Owner Operator Insurance – Non-Trucking, Bobtail & Unladen Liability Definitions and Impact

Motor Carriers (MC), which use Owner Operators (OO), enjoy certain benefits, but also face additional risks. Uninsured exposure to the OO can occur even if the Motor Carrier is not using the OO in a business use capacity. The MC’s Trucking or Commercial Auto Liability policy (AL) provides coverage for motor carriers’ owned units and any hired tractors or trailers while they are being hired. Once an Owner Operator is no longer employed by the Motor Carrier in a “business use” role, coverage ends. The concern is that the OO may continue to use their vehicle while displaying the MC placard. There may not be other insurance. Many times, the MC’s “deep” pocket is used to compensate the third party who has been injured.

To address the coverage gap of the Owner Operator, three products were developed.

Non-trucking Liability:

Low cost

Auto Liability: Low Protection for Motor Carriers

High Market Accessibility

Non-Trucking Liability protects “personal use” through the use of a Trucking and Commercial Auto Liability policy form, as well as attaching a “business usage” exclusion. This is because the definition of “business usage” is not often defined in the policy. It is instead derived from various state or federal court decisions.

Unfortunately, the broad interpretation of “business usage” extends beyond “dispatch” and “business use”. These are typical scenarios that would be excluded from the Non-trucking policy because of the expansive interpretation of “business use”.

  • OO drops the load, and his journey home will include a trip to a grocery store. Courts determine that OO owes a trip home.
  • OO takes vehicle to garage for maintenance on weekends (courts decide OO is maintaining the unit in accordance with MC Lease requirements).
  • OO is out-of-town, between loads. He goes to the movie theatre. (courts make it clear that OO is not in the town, at the direction MC)

Example of Coverage: OO uses his truck for personal use to run to the grocery store and hit another vehicle.

Bobtail Liability

Cost: Medium

Medium: Protection of Motor Carriers Auto Liability

Market availability low

Although many in the transportation industry use the same terms for Bobtail Liability or Non Trucking Liability they actually mean something quite different. Bobtail defines coverage to include “anytime the trailer is not attached”, regardless of whether the OO has been dispatched or not.

Example of Coverage

  • Load OO and bobtails for next load
  • OO drops are loaded at the end of each day, and bobtails go home.
  • The Bobtail Policy won’t respond to trailers attached to it, even if they are in an individual situation.:
  • OO takes a trailer home and then runs to the store the following weekend.
  • OO uses his tractor on weekend to move a mobile house.
  • OO aids a friend to move by pulling a trailer with household goods

Unladen Liability:

Cost: Very high

Auto Liability: High Protection for Motor Carriers

Market Availability Very Low (Per-Class Basis)

Unladen Liability is the least ambiguous in coverage and provides the highest level of protection for the MC/OO. This policy covers bobtailing (no trailer attached), and deadheading (“trailer does no contain or carry any cargo-no bill of lading), regardless the dispatch. This coverage line is difficult because it has a low availability. It is not usually available in a master settle deduct program. Instead, the OO will need to apply on a direct basis.

Each coverage model has its pros and cons. They vary depending on risk tolerance and operations of the Motor Carrier and Owner Operator. It is crucial to choose the right program for managing your risk. A qualified broker can help you review your existing insurance policies and provide recommendations for the best options.