Our firm handles a wide variety and a steady volume of trucking operations. From time to time we encounter new owner-operators, who are getting everything in order to lease on and haul for another entity, but they’re not certain what specific coverages they need for this situation. Often times, the lessor’s insurance requirements aren’t clearly communicated to the lessee, but at times they are and there’s simply a misunderstanding. The impact on the insured’s bottom line can be staggering, as the price difference between primary liability and Non-Trucking Liability is significant. Let’s look at an example. X Trucking is leased on with Y Trucking and will be hauling livestock from Georgia to Texas. As soon as X Trucking hooks up to one of Y Trucking’s trailers then the liability insurance for Y Trucking becomes primary. The moment X Trucking drops that trailer in Texas at a feed lot then his Non-Trucking Liability coverage takes over. Returning from Texas with an empty trailer is commonly referred to as “Deadheading”, whereas, if the trailer had been dropped and the driver for X Trucking returned to Georgia without a trailer this is known as running, “Bobtail”.
So, we’ve address who’s on point for liability matters, but we need to address how physical damage, cargo, and coverage for the trailers will be handled. Most lease agreements will address and spell out the details, but generally speaking, the lessee will carry Physical damage (Comprehensive & Collision) coverage on their own rig, cargo coverage to protect the lessor’s cargo, and there’s often times Trailer Interchange coverage that’s endorsed to the insured’s policy. The nature and value of the cargo will need to be identified, and the trailer interchange endorsement will require a value limit for the Lessor’s trailers. The design of this product is to provide coverage for the lessor’s trailers up to a specified limit, regardless of which of the Lessor’s trailer are being pulled. As you can see, Non-Trucking Liability is a part-time coverage, so to speak, while primary liability is not. Primary Liability for X Trucking would be thousands of dollars higher than Non-Trucking Liability and might be the difference between operating successfully or having to park and sell your truck. Unfortunately, there are unscrupulous agents out there, who will gladly sell primary liability to an owner-operator, who simply needs Non-Trucking Liability. Make sure you deal with an agent you can trust.