By Rich Rozman
It is quite costly from an insurance standpoint to operate a snow & ice management company. The severity and frequency of losses and the resultant claims paid by insurance companies are greater and, therefore, the costs to provide insurance are greater.
Snowplowing is unique in that vehicles are “transportation” between jobs and “equipment” while on site. From a transportation aspect, your commercial auto insurance can be segmented into two main areas: liability coverage to protect you against financial loss for injury or damage you cause others, and physical damage coverage to protect you against financial loss for damage to your vehicles.
Any powered vehicle or motorized equipment that travels on public roads needs to have some type of commercial automobile liability coverage since your business is at financial risk because of your drivers’ actions. This can be done by listing (scheduling) the vehicle in the automobile section of your policy or by adding an endorsement to your policy that covers “off-road equipment” while it is on a public road. There are finer points as to what “travels on public roads” means and is an important discussion that you need to have with your insurance broker.
Coverage options
One of the more important decisions you will need to make is how to cover snowplows and salt spreaders. You can protect against loss or damage to those items by including them as being part of the truck by using specific wording or by scheduling them on an Inland Marine schedule or equipment floater. Ask your broker for their suggestions. My suggestion is to weigh the merits of each type of coverage.
If included as part of the truck, it may be less expensive to insure and no additional deductible should be incurred if damaged or stolen. If listed on an Inland Marine or equipment floater, it may cost a little more to insure, there may even be a second deductible (one for damage to your truck, one for damage to the plow), but you may gain replacement cost valuation. That means that even though the plow or salt spreader is two, three or four years old and seriously depreciated for accounting or resale purposes, the insurance company will pay on the basis of replacement cost or “new for old, like kind and quality.” This can easily outweigh any premium advantage. There is also an advantage of doing the equipment schedule as a separate risk management step to be sure the plows and salt spreaders are insured and not forgotten.
Auto and medical coverages
One important, and sometimes overlooked risk management concept, involves the Medical Payments (MP) and Uninsured Motorists Liability (UM) coverage. Those coverages mean that drivers and passengers in your vehicles who are injured can or will claim against your insurance. In general, with two notable exceptions, I recommend against these two coverages for two reasons:
- First, they likely duplicate your workers’ compensation coverage—statutory coverage you must have for your employees. The two exceptions are if either is required by law, and if the coverages are not duplicating workers’ compensation. This could occur when the vehicle is being used for personal purposes and there is no personal auto insurance (a source of MP and UM coverage) in force.
- The second reason is that the UM coverage can make you and your insurance a “target” for lawsuits from employees and eager attorneys, whether or not they claim against your workers’ compensation.
Once you determine that the truck or machine should be covered under the commercial auto section, there are about 14 items of information the insurance company will need to properly list and insure the vehicle (make, model, year, cost new, garaging location, etc.). We’ll discuss why these items and other auto insurance issues should be important to you in my next column.
One thing to consider is commercial vehicles tend to be used every day. If not, discuss “layup credits” or “prospective discounts” with your broker.
Worth considering
As you review your policy or are shopping for insurance, consider what “good” or “full coverage” auto insurance means. First, “full cov-erage” is not an insurance term and can be misleading. To some, it means a selection of standard coverages. To others, it means all the bells and whistles the insurance company offers. To others, it means no deductibles for physical damage to their vehicles. Steer clear of inaccurate terminology whenever possible and seek clarification if presented with the option.
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 .
