Understanding the Motor Carrier Form: Truckers Policy

Today most of our goods are transported to us via truckers.  This is a huge industry in the United States and the insurance industry has developed a specialized type of coverage for this industry.  The Motor Carrier Coverage form is an ISO form like the Business Auto Policy.  It is designed for businesses which haul goods on behalf of others in exchange for a fee.

Brief History Lesson

The Motor Carrier Coverage Form replaces the old ISO Truckers Coverage Form.  The latter is no longer relevant as it contains outdated language.  The Truckers Coverage Form was developed at a time when the federal government imposed strict control over trucker's rates and routes.  The trucking industry was deregulated in 1980 by the passage of the Motor Carrier Act. Nowadays, trucking companies can choose their own routes and negotiate rates with customers.  The Motor Carrier Form reflects these regulatory changes.

Who Needs It? 

The Motor Carrier Form should be purchased by any business that transports property via autos and cannot obtain adequate coverage under the standard Business Auto Policy (BAP).  The Business Auto Policy intended for companies that transport goods in their own vehicles.  An example is a bakery that uses bakery-owned trucks to transport baked goods to retail stores.  The policy is not well-suited to trucking companies.  Here is why: 

• The "Who Is An Insured" section of the Business Auto Policy does not cover the owners of vehicles leased to the Named Insured.  This is problematic because many truck leases require the lessee to insure the lessor (vehicle owner) under the lessee's auto liability coverage.  
• Physical Damage coverage in the Business Auto Policy does not apply to trailers owned by someone other than the Named Insured.  This can present problems if the policyholder is liable for any damage that occurs to a leased or borrowed trailer.  
• Under the Business Auto Policy, liability insurance is primary only for autos the Named Insured owns.  If the policyholder hires or borrows a vehicle, that vehicle will be covered for liability on an excess basis. 

The Motor Carrier Form is typically used to insured businesses that transport goods using vehicles owned by someone else (or a combination of vehicles they own and vehicles they don't own). 

However, it can be used by any company that qualifies as a motor carrier, as that term is defined in the form:  

• a person or organization providing transportation by auto in the furtherance of a commercial enterprise.

This definition is broad enough to include common carriers, contract carriers and private carriers. 

• A common carrier is a company that will haul goods on behalf of anyone in exchange for a fee. 
• A contract carrier transports goods on behalf of specific customers according to the terms negotiated in a contract. 
• A private carrier hauls its own goods using its own vehicles.  

MCP versus the BAP

The Motor Carrier Coverage Form is combined with the Motor Carrier Declarations and various endorsements to create a Motor Carrier Policy (MCP).  In many ways, the Motor Carrier Policy closely resembles the Business Auto Policy (BAP).  Some of the key differences are outlined below.

Covered Auto Symbols

Like the Business Auto Policy, the Motor Carrier Policy utilizes a set of numbers, called "covered auto designation symbols," to indicate the types of vehicles that are "covered autos" under the policy.  The symbols used in the Motor Carrier Form are described in the chart below.  These are not the same symbols used in the Business Auto Policy.  

Who Is an Insured? 

The "Who Is An Insured" section of the Motor Carrier Policy  resembles the corresponding section of the Business Auto Policy.  Like the Business Auto Policy, the Motor Carrier Policy covers the Named Insured for any covered auto.  It also covers any permissive user while driving a vehicle the Named Insured owns, hires, or borrows.  However, the Motor Carrier Form includes two categories of insureds that are not covered under the Business Auto Policy.  

Trailer Owner

The owner of anyone else from whom you hire or borrow a trailer is an Insured if the trailer qualifies as a covered auto under your Motor Carrier Policy.  This party is insured while the trailer is connected to a power unit (truck or tractor) that is a covered auto.  He or she is also an Insured while the trailer is not connected to a power unit if it is being used exclusively in your business. 

For example, you hire a trailer for two weeks from Rent-A-Trailer in order to haul a large load for a customer.  Your Motor Carrier Policy shows symbol 61 (any auto) in the Declarations.  Both your tractor and the rented trailer are covered autos.  You are driving your tractor with the rented trailer attached when you inadvertently collide with another vehicle.  The driver of the vehicle is injured in the accident and sues Rent-A-Trailer for bodily injury.  As the owner of the hired trailer, Rent-A-Trailer is covered for the claim under your Motor Carrier Policy. 

Lessor of Truck or Tractor

Also covered under the Motor Carrier Policy is a person or company from whom you have leased a vehicle (other than a trailer) for use in your business as a motor carrier for hire.  This party is an Insured as long as he or she has not signed a Hold Harmless Agreement in your favor.  That is, the lessor is an Insured if he or she has not signed a contract assuming liability on your behalf for accidents arising out of the use of the leased auto.  In addition to the lessor, any driver, agent, or employee of the lessor is an Insured.  

For example, you lease a tractor from Rent-A-Truck to use in your trucking business.  The lease requires you to indemnify Rent-A-Truck for any claims against it that arise out of your use of the tractor during the period of the lease.  The lease does not hold you harmless for claims arising out of your use of the tractor.  Thus Rent-A-Truck is an Insured under your policy during the term of the lease.

Trailer Interchange Coverage

The Motor Carrier Policy includes a liability coverage called Trailer Interchange Insurance.  The latter covers damage to trailers in the insured's custody for which the insured is liable under a Trailer Interchange Agreement.  A Trailer Interchange Agreement imposes liabliity on the hauler (trucker pulling the trailer) for physical damage to the trailer that occurs while the trailers is in the hauler's possession.

Truckers may need Trailer Interchange Coverage if they transport goods in trailers owned by someone else.  Many truckers haul trailers owned by other truckers in order to facilitate the transportation of goods.  

Trailer Interchange Agreements typically require the trailer hauler to purchase Trailer Interchange Insurance.  The insurance covers the sums 

the insured is legally obligated to pay as damages because of loss to a trailer the insured does not own.  Three options are available under Trailer Interchange Coverage:

• Comprehensive:  Covers damage to a trailer by any cause other than collision with another object or trailer's overtun.
• Specified Causes of Loss:  Covers damage to a trailer by fire, lightening or another peril listed in the form.
• Collision:  Covers damage to a trailer by its collision with another object or its overturn.

Trailer Interchange Insurance includes Supplementary Payments (defense coverage).  It excludes damage caused by a nuclear hazard, war, freezing, tire punctures, and several other perils.  It also excludes loss of use. 

Primary or Excess Coverage Determined by Contract

Truckers often use autos owned by someone else.  They may also loan or rent autos to other truckers.  Under the Motor Carrier Policy, autos that are hired or borrowed to or from another trucker may be covered on a primary or excess basis.  Whether coverage is primary or excess depends on which party is responsible for damage to the auto.  The other insurance clause in the policy explains how coverage applies. Below are the key provisions with regard to hired or borrowed vehicles. 

• Autos Hired or Borrowed From You:  Liability coverage is primary if you (the lessor) are liable under a Hold Harmless Agreement for accidents arising out of the use of the auto.  Coverage is excess if you have notsigned a Hold Harmless Agreement. 
• Autos You Hire or Borrow from Another Motor Carrier:  Coverage is primary if the lessor has not assumed liability under a Hold Harmless Agreement for accidents arising out of the use of the auto.  If the lessor has signed such an agreement, coverage is excess.  
• Trailers:  If no contract states otherwise, a trailer connected to a power unit (tractor) is covered on the same basis (primary or excess) as the power unit, if the power unit is a covered auto.  If the power unit is not a covered auto, then the trailer is covered on an excess basis.
• Trailer Interchange Coverage:  Applies on a primary basis
• Owned Versus Non-Owned:  If no contract states otherwise, owned autos are covered on a primary basis.  Autos you do not own are covered on an excess basis.  

With COVID-19, our truckers have become the driving force to keep our country moving.  Having the right insurance for trucking business is a vital part to protect your business, your drivers, and your future.