By Rich Rozman
Having the right equipment in the right condition at the right time is a key component to running a successful snow & ice management company. Much of your equipment is truck-mounted, so it’s important to know how to best protect that equipment platform so you can be successful.
There are several ways your vehicles can be rendered useless to your business. The insurance world categorizes these into two main types of loss: Collision and Other Than Collision (Comprehensive). There are also residual and sometimes costly side effects of those two categories. Incorrect assumptions regarding what is insured, valuation of vehicles and pollution events can be causes for business headaches, too.
What’s covered?
Collision means hitting another object (vehicle, animal, wall, building or tree) with the vehicle. For commercial auto purposes, overturn is also considered collision.
Other Than Collision (Comprehensive) is any other source of damage except collision unless specifically excluded. Those exclusions include nuclear hazard, war or military action, racing, wear and tear and tire damage. Fire, lightning, theft, windstorm, flood, earth movement, trees falling on trucks, vandalism and others would be covered by the Comprehensive part of your policy.
Specified Causes of Loss coverage provides protection against six types of loss and reduces the premium somewhat. In my opinion, it reduces the coverage and exposes you to uninsured perils with little savings. Because we don’t choose how our vehicles are damaged, I feel the broadest type of coverage is usually the best option—then you control the premium by the deductible selected.
Other coverage types may be purchased individually or in an “endorsements package.” Each company will offer a different mix of coverage to appear different from its competitors. These “bells and whistles” endorsements commonly include:
- Towing expense or labor performed where the vehicle has broken down.
- Rental reimbursement for a substitute vehicle when the vehicle is rendered inoperable by a covered loss.
- Transportation expense for the rental of a substitute vehicle when the entire vehicle is stolen.
- Glass repair deductible waiver eliminates the deductible if the glass can be repaired instead of replaced.
- Loan/lease gap covers the difference between the value of the vehicle (depreciated or actual cash value) and the remaining financial obligation on any lease or loan.
- Hired auto physical damage pays for damage to a rented vehicle.
- Accidental airbag discharge can be included if OTC/Comprehensive coverage is purchased.
What’s not covered?
Knowing what is not covered is just as important as knowing what is. Property and circumstances that are usually excluded includes:
- Cargo (salt or brine). It needs to be included in your Inland Marine or Equipment Floater policy
- Tapes/CDs, computers, phones and smartphones, GPS
- Radar and laser jamming devices
- Electronic equipment used to receive, reproduce or transmit audiovisual or data signals
- Personal property
- Diminution of value
Deductibles
Most companies offer a variety of deductible amounts and will even let you select different deductibles for Collision and Comprehensive. As a risk management (cost-reducing) tool, selecting different deductibles makes little sense. My deductible rules are:
- Don’t insure what you wouldn’t claim.
- Don’t insure what you would repair yourself.
- Don’t insure at the level at which the insurance company gives you a good premium credit.
- Insure that which would be financially uncomfortable or difficult for you to pay.
Another way of looking at deductibles is to choose one that is just above your type of frequent loss cost or is just above the level at which the insurance company adds surcharges or premium factors that significantly increase the premium you pay. There is no industry published data that tell you those numbers, so you should obtain premiums for at least two deductibles so you can decide which one is best for your company.
Did you know?
Lay up and lower costs: If you regularly “lay up” or do not use vehicles for certain periods, there are two ways insurance companies will credit you for this “unused” time. The first is to remove all but the OTC/Comprehensive coverage. When the vehicle is put back into use, you must call your broker to have the coverage reinstated. The second (and preferred) is to determine in advance how much or when the vehicles will not be in use and to receive a “prospective premium discount” for those periods. At the end of the year, the insurance company will usually perform some type of audit (like the one you have for your general liability) to correct for any over- or underpayment of premium.
Environmental issues: Environmental damage caused by fluids that are normally used in the operation of a vehicle (fuel, lubricating oils and hydraulic fluid) that are released in the course of a covered loss is covered by the auto policy. Environmental damage caused by cargo (salt or brine) is not. To cover pollution by cargo you must add endorsement CA 99 48 Pollution Liability – Broadened Coverage for Covered Autos.
Claims basis: Commercial auto policies are written on an “actual cash value” basis, which means the insurance company will take de-preciation and wear and tear into account at the time of claim settlement. The company can also choose to offer repair or replacement with property of like kind and quality. Understand that the insurance company will subtract depreciation when it settles your claim. You should subtract it when you do your financials and pay your business taxes.
Rich Rozman, CLU, ChFC, works with manufacturing, transportation and contracting businesses with SeibertKeck Insurance Agency, a 100-year-old insurance brokerage with several offices in Ohio. Contact him at This e-mail address is being protected from spambots. You need JavaScript enabled to view it .
