WHEN DOES A TRUCK STOP BEING A TRUCK?

Scott, a security guard, was injured when the driver of a truck he was inspecting unexpectedly closed the truck’s roll down door. Scott’s back and neck were injured so he sued the employer of the truck driver. The employer’s CGL carrier refused to cover the loss because of the automobile exclusion. Scott argued that the automobile exclusion would not apply because, at the time of the loss, the truck was not being operated as a truck.

See how the courts interpreted the argument that a truck was not a truck.

In August 2011, Mr. Scott Morrow (Morrow), a security guard, was injured while performing his duties by inspecting a truck owned by Wayne’s Vending (Wayne’s). Morrow sued for injuries he received when the Wayne’s employee/truck driver lowered the truck’s roll down door, striking Morrow’s neck and back. A lower court ruled against Morrow and in favor of Wayne’s Commercial General Liability (CGL) insurer, American Empire Surplus Lines Insurance Company (Empire). Morrow appealed.

The appeals court reconsidered the decision of the original court to agree with Empire. The insurer argued that its CGL policy’s automobile exclusion applied to the incident that injured Roberts as, in its judgment, the loss was from the use of an automobile. On the other hand, Morrow contended that, as the vehicle was not in motion at the time he inspected it, the truck was not “in use.” Specifically, the truck was not moving, nor was it being loaded, unloaded or, in any way, being operated as a truck.

However, after reviewing a related case and considering that the truck engine was being used to transport goods, but was just temporarily stopped, it was still being used as a vehicle, so the CGL “use of automobile” exclusion was applicable. The lower court decision in favor of Empire was affirmed.

*Scott Morrow v. State Farm Mutual Automobile Insurance Company, et al. No. 2105-CA-0578 Court of Appeals of Louisiana, Fourth Circuit. Filed June 29, 2016. Affirmed. Westlaw 196 So. 3d 773.

* Editor’s note: the “et al” portion includes American Empire Surplus Lines Insurance Co.

The trucking industry is changing

The trucking industry is having problems staffing up. Young people are not joining the ranks as older drivers retire. The better fleet operators know that they must hire, train, and retain to survive. One important tool is managing fleet risk in order to prevent injuries.

Review a Rough Notes article about high-tech tools being used in the trucking industry.

High-Tech Tools To Manage Fleet Risk

By Mark Walton

Advancements in technology are contributing to loss mitigation in the fleet safety and management space

When was the last time a claim was paid that shouldn’t have been? If you’re like most agents, you’ve seen countless claims that never should have been paid. On the other hand, many claims that should be paid are not.

With advances in technology, it’s possible to exert more control over this situation. And more and more fleet managers are paying closer attention.

Loss mitigation is critical to any fleet business, small or large. This process applies to any catastrophic or potentially catastrophic exposure or risk. In the fleet business, this is usually a bad accident, spill, or natural disaster. What can be done to prevent these losses varies depending on the risk management professional and the specific circumstances that surround the fleet.

In the past, a fleet manager or owner might try to manage risk by putting equipment in separate corporations, purchasing additional layers of insurance, or improving training methods. Today, fleet managers can leverage technological advances to effect real change in their business and minimize both losses and exposures.

Keeping an eye on the ball

The trucking business is a tough industry, where the owners and fleet managers are working in the business daily, often worrying more about getting the next load out, fixing a truck, or hiring or firing than they are about risk management and loss control techniques. As a result, many factors are overlooked that turn out to be critical in the settlement of claims and management of the post-accident process.

How many fleet owners hold regular safety meetings? What about training to prepare drivers in the event they become involved in an accident? Does the fleet have a defined process for loss mitigation? Through our years of insuring trucking companies, we’ve found that countless customers struggle with the implementation of systems designed to control loss frequency and severity. Measures can be as simple as safety meetings and running motor vehicle reports (MVRs) on a timely basis, or more complex processes, like tracking where a truck is operating compared with where it should be.

Many fleet owners struggle with these tasks because they don’t have the time, understanding, training, or tools to keep them on the straight and narrow. Traditionally, fleet managers have tried to identify poor drivers and either provide extra training or remove them. This approach helped not only to reduce losses, but also to differentiate the fleet in the eyes of customers, drivers, and insurers. By using forward- facing cameras, telematics, and automated reporting, fleets now can identify poor drivers more quickly and take remedial action.

The marketplace is trending toward the use of more powerful tools to prevent and manage loss.

Technology innovations

Fleets are now using a variety of advanced technologies to manage many aspects of loss mitigation and prevention.

Platooning technology— Truckers often like to travel together. Their trucks are loaded at the same time and dispatched to the same location. To help drivers reach their destination faster and achieve greater fuel efficiency, platooning technology alerts the driver when the driver in front of him or her is braking or accelerating. The likelihood of a rear-end collision is significantly reduced. If a collision does occur, it is likely to be less severe, because the driver in the rear already has begun to brake and slow the vehicle. Based on the Internet of Things, this automated process allows the driver to react at a rate as fast as 0. 1 second. Volvo recently announced its adoption of platooning technology, and it will be exciting to observe how this tool will improve road safety and fuel efficiency.

Accident scene management— In most fleets, drivers attend numerous safety meetings. The typical “discussion” focuses on donuts. Other than donuts, the topic du jour is usually accident avoidance and what customer sites to watch out for.

A subject that is almost never discussed is what to do when the driver becomes involved in an accident. The average is one accident per seven trucks per year. If a fleet has 14 trucks, it will have two accidents.

Handling the accident scene appropriately can make the difference between having a claim denied and receiving a settlement at the policy limits. It’s not unusual for a driver to hit another vehicle with one person in it, only to have four bodily injury claims. If a fleet manager empowers drivers, through appropriate tools and training, to capture the right information at the right time, claim costs will decline dramatically.

Mobile-app-based technology is available to address several key elements, including real-time claim reporting, capture of accident scene information— including witnesses and pictures before spoliation of data occurs, and alerting the fleet manager to the severity and location of an accident, so it can be managed properly, allowing for the mitigation of loss and claims costs.

Automated vehicle inspections— In an accident-related court case, it’s routine for the plaintiff’s lawyer to ask to see the vehicle inspection and repair history. New technology allows the fleet manager to confirm completion of the vehicle inspection process by tracking whether the driver actually walked around the truck. The manager also can track a safety defect from inspection to mechanic and back to the driver in real time. This allows the fleet manager to hold the mechanic and driver accountable, making the fleet both safer and more defensible in court.

Transparency—Gone are the days of looking in the rear-view mirror for fleet evaluation. Loss control specialists, underwriters, and agents long have used MVRs, loss history, hiring practices, and SAFER scores to assess fleets. Now, it’s possible to observe what fleets are doing in real time. The fleet manager can pull up scorecards that offer myriad vital details in the present tense. This gives the manager insights into how often a driver is speeding, running stop signs, or traveling on a poorly maintained road.

Transparency is critical in the loss mitigation process because if the fleet manager can see that a driver has become involved in an accident, he or she can send an adjuster to the scene. The manager can prevent accidents by getting an erratic driver off the road before he or she causes one.

Transparency also allows a loss control specialist to provide helpful guidance to the fleet so it can prepare more effectively to participate in the post-loss process. This planning will keep the cost of an occurrence to a minimum.

Post-accident processes—Fleets are mobile businesses, and each town or jurisdiction is different. At the time of an accident, the fleet manager must route the driver, the cargo, and the truck to the right place. The efficiency and accuracy of this dispatch are critical in loss mitigation. If the truck is held up in a towing yard, the cargo might be damaged and the customer lost. If the driver isn’t immediately tested for drugs, the results of later testing may not be accurate. If the truck and cargo aren’t handled correctly, important data may be spoiled.

Technology is available to assure cargo is tracked and can be found in the event of theft. Blackberry, for instance, has a new product called Radar, which is used for a variety of things, including operational efficiencies and load tracking. More important, it lets managers know where the cargo is at all times. This solution can also alert the fleet manager if the trailer leaves a preconfigured geographic area.

Safety pays

With these industry-transforming opportunities, fleet managers now can show their customers why they are safer and more reliable than competitors that don’t use these new technologies.

For an underwriter, agent, risk manager, or any other stakeholder, the time is now to use the newest technologies to segment the market and identify the best-in-class risks. These are the motor carriers and trucking companies that are best equipped to manage their business and enjoy the greatest chance of success. Safety pays—and so does mitigating loss.

The author

Mark Walton is co-founder and chief executive officer of Gorilla Safety, provider of a patented, proprietary software solution that fully automates all aspects of fleet and safety management. He can be reached at mwalton@gorillasafety.com

Coverage for a trucking risk

ISO offers three types of auto coverage forms. The Business Auto is the standard. The Auto Dealer is for different types of vehicle dealerships and the Motor Carrier is for the trucking industry. A trucking risk can use the Business Auto but at the risk of losing certain advantages.

Review a coverage comparison of the Business Auto Coverage Form and the Motor Carrier Coverage Form.

INTRODUCTION

This comparison is a brief summary. For more information, please see the detailed analyses for each of these coverage forms.

Related Articles:

CA 00 01–Business Auto Coverage Form Analysis

CA 00 20–Motor Carrier Coverage Form Analysis

FORMAT

CA 00 01–Business Auto Coverage Form has five sections. CA 00 20–Motor Carrier Coverage Form has six. The additional section is Trailer Interchange Coverage. This comparison follows the Business Auto Coverage Form and addresses Trailer Interchange Coverage last.

SECTION I–COVERED AUTOS

Description of Covered Auto Designation Symbols

Both coverage forms open with a description of covered auto designation symbols. The definitions in both forms are similar but several definitions in the Motor Carrier Coverage Form are unique.

Owned Autos You Acquire After the Policy Begins

These symbols determine if coverage applies to newly acquired autos.

• Business Auto Coverage Form symbols1, 2, 3, 4, 5, 6, and 19 extend coverage to similar autos the named insured acquires during the policy term. Symbol 7 extends coverage to similar autos acquired during the policy term if all owned vehicles are scheduled and insured, or if the acquisition replaces one of them and the named insured notifies the insurance company of the acquisition within 30 days of the acquisition date.
• Motor Carrier Coverage Form symbols 61, 62, 63, 64, 65 and 66 extend coverage to similar autos the named insured acquires during the policy term. Symbol 67 extends coverage to similar autos acquired during the policy term if all owned vehicles are scheduled and insured, or if the acquisition replaces one of them and the named insured notifies the insurance company of the acquisition within 30 days of the acquisition date.

Certain Trailers, Mobile Equipment and Temporary Substitute Autos

This section is identical in both coverage forms.

SECTION II–LIABILITY COVERAGE

Coverage

This section is identical in both coverage forms.

Who Is an Insured

This section is considerably different in the two coverage forms and is one reason that motor carriers need a unique form. The Motor Carrier Coverage Form changes several of the groups identified as insureds under the Business Auto Coverage Form. The owner of a hired or borrowed vehicle is an insured if the vehicle is used in the named insured’s motor carrier business. If the vehicle is a trailer and is attached to a covered power unit, the trailer’s owner is also an insured. Parties not included as insureds are:

• Motor carriers that meet their financial responsibility obligations in ways other than auto liability insurance
• Motor carriers that do not provide primary insurance for hired autos used exclusively in their businesses under written contracts or agreements that protect the vehicle owner on a primary basis
• Rail, water and air carriers, their employees and agents, excluding the named insured and its employees, for a trailer if bodily injury or property damage takes place when it is not attached to a covered auto being used for transportation, loading or unloading

Coverage Extensions

This section is identical in both coverage forms.

Note: The Out Of State provisions are similar except that CA 00 20 states that this extension does not extend to meet any state or federal motor carrier requirements.

Exclusions

This section is identical in both coverage forms.

Limit of Insurance

This section is identical in both coverage forms.

SECTION III–PHYSICAL DAMAGE COVERAGE

Note: This is Section IV in the Motor Carrier Coverage Form.

Coverage

This section is identical in both coverage forms, other than a difference in the order of the exclusions and that the Motor Carrier Coverage Form excludes covered autos in the possession of others under a written trailer interchange agreement.

Limit of Insurance

This section is identical in both coverage forms.

Deductible

This section is identical in both coverage forms.

SECTION IV–BUSINESS AUTO CONDITIONS

Note: This is Section V–Motor Carrier Conditions in the Motor Carrier Coverage Form.

Loss Conditions

This section is identical in both coverage forms.

General Conditions

This section is identical in both coverage forms except that the other insurance provisions are different. Each has a different approach to vehicles hired to or hired from others and also to vehicles subject to trailer interchange coverage.

SECTION V–DEFINITIONS

Note: This is Section VI in the Motor Carrier Coverage Form.

This section is identical in both coverage forms except that the Motor Carrier Coverage Form has definitions for:

• Private passenger type
• Motor Carrier

In addition, the Motor Carrier Coverage Form adds containers to the definition of trailers with respect to Trailer Interchange Coverage.

SECTION AVAILABLE ONLY IN THE MOTOR CARRIER COVERAGE FORM

Section III–Trailer Interchange Coverage

This section is in only the Motor Carrier Coverage Form. It provides Physical Damage Coverage on non-owned trailers. It has its own coverage extensions, exclusions, limits of insurance and deductible.

This coverage can be added to the Business Auto Coverage Form by attaching CA 23 30–Motor Carrier Endorsement.

Related Article: CA 23 30–Motor Carrier Endorsement

Are you interested?

A number of markets are available for trucking operations and the premium on each risk can be substantial but any agent wanting to pursue these accounts needs to understand the unique aspects of the industry. Producer’s Commercial Lines Risk Evaluation System is an excellent starting point to begin your research.

View the Trucking Narrative that could start you on your way.

Category: Trucking and Transit

SIC CODE: 4212 Local Trucking without Storage
4213 Trucking, Except Local
4214 Local Trucking with Storage

NAICS CODE: 484110 General Freight Transit, Local
484121 General Freight Transit, Long-Distance – Truckload
484122 General Freight Transit, Long-Distance-Less than Truckload
484220 Specialized Freight (except Used Goods) Transit, Local
484230 Specialized Freight (except Used Goods) Transit, Long-Distance

Suggested ISO General Liability Code: 99793

Suggested Workers Compensation Code: 7228, 7229, 7230, 7231, 7232

Description of operations: Truckers transport cargo from its initial loading and pickup at the shipper’s location to final delivery and unloading at the receiver’s location. The cargo can include raw materials, work in process, and finished goods. The trucker may assist customers in the packing and unpacking of freight. Many trucking companies have warehouse facilities for both temporary and long-term storage of customers’ goods. While some truckers transport freight to the same destinations over and over, others transport single shipments to a particular destination. The trucking industry is regulated by a number of federal agencies.

Property exposure can be high if the risk repairs, refuels and maintains its own vehicles on premises. Exposures include flammable liquids, including gasoline and diesel fuel, and heat-producing activities such as welding. Flammable liquids and heat-producing activities must be separated from combustibles to prevent fire and explosion. All spray-painting should be conducted in a spray booth with approved fixtures. The condition and controls of fuel tanks, whether above or below ground, are important for both property and environmental liability. Fire hazards can arise from the combustibility of items stored for customers. There must be adequate aisle space to allow firefighters to carry out their duties. If items in storage include any flammables or ignition sources, they must be properly controlled. As stored items are attractive targets for theft, there should be appropriate security including physical barriers to prevent entrance to the premises after hours and an alarm system that reports directly to a central station or the police department.

Crime exposure is from employee dishonesty and from money and securities. Background checks, including criminal history, should be performed on all employees handling money. Trucking operations involve a number of transactions and accounts that can be manipulated. There must be a separation of duties between persons handling deposits, billing, ordering, disbursements and reconciling bank statements. Regular internal and external audits should be conducted. As drivers, loaders and unloaders have access to customers’ premises, the exposure to theft of customer property or customer identity theft increases.

Inland marine exposure is from accounts receivable, computers, motor truck cargo, valuable papers and records, and warehouse operators’ legal liability. Customers’ property may be damaged while being transported due to overturn, collision, or theft. Cargo containers should have locks and appropriate alarm systems. Most truckers are subject to minimum cargo legal liability requirements. The bill of lading spells out the terms of the agreement that must be honored. Insurance coverage will vary, but may exceed these minimums if customer satisfaction is important to the trucker. Any items in storage must be marked to prevent incorrect release. Records should be duplicated and be stored off site.

Premise liability exposure is extremely low due to limited public access to the premises. Cargo containers stored outside may present an attractive nuisance to minors. Fencing and lighting help reduce this exposure. Most off premises exposures relate directly to truck operations, such as loading and unloading, and are covered under the motor carriers’ liability policy. Contracts may expose the operation to additional liability.

Environmental impairment exposure can be high due to underground fuel tanks and waste disposal of fluids used for servicing and repairing trucks. All underground fuel tanks must meet state or federal regulations and be routinely tested for leakage. Contracts should be in place to dispose of all environmentally dangerous chemicals. Spill procedures must be in place to prevent the accidental discharge of sludge from water reclamation systems used in washing trucks.

Automobile exposure is written on a motor carriers’ policy. The exposure is very high because it includes loading and unloading of freight. There is considerable opportunity for contact with the client, who can be injured should the movers drop or overturn items being carried. Children may be present during loading or unloading operations at residences or schools, requiring additional caution. All drivers must have training in lifting and handling of items being carried. They must have a valid commercial driver’s license (CDL) for the trucks being driven and the cargo being moved. MVRs must be acceptable and checked regularly. Manipulating a large semi-trailer rig in a residential or commercial area requires training and awareness of surroundings. All drivers must be well trained and attend continuing education courses to maintain and improve skill levels. Driving logs must be maintained, and drivers must not be permitted to exceed regulatory limits on their hours of service. Random drug and alcohol testing should be required. Vehicles must be maintained and records should be kept in a central location. Accidents can result in the spillage of diesel fuel or other operating fluids from within the truck, requiring cleanup.

Workers compensation exposure comes from driving, loading and unloading customers’ goods, and repair and maintenance activities. Drivers must operate in adverse traffic conditions such as inclement weather or road construction. They must be monitored to ensure that an appropriate amount of time is allocated for sleep. The operations of unloading and unloading have a very high potential for all forms of back injury, hernia, sprain, and strain losses from loading, unloading, and warehouse operations. The training, material handling devices, and equipment are important to review. Garage employees can be injured by vehicles falling from hoists, strains, sprains and other lifting injuries. Good housekeeping is critical to reduce injury from slips, trips, and falls. Burns, eye injuries, and respiratory problems can occur with the welding and painting. Dermatitis can result from employees coming into contact with harsh cleaning detergents. Repair areas should be properly ventilated. Proper safety equipment is required. If independent owner-operators are used, responsibility for workers compensation coverage must be specified by contract.

Minimum recommended coverage:

Building, Business Personal Property, Business Income and Extra Expense, Employee Dishonesty, Money and Securities, Accounts Receivables, Computers, Motor Truck Cargo, Valuable Papers and Records, General Liability, Employee Benefits, Umbrella, Motor Carriers Liability and Physical Damage, Hired and Nonownership Auto, Workers Compensation

Other coverages to consider:

Earthquake, Flood, Cyberliability, Employment-related Practices, Environmental Impairment, Warehouse Operators’ Legal Liability, Stop Gap Liability