Western Truck Insurance Services

It is common practice in the trucking industry for truckers to use trailers belonging to others in the normal course of their business. All of the ISO Coverage Forms (Business Auto, Truckers, Motor Carrier) extend Liability Coverage for nonowned trailers while attached to a covered auto.

Truckers however are often responsible for not only liability, but also for any physical damage that occurs to trailers of others while in their possession. Physical Damage Coverage for non-owned trailers is not inherent in the ISO coverage forms which exclude liability for property of others while in the insured’s care, custody or control. This coverage must be added, and is occasionally referred to as “bailee coverage” - a bailee being “any individual or entity which holds property of another”, the property in this case being a trailer.

There are three common solutions to providing physical damage for non-owned trailers:

1. Trailer Interchange Coverage: Prior to deregulation of the trucking industry, authority involved specific geographic areas only, and trailer interchangeagreements between truckers were commonplace. These agreements are much more rare today, and few currently exist outside of the UIIA (Uniform Intermodal Interchange and Facilities Access Agreement). There is a specific Covered Auto Symbol for use with the ISO Truckers and Motor Carriers Coverage Forms to provide Trailer Interchange Coverage, and the coverages and exclusions are a part of the insuring agreement. Trailer Interchange Coverage does extend to all liabilities an insured has for damages to a trailer while in his possession - it does not require that thetrailer be attached at the time of loss. It also includes “a container” under the definition of a trailer, so is properly used for intermodal operations where the equipment interchange often includes both a trailer chassis and a container. Trailer Interchange Coverage however requires that a “writtentrailer or equipment interchange agreement” be in place at the time of loss, so may not extend to all situations when a trucker has a non-owned trailer inhis possession.
2. Non-Owned Trailer Physical Damage: Normally this is structured by the insurance carrier including as a covered auto “any non-owned trailer while attached to a covered (or scheduled) power unit”, and listing a maximum physical damage coverage amount for these non-owned trailers. The advantage of this approach is that it does not require a written agreement for coverage to apply. Handshake, verbal, and informally written agreements are commonplace between truckers, or between truckers and shippers, and Non-Owned Trailer Physical Damage Coverage is broad enough to encompass the insured’s liability for all of these situations, as well as those for which there are formal written agreements. It is worth noting however that coverage under this approach is restricted in the same manner that the policy’s inherent liability coverage for non-owned trailers is restricted - the trailer must be attached to a covered power unit at the time of loss.
3. Hired Auto Physical Damage:  This coverage extends to trucks, tractors and trailers that are leased, hired, rented or borrowed by the insured. Like Trailer Interchange Coverage, Hired Auto Physical Damage applies based on the insured’s liability, and does not require that the trailer be attached at the time of loss. Long-term trailer leasing exposures are more properly covered through other mechanisms, however short term exposures may be handled through this coverage. Normally the policy should also contain Hired Auto Liability Coverage, and the insured must keep a record of the number of vehicles hired, and the number of days that the coverage was used, as this coverage is subject to audit at the end of the policy term. Pricing is typically based upon the estimated cost of hire for the upcoming term, adjusted by annual audit, so if this approach is used to cover nonownedtrailer physical damage exposures, an “if any” rating approach would not be appropriate when actual exposures exist - the anticipated cost of hire must be used as the rating.

TRAILER INTERCHANGE

 Trailer Interchange (TI) insurance provides physical damage insurance for trailers being pulled under a trailer interchange agreement (which transfers a trailer from one trucker to another in order to complete a shipment). Since these trailers are not owned by the driver, they are not covered by the driver’s insurance. TI provides physical damage insurance for non-owned trailers damaged by a covered peril while in the driver’s possession under a written trailer interchange agreement. Liability insurance must be in place to be eligible for TI insurance. TI is currently only available for tractors or pickups and there must be at least one trailer, owned or not owned, listed for each tractor .

Since the exchanged trailers are not owned by you, they require separate insurance coverage because they are not covered under your regular Physical Damage insurance.

This is essentially Physical Damage insurance for non-owned trailers. This insurance protects you if the trailer is damaged by collision, fire, theft, explosion or

vandalism.

Who Needs Trailer Interchange Insurance?

If you have a trailer interchange agreement, you need Trailer Interchange insurance to protect you while you’re in possession of a container or trailer that you don’t own.

A trailer interchange agreement is a contract that arranges to transfer a trailer from one trucker to another in order to complete a shipment. Typically, the trucker in possession of the trailer is responsible for paying any damages that are incurred while they have the trailer.

Limits, Deductibles and Other Details:

With Trailer Interchange insurance, you must select both a limit and a deductible. The limit is a single amount that describes how much your insurance company will pay if you use this coverage. The deductible is the amount that you agree to pay out of pocket to help with the repairs or replacement.

Trailer Interchange Coverage Example:

You’re hauling an exchanged trailer and you pull off the highway to refuel. While you’re inside grabbing a bite to eat, your truck is stolen.

Since you don’t own the trailer you were hauling, your regular Comprehensive insurance or Property Damage insurance won’t pay for the stolen trailer. Instead, your Trailer Interchange insurance would protect you.

If you selected a limit of $20,000 and a deductible of $1,000, you would pay the first $1,000 toward replacing the stolen trailer and your insurance would pay up to $20,000 toward the replacement.

If the trailer was worth more than $20,000, you would be responsible for paying the difference. If the trailer was less than $20,000, then your insurance would cover the full cost after your deductible.

Exceptions and Restrictions:

The trailer in question must be in the insured person’s possession under a written trailer interchange agreement.

You also must purchase Liability insurance to be eligible for Trailer Interchange insurance.

Trailer Interchange insurance is currently only available for tractors and pickups. Other vehicle types are not currently eligible for Trailer Interchange insurance.

There must be at least one trailer, owned or not owned, listed for each tractor and/or pickup.

State Specific Details

Trailer Interchange insurance is not available in the state of Virginia.

Requirements for UIIA Equipment Providers for Trailer Interchange:

Many UIIA Equipment Providers require that Motor Carriers maintain a trailer interchange policy covering physical damage to non-owned equipment with varying limits depending on the Equipment Provider. Please note that the limits required for trailer interchange are shown in US Funds so if the policy being provided is in Canadian Funds the limits must meet the equivalent of the US Fund limit shown. The limitfor trailer interchange must be shown on the certificate of insurance. If the policy limit is Actual Cash Value, this must be noted on the certificate.

Trailer Interchange coverage that is required by Equipment Providers must cover the physical damage to non- owned equipment (including containers, chassis and trailers while in the motor carrier’s care, custody or control).

Acceptable wording for Trailer Interchange is as follows:

Trailer Interchange

Trailer Interchange physical damage

Non-owned physical damage

Bailees – this can be accepted if it does not reference hired auto physical damage.

The endorsement CA23-13 is not acceptable for trailer interchange unless it covers comprehensive and collision in addition to fire and theft. The endorsement must indicate that both comprehensive and collision are covered before this endorsement is acceptable.

The wording “damage to non-owned automobiles in the insured’s care, custody and/or control is also acceptable.

It seems that one of the more consistent areas of needed improvement for truckers, whether large fleet, small fleet or owner operators, is in the approach to claims reporting. This writer, who actively receives claims, has seen the gambit in claims reporting from well documented detail to virtually no information provided at all.

So what’s the big deal?  Why collect any information at all, especially if there will be a police report available anyway? The answer to these questions is not always obvious to the truck driver who is feeling threatened by the consequences, regardless of whether the accident was the driver’s fault.

Approximately 30% of truck accidents are never reported by truck drivers. Most of those “non-reports” are not-at-fault accidents and the drivers just “presume” the other party will take care of their own damages. Many, however, are the result of a driver either embarrassed about the incident or hopeful it will just disappear. Finally, quite a number of these non reported accidents are the result of the driver just not knowing what to do.

Accident reporting is simple. Just about every insurance company and/or agent provides an accident report form directly to the motor carrier or driver. That form is the basis for collecting information about the accident and all drivers should carry that form in their truck. It is the responsibility of fleet safety personnel to make sure the form is in all trucks and that drivers are continuously trained on how to complete it.

At the time of any collision, fire, theft, or other loss, the driver should take a deep breath and go into, what I call, “the data collection mode”. This should be a non-emotional, fact gathering, state of mind. There should be no admitting or blaming for wrong doing with other parties. The driver should immediately grab the accident report form and begin asking questions and documenting information.

The first, and most obvious, is to assess whether anyone is hurt including the other driver and anyone else involved. Assuming the other driver has not been hurt and can actively participate in obtaining details, he/she should get themselves, all other parties, and the vehicles out of harm’s way if at all possible.

Once safely out of danger, the driver should note the date, time, and specific location of the occurrence on the report form. Also write down the description of the other vehicles involved, license plate numbers, and note how many people were in other vehicles.  Again, document this information on the report form. Before the police arrive, the driver should courteously approach the other parties and invite them to assist by exchanging contact information including name, address, phone numbers, email addresses, and insurance information.   No discussion of who was at fault should occur as that only leads to everyone becoming defensive and uncooperative. If the driver has a camera, or phone equipped with one, it is advisable to take pictures of everything.

After exchanging information, the driver should clearly write out an honest description of what occurred along with a graphic diagram of the incident. Doing so will help everyone visually understand the nature of the verbal and written details. Once this has been completed, the fleet safety manager (if applicable), a representative from the insurance company, and/or the insurance agent should be contacted.

Generally, the biggest stumbling block we run into is with the driver not moving quickly to obtain the above information, and then when police arrive and separate the parties, it’s too late for the driver to obtain the much needed information.

Claims that are reported immediately and with complete information are almost always settled at a lower cost than those that are not reported quickly and with detail. All drivers should make sure they carry the claim report form in their vehicles at all times.