Attachment - Independent Insurance Agent

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Presented by NHAIA Education Director
Judy Durst, CPIW, CPCU, AU, ARE, AINS, ITP, CRIS
Introduction
Trucking accounts have some very unique
exposures. This webinar will provide you
with a sampling of what those exposures
are and how to handle them. Let’s begin
with some important definitions
Gross vehicle weight: weight when full –
utilized in insurance rating & government
regulation
Tare weight: weight when empty (difference
between the GVW & the Tare weight is the
payload)
Cab over tractor: driver cabin is over the
engine
Conventional – long nose tractor: engine is
in front of the driving compartment (easier
& safer to drive, easier to maintain, holds
value in marketplace longer, & has a better
loss ratio)
Semi-trailer: kingpin is attachment
device – fits in fifth wheel
Flatbed: no sides or top – load exposed
to elements
Lowboy: used to haul equipment
Dry Van: no refrigeration capacity
Refers: refrigeration unit – refer
equipment doubles the value of the
equipment versus a dry van. Refer has
separate serial number – get it!
Intermodal containers: containers that
allow for a combination of transportation
– land/sea or land/air
Type of operators/owners of trucks
Private Carrier – hauls own property
For hire Carrier – hauls goods of others
Where operated
Intrastate – only one state
Interstate – over state lines
The trucking industry in America is highly
regulated. In order for a trucker to haul
goods across state lines or within state for
hazardous substances, they must have
permission to haul from the USDOT.
You’ve probably seen the MC or USDOT
numbers on the drivers door.
Who is regulated?
Commercial motor vehicles as defined by
the regulation:
A commercial motor vehicle is any selfpropelled or towed motor vehicle used on
a highway in interstate commerce to
transport passengers or property when the
vehicle:
(1) has a gross vehicle weight rating
(GVWR) or gross combination weight
rating (GCWR)—or a gross vehicle weight
(GVW) or gross combination weight
(GCW)—of 4,536 kilograms (10,001
pounds) or more, whichever is greater; or
(2) is designed or used to transport more
than 8 passengers, including the driver,
for compensation;
or (3) is designed or used to transport more
than 15 passengers, including the driver,
whether or not it is used to transport
passengers for compensation; or (4) is used
in transporting material found by the
Secretary of Transportation to be hazardous
under 49 U.S.C. 5103 and transported in a
quantity requiring placarding under
regulations prescribed by the Secretary
under 49 CFR, Subtitle B, Chapter I,
Subchapter C.
What types of commodities are regulated?
Exempt: raw (agricultural items mostly) –
no need for government to give
permission to haul items (example is a
cucumber)
Controlled, Processed or Manufactured –
regulated (example is when the cucumber
becomes a pickle – it has been processed
and is now subject to regulation)
Hazardous: you would be surprised what
is considered hazardous by the federal
government. Did you know that milk is
considered a hazardous substance?
Filings needed
What is a BMC 91X?
Form filed by the insurance company to
prove that the trucker has liability
coverage in the amount required by the
federal government
Things to remember about the filing:
• Make sure you have the name of the
trucker EXACTLY as it appears with
the Federal Highway Administration
(FHWA). It will get bounced and your
trucker will not be able to operate or
if stopped, may not be able to
operate until it is corrected.
• If policy is cancelled, the filing is not
automatically cancelled. Policy will
remain in force until the filing has been
cancelled, with proper notice (35 days).
• If a trucker hires an independent to
truck for them, the independent is
working under the truckers DOT
number. The coverage provided by
the trucker would also provide
coverage for the independent while
trucking for them. The
independent’s vehicle is covered but
not listed on the truckers policy.
• If the trucker uses many
independents to get his/her goods to
market, rather than rating based on
the number of vehicles the trucker
owns, the insurance carrier will rate
it based on the insured’s gross
receipts. That will take into
consideration the non-owned trucks
working under the insured’s filing.
• The government does not care who is at
fault. They have the filing and will
make the company pay for the loss
based on the filing, even if no coverage
applies to the policy. Check out the
MCS 90! We’ll get to that in a minute.
• Make sure the policy has the limits
that are required for the insured’s
type of operation. If you can’t get it
all under the Truckers form, you’ll
need an excess or umbrella form and
it will need to have a BMC 91X issued
as well.
• Not sure if your insured needs a
filing? Check it out at safersys.org.
It will allow you to do a name look
up.
• Under the FMCSA website, you’ll find
hazardous materials information and
a link to state specific information.
What liability limits are required:
$750,000. for-hire truck (interstate or
foreign) hauling non-hazardous property
$5,000,000. for-hire or private (interstate,
foreign or intrastate) hauling hazardous
property such as:
Transported in cargo tanks, portable tanks
or hopper-type vehicles with capacity of
over 3,500 water gallons; Bulk Class A or B
explosives, poison gas, liquified
compressed gas or compressed gas;
highway route controlled quantity of
radioactive materials
$1,000,000. for hire and private (in
interstate & foreign commerce in any
quantity) or intrastate (in bulk only) for
oil and hazardous substances and
materials not mentioned previously.
$5,000,000. for-hire and private (in
interstate & foreign commerce) for any
quantity of Class A or B explosives, poison
gas or highway controlled radioactive
materials.
What is the MCS 90 and what does it do?
This form is SO misunderstood. Many
people think that this provides pollution
coverage. Here are some of the concerns
about this form:
• If the carrier has filed a BMC 91X on
behalf of your client, this form MUST
be attached to the auto policy. If it is
not, the insured can be fined $11,000
by the FHWA.
• It indicates that the policy will respond
to public liability for all autos owned
or operated by insured as required by
the filing to FHWA
• The endorsement provides no
protection to the insured. If the
insured did not buy the necessary
coverages, the insurance company will
pay the damages and then recover from
the insured.
• By putting this endorsement on the
policy, it DOES NOT give your insured
pollution coverage. They have to buy
it.
• If you don’t take the necessary steps to
put the pollution coverage in place (CA
99 48 or equivalent), the insurance
company will have to satisfy the filing
requirements and pay the pollution loss
and they WILL subrogate against the
insured to recover what they paid.
E & O here we come!
What is a BMC 34?
Filing needed for proof of cargo insurance.
Make sure the insured has the necessary
coverages and that the limits are as
required. Interstate haulers required
limits are $5,000 per unit/$10,000 per
occurrence. BMC 34 is the actual filing
with the federal government and BMC 32 is
the endorsement.
Motor Carrier form – insured
The insured named on the dec and any
permissive user of a covered auto as well as
an owner of a non-owned auto will be an
insured if that auto is being used exclusively
by the insured and is being “used pursuant
to operating rights granted to the ‘you’ by
a public authority”.
Liability exposures
• Pays damages when the insured is
legally obligated.
• Duty to defend
• On the road exposures – hitting another
truck, vehicle or person
Liability exposures continued
• Loading & unloading exposures
• Liability as a result of the tractor and/or
trailer
Don’t forget to look at those symbols!
Covered Autos
Motor Carrier Symbols
Any “Autos”
61
Owned “Autos” Only
62
Owned Private Passenger Type “Autos” Only
63
Owned Commercial “Autos” Only
64
Owned “Autos” Subject to No-fault
65
Owned “Autos” Subject To A Compulsory Uninsured Motorists
Law
66
Specifically Described “Autos”
67
Hired “Autos” Only
68
“Trailers” in Your Possession Under a Written Trailer or
Equipment Interchange Agreement
69
Your “Trailers” In the Possession of Anyone Else Under A Written
Trailer Interchange Agreement
70
Nonowned “Autos” Only
71
Trailer interchange? What is it?
Use of trailers belonging to others while
“auto” is in anyone else’s possession
under a WRITTEN trailer interchange
agreement.
Two approaches to covering this exposure
include:
1) For the motor carrier having
possession of the auto can include
coverage by adding symbol 69 on its
own policy. If the owner of the “auto”
feels this coverage is enough, they
don’t need to worry about the
exclusion.
2) For the insured that is not
comfortable with just the coverage listed
in the previous slide (on the other
carrier’s policy), the insured can elect
symbol 70 on their own policy. It provides
coverage the missing coverage and
actually deletes the exclusion
Remember that the trailer interchange
coverage provides is a “third-party”
liability coverage. Insured must be
legally liable for the damage to the
trailer.
The trailer interchange coverage
applies only to WRITTEN trailer
interchange agreements. It does not
apply to a covered auto while in the
possession of someone else if there is
no WRITTEN trailer interchange
agreement.
Other Concerns: Non-Trucking Use
Deadheading: When the owner/operator
has completed their delivery under
someone else’ authority and are
returning without a load.
Owner/operator needs to purchase this
coverage as they would no longer be
covered under the authority of another.
Bobtailing: When the semi-trailer is
disconnected from the tractor. Being used
outside of the agreement with another.
In both cases on these two slides,
coverage would need to be provided by a
Business Auto policy with the TruckersInsurance for Nontrucking Use
Endorsement (CA 23 09)
Pollution exposures:
Two pollution exposures for truckers
• The fluids used to run the vehicle –
covered under the Business Auto, &
Motor Carrier Liability coverage
• Pollution from upset or overturn of
cargo – needs to be added by
endorsement. Most common
endorsement is the CA 99 48.
Rating
Liability Insurance:
• fleet or non-fleet (fleet is five or more)
• size – based on either gross vehicle
weight (GVW) or gross combination
weight (GCW) when you are dealing
with truck/tractors & trailers.
Truck Size classes include:
• Light trucks – GVW 10,000 lbs or less
• Medium trucks – GVW of 10,001 to 20,000
lbs.
• Heavy trucks – GVW of 20,001 to 45,000 lbs.
• Extra-heavy trucks – GVW over 45,000 lbs.
• Truck-tractors – equipped with fifth wheel
coupling devices for semi-trailers – two sizes:
• Heavy truck-tractors – GCW of 45,000 lbs
or less
• Extra-heavy truck-tractors – GCW of over
45,000 lbs.
Trailer Size classes include:
• Semi-trailers – equipped with fifthwheel coupling devices for use with
truck-tractors – load capacity of over
2,000 lbs.
• Trailers – load capacity over 2,000 lbs.
other than a semi-trailer.
• Service or utility trailers – any trailer
or semi-trailer with load capacity of
2,000 lbs. or less
• Radius – straight line from the street
address of principal garaging. Includes
local (up to fifty miles), intermediate
(51 to 200 miles) and long distance
(over 200 miles).
• Zone rating – Trucks, tractors, trailers
(other than light trucks & trailers) that
operate regularly over 200 miles and
through metropolitan areas.
Rating based on Cost of Hire
How do you rate the trucker that has a
few or no owned vehicles and operates
through owner/operators on a lease
basis? You would compute the advance
premium by multiplying each $100 of
total estimated cost of hire during the
policy period by the cost of hire rate.
Rating based on Gross Receipts
Best way to get premium for all exposures.
Gross receipts do not include:
amounts paid to air, sea, or land carriers
operating under their own permits; taxes
collected as a separate item and paid
directly to the government; C. O. D.
collection for cost of merchandise including
collection fees; Warehouse storage
charges; Advertising revenues
Secondary classifications: They increase
or decrease the rate based on what is
being hauled. Some of the secondary
classifications include:
exempt carriers; food delivery;
specialized delivery; waste disposal;
farmers; dump & transit mix trucks &
trailers; contractors; not otherwise
specified classes
Physical Damage:
All autos, other than zone rated are rated
based on the same criteria as the liability
coverage as well as original cost new,
coverages wanted and deductibles.
Zone rated utilizes the zone rating table,
based on the original cost new & age
group of the auto as well as the longdistance factor obtained when rating the
liability coverage.
Trailer Interchange:
• If even interchange – owned for nonowned – no charge
• If the insured wants to have coverage in
force while his trailer is in possession of
another, coverage is rated based on the
radius and a daily per-trailer base rate is
developed.
Cargo exposures:
What do you need to consider?
• Who owns the property being hauled?
(use owner’s form or legal liability
form)
• Does the insured back haul?
• What type of property is being
hauled? How damageable is it?
Special protection & care?
• Schedule vehicle or on blanket basic
(based on gross receipts)
• Coinsurance?
• Inland Marine form or fire form?
• Radius of operations?
• When does coverage attach? What
are the exclusions or limitations?
• Are there any warranties?
• What about terminal coverage? What
about layovers?
Trucking markets
This is truly a specialty market. You need
to familiarize yourself with the markets
involved and they do change.
The Rough Notes Company, Inc. publishes
“The Insurance Marketplace” annually. It
includes not only information about the
truckers markets but also markets for
other hard to place accounts. You can
also check the Rough Notes magazine for
additional updates such as special
sections
SUBMISSION REQUIREMENTS:
• Most specialty trucking insurers have
their own applications because they
feel that the ACORD forms are not
sufficient to meet their needs. Make
sure you are using the right forms.
• Balance sheets & income statements for
the past two years. This will allow the
underwriter to determine if the trucking
company can attract better drivers
through competitive wages and benefits,
can afford to upgrade and maintain their
equipment properly, be able to
withstand market changes and
competitive pressures, can pay their bills
on time and can afford to follow through
and enhance their safety programs.
• Exposure history – historically, how
many power units has the insured had
over the last 2 to 3 years. You should
also obtain the same history for
revenues and mileage.
• Listing of equipment including owned
and those furnished by independent
owner/operators.
• Drivers listing and up-to-date MVRs.
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Type of commodities hauled.
Contracts & agreements.
Safety manuals & procedures
Loss control requirement compliance
Providing for the needs of your trucking
client requires that you remain up-to-date
on trucking exposures, coverages, markets
and loss control measures. The needs are
great and the requirements that must be
met are numerous.
The US Department of
Transportation/Federal Highway
Administration has an excellent website
to provide you with additional
information and to answer your
questions/concerns. Please check them
out at http://www.fhwa.dot.gov
• Claims history – currently valued
insurance carrier loss runs – 3 years is
minimal – 5 years is preferred.
• Fuel tax reports – indicates total
mileage by state for the past two
years.
Questions?
Let’s do another poll
Housekeeping items before we end
• Complete & send roster for CE
• Fax # 603-224-0550
• Email: [email protected]
Thank you for using NHAIA for your
insurance education needs. This webinar
has been approved for one continuing
education credit hour in NH, VT & ME.
Please make sure that you have signed
the roster so I can add those credits to
your transcript.

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