If using a company-owned or third-party vehicle to transport employees, clients, students or any large group of people, it is important to understand what the potential financial loss could be in the event of an accident.
Over the past several days, bus accidents that resulted in varying degrees of personal tragedy have occurred from Canada to Georgia to Long Island. Such incidents serve as a reminder to organizations that they need to have the proper insurance coverage to limit their financial loss when transporting people.
A broad range of Commercial Auto Liability limits are available for purchase. Such coverage can offer a layer of protection from costly exposures for shuttle vans, limousines, buses and taxi services, or any type of private shuttle or mode of transportation for large groups.
Without the proper amount of Commercial Auto Liability Insurance, an organization that is found to be at fault could lose everything.
On average more than 10 million motor vehicle accidents occur in the U.S. every year. The damages caused by these accidents cost upward of $230 billion annually, or an average of $820 per person, according to Burns & Wilcox. Without the proper insurance in place, repair costs and litigation fees can quickly build if an accident occurs. Excess Auto Coverage can further protect against financial loss resulting from legal liability for automobile-related injuries to others or damage to property.
Residents of America and Canada took a combined 604 million motor coach/bus passenger trips in 2014 covering 61.8 billion passenger miles, according to the latest data provided by the American Bus Association. In addition, nearly 3,630 motor coach and bus companies operated more than 36,500 motor coaches in the U.S. and Canada in 2014.
A total of 4,311 large trucks and buses were involved in fatal crashes in the U.S. in 2015, according to the Federal Motor Carrier Safety Administration (FMCSA).
FMCSA’s minimum insurance levels often not enough
“The FMCSA requires any vehicle transporting 15 or more passengers in the U.S. to carry a minimum of $5 million in Commercial Auto Liability Insurance,” said Rebecca Roberts, Associate Vice President and Managing Director, Burns & Wilcox, Indianapolis. Vehicles carrying fewer than 15 passengers require a minimum of $1.5 million in Commercial Auto Liability Insurance.
“I suggest that organizations — and this includes for-profits and, where feasible, nonprofits — consider purchasing additional umbrella policies and excess layers above the minimum,” Roberts said. “Without the proper amount of Commercial Auto Liability Insurance, an organization that is found to be at fault could lose everything.”
Unfortunately, that’s exactly what happened to New York-based AM USA Express following a 2014 tour bus crash in Delaware that killed three people and injured many others. The National Transportation Safety Board concluded the probable cause of the crash was excessive speed. The bus was insured for $5 million. The insurers filed court papers saying they expected claims to exceed their policies, so AM USA Express was forced to liquidate its assets and go out of business.
After an accident, the at-fault party is responsible for damages resulting from bodily injury, property damage, physical damage to the vehicles and damage to any cargo on-board a vehicle. “Fortunately, plenty of insurers offer affordable umbrella options,” Roberts said. Costs can vary significantly, but often will range from $1,000 to $5,000 annual premium per vehicle for each $1 million of coverage limits beyond the Commercial Auto Liability policy.
“Generally speaking, as the umbrella attachment point goes up, the corresponding price goes down,” Roberts said.
Additional coverage may be warranted
Outside of Commercial Auto Liability policies, organizations may want to consider Directors & Officers (D&O) Liability Insurance as well. D&O can provide an additional layer of protection since an organization’s directors (executive management) are responsible for establishing legal and regulatory compliance expectations, such as guidelines to ensure that event managers and drivers are properly vetted. Failure to do so could be seen as a breach of fiduciary duty, or result in claims of negligence or mismanagement.
“A lack of proper coverage can also lead to claim denials, which can result in premium increases or other outcomes that can be financially debilitating,” said Timothy Rabb, Underwriter, Professional Liability, Burns & Wilcox, Corporate Headquarters.
“You will want to have stringent rules in place when selecting people, externally or internally, who facilitate your events, such as shuttle or bus drivers,” Rabb said.
Any organization hiring a third party for transportation should also consider hiring an insurance lawyer to draft legally-binding contractual agreements for further protection, Rabb said. Additionally, Employment Practices Liability Insurance (EPLI) can help protect against employment-related claims that may exceed the scope of General Liability.
Working with an insurance broker or agent is critical
Regardless of the size and scope of an organization, it can be difficult for management to estimate the amount of insurance required. Roberts recommends working with an insurance specialist to provide a complete picture of potential liability so that informed decisions can be made.
“When purchasing insurance, business owners have to think beyond the cost or the minimum insurance requirement,” Roberts said. “To thoroughly protect their business, they must ask if their insurance limit is enough to cover the full potential exposure.”
As with any coverage need, an insurance broker or agent must be consulted. Click here to forward this article to your insurance broker or agent to ask if you need this coverage, or share this with clients to start the conversation and ensure proper protection.
This information was provided by Burns & Wilcox, North America’s leading wholesale insurance broker and underwriting manager. Burns & Wilcox works exclusively with retail insurance brokers and agents to assist clients like you with their specialty insurance needs. Ask your insurance broker or agent if an Commercial Auto Liability, D&O or EPLI policy is right for you.