Liability Umbrellas - Hold onto Your Hats

TRKINSURE

Active Member
15
As though the world doesn't have enough bad news currently.... SUM Insurance has let our brokerage know that they will no longer be offering renewal terms for trucking companies who are looking for excess liability.

Anybody who has an underlying policy of $2M are going to find it difficult, if not impossible to find a higher limit unless the primary carrier is willing/able to offer a higher limit.

This is going to cripple the industry as many of your customers require $5M limits.

Hopefully someone can come up with a solution. But fair warning, whoever does is likely going to charge through the nose for it.

This is not good - can anyone with any input please PM me with a solution?

SUM / Markel International / Lloyd's have now all dropped out of this market over the past 18 months.
 

Jim L

Well-Known Member
20
The reality of the situation is that most American carriers have only 750k - 1M policies and all Canadian companies have a minimum of 2M up to 5M and some 10M. This creates a great opportunity for American lawyers to go all the way with a Canadian company knowing that there is more available to them right from the start from an insurer. The insurer, knowing the challenges of the legal system in the US, are all too happy to sign off on a claim and chalk it up as a win and pay it out - thus rewarding the US lawyer and allowing them to think that this was way too easy. Two decades later this is the result.

I think that the more they find Canadian carriers with smaller pots to steal they more apt they will settle on a much smaller number - a number more in line with the actual damages. It may take a few carriers out but I believe that unless the carrier and/or the owner can be held personally liable for more money, they'll just have to settle with what they can get from insurance.

The question is weather or not you want to pay for the added insurance or take the risk and if you can pass these costs onto the end consumer.
 

lowmiler88

Site Supporter
30
Jim L don't forget they can take equipment, buildings, land etc to pay for the settlement. Not sure it's worth the gamble to have $1mil coverage.
 

Jim L

Well-Known Member
20
Jim L don't forget they can take equipment, buildings, land etc to pay for the settlement. Not sure it's worth the gamble to have $1mil coverage.
I have not forgotten that fact but my comments were made in respect to avoiding the huge claim at the beginning. Basically if 10M is available then a lawyer will see a large potential to get a sizeable chunk. If only 1M was available a lawyer may think twice to soak a lot of time and resources in chasing it. The fact that an insurance policy offers 10M is the trigger that gets the lawyers interest piqued knowing that insurance companies are very quick to offer settlements especially when 10M is on the line.
If there is only 1M available the lawyer would check for assets available in the company. The larger the carrier the more likely the carriers lawyer and accountants have segregated assets such as equipment, land and buildings to another entity and lease them back to the carrier thus creating another layer of protection. The plaintiff lawyer would not only have to prove that the carrier directly was at fault specifically for the incident but also show that the leasing company is at fault which would be much harder to prove.

I believe that Canadian carriers and the insurance companies representing them over the past 2 decades have created an atmosphere where US lawyers and plaintiffs find them as great opportunities for any bump, scrape or incident to get a large payout with little to no work.
 

TRKINSURE

Active Member
15
I don’t disagree with any party. If you have your company structured correctly you can reduce some of your risk.
however your American and domestic clients still want to see between $2M and $5M limits on your policy. You should start the conversation now to let them know that may be a problem in Canada.
I feel that there are going to be plenty of CAN companies losing out to US based operations because of the lack of capacity in our market to provide those limits.
 

lowmiler88

Site Supporter
30
I find being in a Captive you get to see more of the inner workings of insurance companies and the biggest thing that amazes me is they are pretty bang on in knowing what best and worst case scenarios of any incident you are involved in. Biggest payout for us was in Ontario which I would say is a top 3 or 4 area with crazy settlements. I'm involved in every decision regarding a claim whereas before we where pretty much told what was going to happen and had to live with it.
 

Michael Ludwig

Well-Known Member
20
I think how they get away with it in the U.S. is that no "properly structured" trucking company, the one with the MC Number, owns anything but a couple desks and computers. They rent their yard and office facilities from someone. They rent their tractors from someone else. They rent their trailers from yet another someone else. Their equipment is maintained and serviced by even yet another someone else. Their drivers can be, and often are, hired from a driver-service-someone-else. And so on, and so on. In this way, when they get sued for more than the company is worth, they can Chapter 11 the company with the MC Number, but the courts cannot touch the assets.
All these "someone else's" are usually family, and they are all incorporated. While I have not delved deeply into the subject here, and am certainly no expert of any kind, I believe there are "arm's-length" laws here in Canada that preclude our being able to structure our companies in such a manner, and keep them legally separated so as to avoid such situations.
Maybe someone else here has additional insight ???
 

LADYCHAMPAGNE

Site Supporter
2
I would image many trucking companies are owned by a holding company. Holding company owns most of the valuable assets (ie real estate). Any profits that the operating company makes are dividended up to the holding company. The operating company has minimal retained earning are hard assets
 

Michael Ludwig

Well-Known Member
20
To the best of my recollection, a single holding company does not past the tests of control influence vis-a-vis the court system. It could be argued that since the holding company holds all of the assets, the holding company makes the rules.
On the other hand, using a hub & spoke method of ownership, it can be argued that since all of the main elements of a trucking company are owned by several different entities, and controlled at one central point, then the central point is the liable entity in a catastrophic loss situation.
Regardless, ownership of any company with even the slightest bit of exposure to crippling liability claims should make sure that whatever happens, plaintiffs cannot get your house !!!
 
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