Just Bought a Moving Company? The Insurance to Check First

A new owner of a moving company should check six coverages first: commercial auto, cargo, warehouse, general liability, workers' compensation and property, plus crime and an umbrella where the business warrants them. Cargo is the one most worth testing first, because general liability policies usually exclude property in your care, custody or control, so they may not respond to customers' goods while you hold them. This guide is for buyers who just closed on a mover and want to test the seller's program against how the company really runs.

Which policies does a moving company need on day one?

A mover's risks fall into a few buckets: the trucks on the road, other people's goods in your hands, the buildings and stairs where your crews work, the crews themselves, and your own yard and equipment. The table maps each bucket to the coverage that usually responds and what to check in the wording. It describes how these coverages generally work. Your policies may be written differently, and the policy wording controls.

Crime coverage and an umbrella can matter too. Coverage gaps new owners of moving companies find covers where they fall short.

Each line has its own page in the library: commercial auto, general liability, workers' compensation and inland marine (equipment that travels).

Why is general liability not enough for a moving company?

A moving company's whole business is holding other people's property, and general liability policies usually exclude exactly that. The International Risk Management Institute (IRMI) glossary says the care, custody or control exclusion in a general liability policy "eliminates coverage with respect to damage to property in the insured's care, custody, or control." IRMI points to motor truck cargo coverage as an example of a coverage designed for that kind of exposure. See care, custody and control for the plain-English version.

Cargo-type coverage handles goods on the truck, and a warehouse or bailee form handles goods in storage. IRMI defines a bailee as a person or business entrusted with the property of others, often for storage, and notes that most property policies specifically prohibit coverage for the benefit of a bailee unless the policy is issued for that purpose. So the property policy on your own warehouse does not automatically protect your customers' furniture inside it.

The line is not tidy. A scratched floor may be a general liability claim while the couch is a cargo claim, and where each falls depends on the form and the facts. The gaps guide in this set shows how to test the borderline cases against your own forms.

Do you have to file proof of insurance with the government?

For interstate household goods movers, often yes. Federal rules tie registration to security on file (an insurance certificate or a surety bond), and some states set their own filings. Moves that stay inside one state may fall to state rules instead, though whether a given move counts as interstate can turn on where the goods started. A lapse in a required filing can suspend a registration (Florida's statute suspends it immediately), so a filing that sits in the seller's name or lapses at closing can put a registration at risk. List every filing in week one. The amounts, the statute text and what a sale changes are in contracts, licenses and bonds for a moving company.

What should you confirm in the first weeks?

Work through these in order.

1. Named insured. The legal entity on each policy should be the entity you now own or operate through, and the entity on the auto policy should be the one whose name is on the truck doors and the filings. Insurance rights generally cannot be transferred without the insurer's written consent, so in an asset deal the seller's policies do not simply follow the trucks. See wrong named insured after an acquisition.
2. Filings. List every federal and state registration and every insurance or bond filing, whose name each is under and when each lapses.
3. Binding. Confirm in writing that each new policy is bound, with an effective date and time before the first truck rolls under your name. A quote or an application is not coverage.
4. The fleet. Compare the vehicle schedule on the auto policy with titles and lender records, and make sure financed trucks name the lender. See vehicles titled to the seller.
5. Full forms. Ask first for the cargo and warehouse forms with all endorsements, then the general liability form, because the declarations page is only a summary and will not show covered property or the storage definition.
6. Workers' comp. Report the ownership change to the insurer within 90 days. The seller's claims history usually follows the business, so expect to inherit the experience mod (the multiplier that adjusts workers' comp price for past claims). See workers' comp and payroll for a moving company.
7. Building certificates. Send current certificates to the buildings and property managers your crews work in. Certificate tracking in the first month shows how.
8. Old claims. Federal law for interstate household goods moves (49 U.S.C. 14706) bars a carrier from giving customers less than 9 months to file a cargo claim or less than 2 years to sue after a written denial, so moves finished before closing can still produce claims. Get loss runs and a list of open files.

Does the seller's program fit the business you bought?

The seller's broker may have built a sensible program for the seller's way of running the company. Your question is fit: does it match what you will do? Four mismatches are worth checking first. The cargo limit may be lower than the load on a full truck. Storage may be added to the company's work after the policies were written. Crime coverage may cover only the company's own money, not goods that disappear from a customer's box. And the umbrella may not be scheduled over every policy that matters. Coverage gaps new owners of moving companies find tests these and others.

A hypothetical example. A crew is carrying an upright piano down a flight of stairs for a household customer. It slips, and the piano is wrecked and a plaster wall is gouged. The piano is the customer's goods in your possession, so the claim usually starts with the cargo coverage and, on an interstate move, with the valuation the customer chose when signing, such as full value protection or a lower released rate (a per-pound cap the customer agrees to in writing). Full value protection is a level of liability the mover takes on, not an insurance policy, so the question is whether the cargo form's limit and exclusions match what the mover promised. The wall is a different claim. Whether it falls to general liability or to the cargo form depends on the wording and the facts. Walk this loss through your forms with your broker in week one. A Morrow review can do that with the declarations pages and full forms you inherited, though carriers decide terms.

Your lender may add requirements. For Small Business Administration (SBA) 7(a) loans over $50,000, the SBA's rules require hazard insurance on pledged collateral, with a lender's loss payable clause on equipment, but set no minimum general liability limit. See SBA lender insurance requirements.

Keep reading

• Moving Company Coverage Gaps: 10 Places to Test the Seller's Policies
• Moving Company Contracts, Licenses and Bonds: What to Check Before Closing
• Moving Company Workers' Comp: Class Codes, Peak Payroll, Past Claims
• Your First 90 Days of Insurance After Buying a Business: A Checklist
• New Owner Review: Commercial Auto
• All guides for new business owners

Frequently asked questions

Does my general liability policy cover customers' goods on the truck?

Usually not. General liability policies commonly exclude property in your care, custody or control, and a customer's goods on your truck are exactly that. Cargo-type coverage is designed for the exposure, but forms vary, so read the covered property, exclusions, limit and deductible.

What is "full value protection", and is it the same as insurance?

No. Under the federal household goods rules for interstate moves, full value protection is a level of liability the mover takes on unless the customer waives it in writing. Your cargo coverage is what may help the company pay for that liability, so check that the limit and wording match what you promise.

Is the federal cargo minimum enough for my company?

The federal minimums (set out in the contracts guide in this set) are regulatory floors for interstate household goods carriers, not a recommended limit, and they do not tell you what fits your loads or your storage. Ask your broker to compare your cargo limit with the value of a full truck and with what you promise customers.

Can I keep running on the seller's policies after closing?

Do not assume so. Policy rights generally cannot be transferred without the insurer's written consent, and in an asset purchase the seller's policies do not move automatically to a new entity. Confirm with each insurer and your broker before the first move under your name.

Does getting a quote mean I am covered?

No. A quote, an application or a request to a broker is not bound coverage. Coverage starts only when the insurer binds it, so get written confirmation of the effective date and time for each policy.

References

• IRMI: Care, custody, or control (glossary)
• IRMI: Bailee (glossary)
• 49 CFR 387.301, Surety bond, certificate of insurance, qualifications as a self-insurer, or other securities or agreements
• 49 CFR 375.203, What is the extent of my liability for loss or damage to a shipment?
• 49 U.S.C. 14706, Liability of carriers under receipts and bills of lading
• Florida Statutes chapter 507, Household Moving Services
• NCCI: Experience Rating Plan Manual, Item E-1411 (ownership change reporting), as filed with the Texas Department of Insurance
• U.S. Small Business Administration: SOP 50 10 8.1, Lender and Development Company Loan Programs

This article is general information, not legal, tax or financial advice, and not a coverage determination. Coverage depends on the actual policy wording, carrier underwriting, your purchase agreement and your contracts. Ask your attorney and accountant about deal and legal questions.