What should fleet managers look for in a commercial insurance policy to ensure their fleets have the right coverage? What policy terms would minimize a company's risk and overall vehicle insurance costs? Scott Kegler is an insurance broker with The Graham Company, a privately-held firm based in Philadelphia that provides insurance, employee benefits, and bonding to the construction industry. He recommends a regular review of company vehicle policies and offers these five tips.
1. Make Sure Liability Coverage is Symbol 1 'Any Auto.'
Business auto policies are written with symbols, ranging 1-9, to indicate the extent of liability coverage. "Symbol 1," which means "Any Auto," provides maximum protection.
"Sometimes an insurance company will put a Symbol 7 on the policy," Kegler said. "Symbol 7 covers only the specifically described autos listed on the policy."
A danger, according to Kegler, occurs with large fleets, in which vehicles come on and off the policy throughout the year. "You risk missing something and a vehicle does not get added or deleted in the right way. If one of your vehicles gets in an accident and it was not listed on the policy at the time, the insurance company can say, 'Sorry, we didn't know about that vehicle,' and you're left without coverage."
Symbol 1 liability coverage forestalls this situation, Kegler said.
2. Obtain Multiple Quotes
When increasing coverage to a $2 million limit per occurrence, obtain quotes from both primary carrier and umbrella policy writers to determine the most cost effective.
Most commercial auto policies limit per-occurrence insurance to $1 million. For additional protection, many companies purchase an umbrella policy for an additional $1 million, protecting the company with a $2 million limit total.
Before buying an umbrella policy, however, Kegler recommends requesting a broker price quote on both the additional $1 million umbrella policy and an increase in the primary policy from $1 million to $2 million.
"The most expensive part of the umbrella policy is the first $1 million in excess of the commercial auto policy," explains Kegler. "What you can try to do is get a $2 million limit instead of $1 million on your primary policy. You might be able to do it more cost effectively than buying it from the umbrella carrier."
3. Determine Your Deductible
Consider basing the deductible on per-occurrence catastrophe versus per-vehicle.
If a fleet is parked in the same location, a per-occurrence catastrophe deductible limits the total amount a company must pay when a single event (such as a hailstorm, hurricane, or fire) damages several vehicles at once.
"Let's say your commercial auto policy has a $5,000 per-occurrence property damage deductible and a $25,000 per-occurrence catastrophe deductible. If you had a hailstorm that damaged 20 vehicles, the most you would have to pay with a catastrophe deductible is $25,000, rather than $100,000 (20 vehicles multiplied by $5,000 for each vehicle)," says Kegler.
4. Investigate Self-Insuring Physical Damage Coverage
"Do the analysis to find out how much it costs you to purchase the physical damage coverage as part of your business automobile policy," Kegler advises.
Compared to annual costs of physical damage claims, many companies find it cheaper to self-insure physical damage coverage and pay to fix their vehicles, he explains.
5. Uninsured Motorists Coverage
Consider declining - or accepting only minimum limits for - uninsured/underinsured motorist coverage.
This coverage pays for bodily injury, sickness, or disease caused by a driver who has no insurance or insufficient coverage to pay for the damage caused in an accident. Company fleet drivers are already protected by Workers' Compensation coverage as well as "First Party" medical payments benefits in the company's commercial auto policy. An additional $1 million limit of liability available to employees can expose company automobile insurance to significant claims.
"The danger of having a $1 million limit available for a large fleet is a driver who falls asleep at the wheel, drives off the road, and gets into an accident. He could claim a 'phantom' vehicle ran him off the road and try to get recovery out of your uninsured/ underinsured motorist coverage," says Kegler. "We've seen big payments come out for questionable claims."
Best Practices to Impact Insurance Rates
"There's a whole series of things you can do when you're hiring," Kegler said. "You want to pull the motor vehicle record of your drivers. Set up a scoring system so that you'll have a company policy that says if the driver has above 'X' number of points, you don't hire him. This way, you have something solid in place to evaluate when you're looking at driving records. We also highly recommend drug testing prior to the job offer and if there is reasonable cause after an accident."
These steps can be outlined in fleet policy concerning employee hiring.
Accident Reporting Procedures
Kegler advises putting a card in every vehicle instructing drivers on actions to take in the event of an accident.
"Make sure the card is simple to follow. One number to call and guidelines on what to do and say after an accident. After you get into an accident, you're upset. You're not thinking clearly. You can get into trouble if you don't do or say the right thing after an accident. The card serves as a guide to ensure the driver follows proper procedures and minimize your risk," Kegler explains.
Disposable Cameras in Glove Box
"Take pictures of the accident scene," Kegler advises. Visual documentation "can be huge to defend your position." Disposable cameras can help if a cell phone is out of power.
A new technology available with cameras can be installed in company cars and trucks.
One system offers two views: what the driver sees and a view of the driver. "Was the guy talking on the cell phone, texting, or trying to eat a Big Mac while driving down the road?" Kegler said. "Camera systems like these will help you monitor that behavior."
The in-vehicle camera systems also provide documentation of fault in a crash occurrence, protecting drivers and the company against false claims.