As in any business model, Motor Carriers (MC) using Owner Operators (OO) enjoy certain benefits while taking additional risks. One of those risks is the possible “uninsured” exposure of the OO while it is not in a “commercial use” capacity for the Motor Carrier. MC’s truck or commercial vehicle (AL) liability insurance policy provides coverage for units owned by motor carriers, as well as tractors and trailers hired during the time of hire. Coverage ceases for an owner operator once it is no longer in a “business use” capacity for the motor carrier. The concern is that the OO continues to use your vehicle while displaying the MC placard and may not have other insurance available. Many times, the “deep” pocket of the MC is used to repair the injured third party.
Three products have been developed to address the coverage gap for the owner operator.
Liability not related to trucking:
Protection of motor carriers Civil liability: low
Market availability: high
Non-trucking liability provides protection for “personal use” by using a commercial vehicle or truck liability policy form and attaching a “commercial use” exclusion. The difficulty arises because the definition of “commercial use” is not typically defined in politics, but is derived directly from various state and federal court decisions that interpret this sentence.
Unfortunately, “commercial use” has been interpreted very broadly and extends beyond “shipping.” Here are some typical scenarios that would not be covered by the non-trucking policy due to the broad interpretation of the “commercial use” exclusion:
- OO drops the load and its return home to include a trip diversion to the grocery store (the courts determine that OO is owed a trip home)
- OO takes the vehicle to the garage on the weekend for maintenance (the courts find that OO is maintaining the unit in accordance with MC’s leasing requirements)
- OO is out of town, between charges. Goes to the movies. (courts determine OO is out of town heading to MC)
Coverage Example: OO uses his truck in his personal time to rush to the supermarket and collides with another vehicle.
Protection of motor carriers Civil liability: medium
Market availability: low
Many in the trucking industry use the same terminology for Bobtail Liability and Non Trucking Liability, when in reality they are quite different. Bobtail defines coverage as “every time the trailer is loose,” whether the carrier shipped the OO or not.
- OO drops the load and shakes to pick up the next load.
- The OO drops are loaded at the end of the day and mixed in the houses.
- Please note that the Bobtail Policy will not respond every time a trailer is attached, even if it really is a personal situation, for example:
- OO brings home an empty trailer and runs to the store on the weekend.
- OO uses his tractor to move a mobile home on weekends.
- OO helps a friend get around by pulling a trailer with household items
Liability without load:
Protection of motor carriers Civil liability: high
Market availability: very low (per class)
No-load liability provides the least ambiguity in coverage and the broadest level of protection for MC and OO. This policy provides coverage while flying (no trailer attached), as well as unloaded (trailer does not contain or carry any cargo, no bill of lading) regardless of shipment. The difficulty with this line of coverage is low availability (it is typically not available in a master settlement deduction program; rather, the OO needs to obtain it directly).
There are pros and cons to each of the hedging models that vary depending on the risk tolerance and operations of the motor carrier and owner operator. Deciding on the right program can be critical to managing your risk. Enlist the help of a qualified insurance broker to review your current insurance programs and operations and provide suggestions and options that best suit your needs.