When Commercial Auto Insurance Isn’t Enough – Do These Scenarios Apply to Your Business?
By CRA
The open road is a dangerous place. Vehicle collisions, truck rollovers, and cargo theft incidents happen every day. Businesses usually carry commercial auto insurance to protect their assets and comply with state law. Sometimes, though, commercial auto insurance isn’t enough.
To make sure you have sufficient coverage, consider whether you need three additional policies that go beyond the protections provided by commercial auto insurance.
Hired and Non-Owned Auto
Businesses maintain commercial auto insurance for the vehicles they own, but what about other vehicles that employees use in the course of work? For example, employees may use their personal vehicles to transport equipment, pick up supplies, or run errands. They may also use rented or leased vehicles for certain tasks. Although these vehicles should have an insurance policy in place, that coverage likely won’t protect the company from liability.
To see how this could be a problem, consider an employee who is involved in a crash while driving his personal vehicle to transport equipment from the company headquarters to a worksite. The employee is determined to be at fault, and the other driver files a lawsuit that names both the employee and the company the employee works for. The employee’s personal auto insurance may cover him – assuming the insurer doesn’t deny the claim on the basis of a commercial activity exclusion – but this coverage won’t typically extend to the employer.
Hired and non-owned auto insurance exists for scenarios like this. While employees still need to maintain personal auto insurance on their personal vehicles, your company should maintain a hired and non-owned policy to protect its interests.
Inland Marine Insurance
Commercial auto insurance provides liability protection in the case you cause property damage or bodily injury to another party. As long as you have comprehensive and collision insurance, you also have coverage for your vehicle. However, commercial auto coverage (like personal auto) does not extend to the property you are transporting in your vehicle. For that protection, you need another insurance policy.
Depending on what you are transporting, you may have sufficient insurance coverage under your commercial property or business owners policy. However, if you are transporting high-value equipment or cargo, you will likely need inland marine insurance to cover your risks. This provides coverage for items being transported over land – as opposed to marine insurance, which covers items being transported over sea. It provides protection against many types of losses, including theft, fire, and storm damage.
If you regularly transport cargo, expensive electronic equipment, construction equipment, or other high-value items, inland marine insurance will provide valuable protection. However, there are different types of inland marine insurance policies – the type you need will depend on the specifics of your operations. For example, if you are transporting cargo, motor truck cargo insurance is appropriate.
Commercial Umbrella Insurance
Rising legal costs have many insurers and business owners on edge. The term, “social inflation” describes an increase in litigation costs and particularly in jury awards that goes far beyond normal increases in inflation. In some cases, jury verdicts are for huge awards – in excess of $10 million. These awards are known as nuclear verdicts.
Experts have pointed to many possible causes, including the rise of third-party litigation funding and juries that want to punish businesses for what they see as a lack of accountability or caution. Regardless of the causes, the impact on businesses is often devasting. When a jury award exceeds the company’s insurance limits, the business may be on the hook for the remainder, which sometimes forces businesses into bankruptcy.
Commercial umbrella insurance provides an additional layer of protection. Businesses can buy commercial umbrella insurance in addition to their regular insurance policies, such as general liability and commercial auto insurance. If they exhaust the limits of the underlying policies, the umbrella policy kicks in to provide extended limits.
If you’ve secured the maximum commercial auto insurance available but you’re worried it still might not be enough, umbrella insurance could provide the additional coverage and peace of mind you’re looking for. At the same time, you’ll be securing coverage for other types of liability, which makes this an effective way to obtain more coverage.
Do You Have the Coverage You Need?
Each business is different. You may need some or all of the policy types listed above, or you may need other types of insurance. Century Risk Advisors can help you secure the coverage that makes sense for your business. Contact us to get started.