Coverage Gaps New Owners of Trucking Companies Find

Most gaps in an inherited trucking program hide behind a good-looking limit or between two policies: a cargo form that excludes the freight you actually haul, an owner-operator truck that neither insurer picks up, a trailer you pull for someone else, or an umbrella sized for fewer trucks. You find them by walking realistic losses through the seller's policies, then fixing each with an endorsement, a new policy, a lease change or a written procedure. This guide is for buyers who already know the core policies and now want to test them.

Where do the gaps hide in a trucking program?

Gaps appear where one policy ends and another begins, or where a contract promises more than a policy delivers. The table is a checklist, not a finding about your program. The seller's broker may well have handled several of these already.

The federal endorsement, Motor Carrier Safety (MCS) form 90 or MCS-90, is also why an unlisted truck or driver matters. If a claim is covered only because of the MCS-90, the insurer pays the injured party and can ask the carrier to repay it, so a scheduling gap can turn into a bill to you instead of a covered loss. Court decisions on when the endorsement applies vary, so ask your broker how your policy treats unscheduled units and drivers. For name mismatches see wrong named insured after an acquisition.

What does a cargo gap look like in practice?

A hypothetical example. A refrigeration unit fails overnight at the yard and a customer's $60,000 produce load spoils. The cargo form has a limit well above the load value but excludes loss from refrigeration breakdown unless a refrigeration breakdown endorsement is attached. The insurer denies the claim, and the customer may still have a legal claim against the carrier. The gap was not the limit. It was an exclusion nobody had read against the fleet's actual freight.

Under federal law, a carrier that issues a bill of lading (the shipping receipt for the freight) is generally liable for the actual loss or damage to goods in interstate carriage, subject to the statute's limits and traditional defenses. That liability exists whether or not the cargo policy pays, and the standard general liability form generally does not fill the gap because it excludes property in the insured's care, custody or control. Check your own wording. The rule is covered in what insurance a new trucking company owner needs.

Run the same test for theft: if loaded trailers sit in an unfenced yard over a weekend, read the unattended-vehicle wording first and ask what security the insurer expects.

How do owner-operators and leased equipment create gaps?

Federal rules let an authorized carrier use a non-owned vehicle only under a written lease, with the carrier in control of and responsible for operating it. The lease must state the carrier's legal obligation to keep public liability insurance, say who provides other coverage (such as the liability a tractor needs when it runs without a trailer, often called bobtail) and disclose any amount charged back to the owner-operator. A buyer who inherits the leases inherits those terms and the question of whose policy answers.

Three things to check: whether the lease insurance clause matches what your auto policy actually does for leased units; whether each owner-operator's own policy excludes trucks operating under someone else's authority; and whether the workers' compensation treatment of these drivers is settled, which depends on state law and the facts. See 1099 contractors and the workers' comp audit bill and workers' comp and payroll for a trucking company, and ask an employment attorney before assuming either answer.

What equipment, umbrella and yard gaps should you check next?

Interchanged equipment. A carrier that pulls containers and chassis usually signs the Uniform Intermodal Interchange and Facilities Access Agreement (UIIA), which points to a separate insurance packet and certificate form. Ask the equipment provider or your broker for the current UIIA insurance requirements packet, and match its coverage types and limits to your policies. Do not assume the seller's certificate on file meets it.

Umbrella. One accident can involve several vehicles, and the federal floor is only $750,000 for a nonhazardous for-hire carrier. Read its list of underlying policies, its driver or vehicle conditions and how it treats newly acquired companies. Some umbrella and excess policies exclude or restrict for-hire trucking, so confirm in the wording that the layer sits over the fleet's auto liability and what it requires of the underlying carrier. See New Owner Review: Umbrella and Excess.

Yard, shop and dock. Business income cover follows direct physical loss at the described premises, so a truck stuck on a roadside is an auto and cargo question, not a business income one. If freight sits at a terminal or cross-dock, ask about warehouse legal liability. Yard tank pollution is a separate exposure that general liability usually excludes.

Cargo spill after a crash. This differs from a yard tank leak. The federal public liability definition includes environmental restoration (removal costs and restitution for damage to natural resources) from an accidental release of cargo, but the standard business auto form from the Insurance Services Office (ISO) excludes pollutants being transported by the covered auto, and a broadened pollution endorsement is available for some forms. Where the policy does not respond, the MCS-90 may pay the injured party and the insurer may seek repayment from you. Ask which form (business auto or a motor carrier form) the fleet is written on and whether it carries that endorsement.

Which paperwork gaps can hurt you after a crash?

Not every gap is a coverage gap. After a serious crash, an insurer, a regulator and a plaintiff's lawyer read the same records. Federal rules require a carrier to keep these:

• Driver qualification files, for as long as the driver is employed and 3 years after.
• Driver logs (records of duty status), for at least 6 months.
• Drug and alcohol tests of surviving drivers after certain crashes, as soon as practicable, with a written note when one is late.
• Accurate entries. Federal rules bar false entries on required records.

In a stock purchase, you take over the company's files and the exposure that comes with them. In an asset purchase, ask deal counsel what follows you. Either way, thin files make a harder renewal. Ask the seller for the files and the accident register during diligence. See what drives insurance cost for a trucking company for how these records reach pricing.

Employment claims are the last gap. Federal law protects drivers, mechanics and freight handlers from retaliation for safety complaints, and complaints go to the Secretary of Labor within 180 days. Whether an employment practices liability insurance (EPLI) policy responds depends on its wording. Many EPLI forms exclude or sublimit wage and hour claims, and driver pay and contractor classification disputes are common in fleets, so ask. See New Owner Review: EPLI.

How do you test your own program this week?

Ask your broker for the full policy forms and the lease and contract insurance clauses, then write down for each loss which policy answers, what it excludes and who pays the rest. Morrow can review inherited policies and customer insurance exhibits, flag gaps and request quotes. New terms depend on carrier underwriting. For the wider checklist of gaps in owner-run businesses, see 15 coverage gaps new owners find, and for the core policy stack see what insurance a new trucking company owner needs.

Keep reading

• Just Bought a Trucking Company? What Insurance Do You Need?
• Workers' Comp, Payroll and Class Codes for a Trucking Company
• Contracts, Licenses and Bonds for a Trucking Company
• Insurance Exclusions That Quietly Kill Coverage
• Wrong Named Insured After an Acquisition: Entities, DBAs and Holdcos
• All guides for new business owners

Frequently asked questions

What happens if my cargo policy denies a claim?

For interstate freight, the carrier can still be legally liable for the actual loss or damage under federal law, so a denial can leave the cost with your company. Read the cargo form's exclusions, such as theft from unattended trucks and refrigeration breakdown, before a claim happens.

Does my commercial auto policy cover owner-operators' trucks?

It depends on the policy wording, the lease and how the units are scheduled. The lease must say who provides coverage beyond the carrier's required public liability. Ask your broker how leased units are treated, and collect each owner-operator's own policy.

Will business income insurance pay when a truck is out of service?

Usually not on its own. The standard form responds to direct physical loss at the described premises after a 72 hour waiting period. A truck down on the road is an auto and cargo question. Ask whether rental or downtime coverage is available.

Do I need pollution insurance for a trucking yard?

It depends on what the yard has, such as a fuel tank, a wash bay or shop waste. The general liability policy usually excludes pollution, and a separate pollution liability policy exists. Your lender or an environmental professional can tell you what is needed.

Can I get in trouble for firing a driver who complained about safety?

Possibly. Federal law protects commercial vehicle drivers and certain other workers from retaliation for safety complaints, and complaints go to the Secretary of Labor within 180 days. Talk to an employment attorney before you act, and ask your broker whether your policy responds.

References

• 49 U.S.C. 14706, Liability of carriers under receipts and bills of lading
• ISO CA 00 01 10 13, Business Auto Coverage Form (specimen copy)
• 49 CFR 376.12, Lease requirements (Cornell Legal Information Institute)
• 49 U.S.C. 14102, Leased motor vehicles
• 49 U.S.C. 31105, Employee protections (commercial motor vehicle safety)
• 49 CFR 387.15, Forms (endorsement in the exact name of the motor carrier)
• 49 CFR 391.51, Driver qualification files
• 49 CFR 395.8, Driver's record of duty status
• 49 CFR 382.303, Post-accident testing
• 49 CFR 390.35, Certificates, reports and records: falsification
• IRMI: Care, custody or control
• IRMI: Pollution exclusion
• IRMI: Business income coverage
• Intermodal Association of North America: UIIA
• 49 CFR 387.5, Definitions (public liability, environmental restoration)

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.