions and enhancements can be very helpful, since the needs of your operation can and will change throughout the lifetime of a policy.
It may be helpful first to know that each insurance company has the opportunity to file their own version of a cargo policy. Each of these policies can contain any number of unique exclusions and/or enhancements. Following are just a few examples of unique commodity exclusions that might exist in any number of cargo policies: furs, garments, electronics, eggs, fresh flowers, seafood, silk, jewelry, pharmaceuticals, cotton ginned within 72 hours, alcohol and tobacco.
Policies may also exclude coverage for certain types of losses, such as those arising from mechanical breakdown of the refrigeration unit (including or excluding driver error) or dampness, rust or wetness. And many will not provide coverage for niche cargo exposures such as autos, yachts, boats, household goods, motor homes and RVs, livestock and operations as a freight brokers or freight forwarders.
Some other common coverage differences include a co-insurance clause (where you are penalized if you under value your cargo), no coverage for newly acquired or substitution vehicles unless they are immediately reported to the insurance company and no cargo coverage if the cargo is loaded on a trailer that is not attached to a tractor at the time of the loss.
Further consideration should be given to those additional expenses some insurance companies will provide payment for, above and beyond the policy limits. Examples include the costs to clean up debris, pollutant clean up and removal, payments to help reduce the loss, coverage for extra expenses to get the freight reloaded and earned freight reimbursement (i.e. reimbursement for the miles you would have invoiced from pick-up to the point of loss that your client likely will not be paying you for.)
With so much to consider it’s no wonder we often labor the details of your cargo needs and spend so much time reviewing the details of our proposed cargo coverage. Do you have questions about your current cargo policy and whether any of the above referenced exclusions or enhancements apply? Call our office today at (800) 596-TRUCK (8782) to request a policy review. All of us at the Navigator Truck Insurance Agency work hard at being accessible, helpful and result oriented.
September 15, 2011
Transport Topics recently published an article which confirmed what many of us in the industry have been suspecting for while now: used equipment values are on the rise (Used Trucks Become Scarce; Prices and Mileage Increase, Transport Topics Online). According to one quoted source, while motor carriers are continuing to seek low mileage vehicles, the availability of equipment has them purchasing equipment with 600,000 to 700,000 miles at prices that are up 15% from just a year ago. Another industry insider indicated that equipment prices are averaging $3,000 – $5,000 higher than last year.
The impact of increased values is multifaceted. On one hand, it’s great for individuals looking to sell their low mileage equipment, but it poses a purchasing challenge for individuals seeking to purchase the same. It also impacts individuals who have no plans to buy or sell equipment. Increased values can have an unfortunate impact on an individual whose equipment is insured on a stated value or scheduled vehicle physical damage policy.
Take for example a recent claim we encountered. Our client’s equipment was insured against physical damage losses on a stated value policy. In essence, the insurance company would pay either the stated value of the equipment or the Actual Cash Value at the time of loss, whichever is less. While our client’s stated equipment values where adequate a year ago, in today’s market they were significantly lower than the equipment’s current Actual Cash Value, the amount he would have to pay to purchasing a replacement piece of equipment with similar year, make and mileage. You can imagine his disappointment and frustration when he found himself having to pay (in addition to his deductible) an extra $5,000 to purchase equipment similar to what he had before the loss.
How can you prevent this from happening to you? Be sure to regularly check the value of your equipment in the marketplace. To learn more about valuing your equipment and the potential impact on premium, see our President’s Blog article addressing this topic from June, 2011 here. Websites such as www.truckpaper.com allow you to search by year, make, model, mileage and features to obtain a good baseline of current prices. If you find your current values are too low, call your insurance agent to have values increased. Still have questions about determining the actual cash value (ACV) of equipment for insurance? Feel free to call our office today at (800) 596-TRUCK (8782). At the Navigator Truck Insurance Agency we work hard to be accessible, helpful and result oriented.
September 14, 2009
Insurance policies can be a challenge to read, especially if you aren’t familiar with all of the industry jargon or didn’t get a thorough run down of coverages before purchasing your policy. At the Navigator Truck Insurance Agency we work hard to make certain our clients understand their policies well before the paperwork is signed. However, one area that we regularly find ourselves clarifying during the process is the basis on which a physical damage policy was written: Actual Cash Value or Stated Amount.
Actual Cash Value and Stated Amount are terms referring to the method used to value a piece of equipment and are quite different from one another. This month I thought I’d take a moment to explain the differences between these two terms and why the valuation basis matters in the event of a claim:
Actual Cash Value: This is a method of valuing equipment that some insurance companies offer to their fleet clients (those operating 10 or more power units); we even represent one company who offers it to their non-fleet clients. While at policy inception you will be required to provide a current equipment schedule that includes the estimated value of your equipment, this value is not used to adjust a claim. Instead, in the event your tractor or trailer is damaged in a covered loss the physical damage claims adjustor will go to the marketplace and determine what the equipment was worth as of the date of the accident. In the event of a total loss you will be paid this amount less the applicable deductible. The benefit of this sort of policy is that there is no limitation set on the value of equipment. It is worth whatever it is worth; no more, no less and co-insurance never applies.
Stated Amount: This method puts the responsibility to report the value of a piece of equipment on the owner. You specify if your truck is worth $100,000 or $10,000 and the underwriter rates your physical damage policy’s premium accordingly. All the responsibility falls to you. In the event that your tractor or trailer is damaged in a covered loss the physical damage claims adjustor will go out to the marketplace and determine the value of your tractor or trailer as of the date of loss. This is where things get tricky. If the insurance company finds that you significantly under valued your tractor or trailer a Co-Insurance Clause may apply (see my November 2008 and January 2009 posts for more information regarding Co-Insurance and Constructive Total Losses), which might mean you will be paid significantly less than what you expected to get for your vehicle in the event of a total loss. As a general rule a non-fleet (operating fewer than 10 power units) or bobtail client will see their policy written on a Stated Amount basis.
Curious if your policy is rated on an Actual Cash Value or Stated Amount basis? Could you use help understanding your truck policy coverage? Give us a call today at (800) 596-TRUCK (8782.) All of us at the Navigator Truck Insurance Agency work hard at being accessible, helpful and result oriented.
Until next month,
Jeffery A. Moss, ARM
May 15, 2009
At least once each quarter I speak with a client who says they received a proposal from another agent and that the premium is just too good to be true! In many cases, this leads the client to have concerns whether their coverages are adequate and I am asked to review the proposal to see what kind of coverage they’ve been quoted. What I often find are large coverage gaps that the client didn’t realize existed.
This month I’d like to reveal some of the common coverage weakness that I come across and what impact these missing coverages might have in the event of a claim:
Lower Auto Liability Limits: While it is true that $750,000 is the limit you are required to carry by the FMCSA, most contracts and shippers will require a certificate of insurance showing a $1,000,000 limit. In many cases a $750,000 limit is not going to reduce your premium significantly, but could cost you business, time and additional money later when you need to amend coverages midterm.
Coordination of Benefits: Some agents will ask you about your health insurance, workers compensation and occupational accident policies when quoting your liability insurance. One reason is that they may be coordinating your benefits. That means that in the event that you are injured in an accident, your health insurance, workers’ compensation or occupational accident policies will respond first. While it may be preferable for your workers’ compensation or occupational accident policies to pay for your injuries, it is normally advisable not to coordinate your health insurance with your auto insurance. The primary reason for this is that health insurance policies often have lifetime limits. So, in the event that your health insurance’s lifetime benefit limit is $750,000 and you are badly injured in an accident, incurring $650,000 in medical bills, this leaves only $100,000 left on your health insurance policy. What would happen if three months after you have recuperated from your accident you learn that you have been diagnosed with cancer? You will likely wish you had all $750,000 available to you, rather than just the remaining $100,000.
No Hired and Non-Owned Auto Liability: Some agents will leave this coverage off in order to reduce premium. However, not having Non-Owned Auto Liability can be dangerous, as it leaves you open to law suits in the event that an individual in their own car is involved in an accident while working for you (i.e. performing a company errand.) It may be argued that because the driver would not have been on the road had they not been completing the errand, it is your responsibility to pay for the auto liability they caused. Non-owned Auto Liability coverage is a very low cost option to insure yourself against such unforeseeable events. Hired Auto Liability, on the other hand, will provide you with Auto Liability for tractors that you have borrowed or short term rented. The cost for this coverage is significantly less than if you purchase it from the truck rental company and including on the policy from the beginning means you won’t be running around at the last moment trying to secure coverage.
Swapping Comprehensive Physical Damage for Specified Perils: Check to make certain that your Physical Damage policy includes Comprehensive coverage, as opposed to Specified Perils. Comprehensive will cover you for any sort of Physical Damage claim (other than collision), while Specified Perils will only cover you for those that are named in the policy. There can be a number of unforeseeable losses, such as vandalism, that you may wish to be insured for. Specified Perils may be less premium than Comprehensive, but the coverage is also significantly reduced.
No Broad Form Collision: In the State of Michigan we are subject to no fault laws. The downside to this law is that if another person is at fault in a collision, you do not have the right to pursue damages by taking that person to court. Instead, your physical damage policy is used to repair your vehicle. Broad Form Collision seeks to limit the amount you have to pay in the event that you are not at fault for a collision, as your deductible for repair will be waived. If you have a physical damage policy with Standard Collision, you have to pay your deductible regardless of who was at fault.
No Hired Physical Damage Coverage: Hired Physical Damage is a nice feature to have on a policy, as it will make certain you have coverage up to a specified amount for any tractors or trailers that you have rented for a short period of time (usually 31 days or less). Again, in most cases, the cost for this coverage is significantly less than what you would pay if you bought it through the equipment rental company.
Co-Insurance Clauses: While co-insurance might not make your premium less, it is often the byproduct of a discounted policy premium. Be careful to investigate any hidden clauses on the Cargo or Physical Damage policies. Ask your agent specifically whether or not co-insurance applies, or if there are higher deductibles for losses caused by theft or refrigeration breakdown.
No or Limited Towing Coverage: The cost to tow a tractor and/or trailer from the scene of an accident can easily exceed $10,000. While most policies will include some sort of towing coverage, it is not always clear how much. When reviewing a proposal ask about towing limits. Many policies cap payments on towing at $3,000 to $5,000. And remember, there is no towing coverage if you do not purchase Physical Damage.
Few or No Physical Damage Enhancements: These are the optional coverages that we often find clients want or expect in their policies, but do not realize must be listed on the policy. Under this heading falls coverages for things such as rental reimbursement and downtime coverage, tarps/chains/binders, personal effects, diminishing deductibles and emergency family travel. In many cases the cost for such enhancements is minimal.
No General Liability: General Liability is an optional coverage that indemnifies you in the event that your company is liable for bodily injury or property damage to a third party. This is for occurrences away from the tractor. One feature of having a General Liability policy is that it automatically includes legal representation in the event that someone brings a suit against you (the premium is significantly less than it would cost to hire and retain an attorney.) Also, General Liability coverage is frequently required in contracts or by shippers before the trucking company is allowed on the shipper’s premises.
Misidentifying Radius of Operations: Unfortunately from time to time we do see radius of operations misrepresented on a proposal. An example of this is when an insurance company restricts the number of times per year you can exceed a predefined radius (normally 300 or 500 miles.) If you routinely travel outside of the radius you have been rated for it is considered falsification of information on the applications and is grounds for midterm rate increases, cancellation of policy or even rejection of claims.
All of us at the Navigator Truck Insurance Agency work hard at being accessible, helpful and result oriented. Need help understanding your “great deal”? Give us a call at (800) 596-TRUCK (8782). We’d be happy to help you out any way we can.
Until next month,
Jeffery A. Moss, ARM
November 14, 2008
A while back we had a client who experienced something that we in the industry call a “Constructive Total Loss.” For him, it was a very painful experience, one that I think we can all learn from.
What is a “Constructive Total Loss?” A CTL is a loss where the item insured is not totally destroyed, but is so severely damaged that the insurance company considers it uneconomical to repair. A CTL in and of itself is not particularly painful, but if you happen to have undervalued your equipment, purchased a stated amount physical damage policy (which the majority of policies are) and been involved in an accident that damages your equipment at 50% or more of the amount stated on the policy, you may feel you got burned.
Here’s what happened to our client:
Tom purchased a “lead” and a “pup” flatbed trailer to be pulled as doubles. The “lead” was purchased for $40,000 and the “pup” for $45,000. Tom figured he could repair almost anything that could happen to these trailers if they were involved in an accident, so he decided to insure them on a stated amount policy for $15,000 each. His assumption was that this would reduce his physical damage premium and that in the event of a claim, if the insurance company paid him $15,000 for each of them, he would be able to use that money to repair any damage that might occur.
On a snowy, icy day Tom lost control and rolled his rig. The result was $12,000 in damage to the “lead” trailer (80% of the value he insured for) and $9,500 to the “pup” (63% of the value insured for.) Tom thought everything was going to be ok, until the Claims Adjuster called him and told him that he was going to “total-out” the two trailers and would be sending Tom a check for $30,000 and, per the policy conditions, the insurance company would be taking possession of the totaled vehicles. Tom quickly realized that while he had $30,000 in his pocket, he had nothing to repair and an additional $55,000 in outstanding loans for the equipment!
There are two important lessons that Tom learned. The first is that there is no savings in underinsuring your equipment. To have insured these trailers up to their full value would have likely cost less than and additional $1,500 a year (much less than the ultimate hit of $55,000.) Additionally, Gap Coverage (which I discussed in last month’s posting) is a coverage that can be vital to protecting yourself financially from unforeseen catastrophic losses.
What would happen in the event of a loss that did a significant amount of damage to your equipment? Would you be content with your settlement in the event of a CTL or is it time to make some revisions? Give us a call today and we can discuss with you the best methods to insure yourself so you don’t get burned by a Constructive Total Loss.
Until next month,
Jeffery A. Moss