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Navigating Insurance in the Trucking Industry: Are You Covered?

Insurance is one of the largest expenses trucking companies face and the exposure resulting from catastrophic accidents can spell doom. Despite that, many companies fail to review company insurance policies, ignoring important changes that might protect them from the many risks involved in hauling a load down the highway. Trucking companies must understand what insurance is needed for their operations and revisit their overall comprehensive plan at least annually.

Federal Regulations impose various financial responsibility requirements on interstate motor carriers. Today, the Federal Motor Carrier Safety Administration (“FMCSA”) is mostly responsible for motor carrier safety, including financial responsibility laws. Minimum insurance requirements for private and for hire motor carriers are found in 49 C.F.R. § 387.7. Basically, no motor carrier can operate a commercial motor vehicle in interstate commerce until it has the minimum levels of financial responsibility established by FMCSA. In order to obtain DOT operating authority, the motor carrier must establish financial responsibility through insurance, bond, or self-insurance with limits that depend on the carriage and what is being transported. 49 C.F.R. § 387.9.

As evidence of meeting FMCSA insurance requirements, carriers must make sure their insurance policies are endorsed for public liability. Liability insurers typically include an “MCS-90” endorsement, designed to protect the public by guaranteeing a minimum level of compensation for injured claimants (currently, $750,000). The MCS-90 endorsement, however, only applies when the underlying policy to which the endorsement is attached does not cover the accident; other insurance available to the motor carrier is insufficient to meet the federal minimum of $750,000 or is nonexistent; and, once the federally mandated minimum has been met, the endorsement is inapplicable. In other words, the MCS-90 endorsement is not insurance, but a surety designed to protect injured third-parties up to the statutory minimum.

Most shippers and brokers require the carrier to have a liability limit of at least $1,000,000. There are many other types of trucking-related insurance options. These include physical damage, general liability, non-trucking liability, cargo insurance, brokerage, trailer interchange liability, warehouse liability, worker’s compensation / occupational accident coverage – and the lists goes on. This list might seem overwhelming, but it’s highly likely you need many of these to properly insure your business and its operations.

Given the increased use of leased (non-owned) equipment and independent contractor owner operators, an accident can involve many parties and insurance policies. Coverage issues focus on which policies, among many, are implicated. The allocation of loss and priority of coverage between insurers will depend on policy language and exclusions, excess provisions in the policy, and the applicable agreements between all parties involved in the transport.

Your coverage decisions must be sufficient to protect you from any potential catastrophe. When possible, the coverage for certain risks can be allocated to third-parties, as in the case of owner-operators leasing to you. Any proper risk assessment should not only include a review of your insurance plan, but a very close look at all agreements in place with owner operators, brokers, shippers, subhaulers, and other third-parties that can contractually insure for risks for which you might otherwise be responsible.

The ever increasing liabilities our industry is facing and the risk of a “break the company” verdict are real. Don’t wait any longer to understand insurance as it relates to your business. At Setliff Law, we are here to guide you through the seemingly complex web of insurance from the beginning and advocate for you whenever insurance issues arise. If you have questions, please contact Pete Schurig at 804.377.1276 or pschurig@setlifflaw.com, or Steve Setliff at 804.377.1261 or ssetliff@setlifflaw.com.

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