Just say no: One owner-operator's approach to broker/customer demands to be 'additional insured'

Longtime independent owner-operator and business consultant W. Joel Baker has seen it time and again. A broker he's about to do business with asks to be added as an "additional insured" on Baker's business's own insurance policy. Every time he asks just why, furthermore, he gets one of two answers, as he made note of in this blog post at his LearntoTruck.com website.  

As the second of these suggests, the practice has been so common throughout recent history as to go unquestioned by the minds of young brokers and agents, and in many cases the owner-operators working with them to keep the trailer full. Baker certainly started out accepting of brokers' reasons for asking for it years ago, when he first started getting the requests. But "the more I found out" about the potential ramifications of essentially giving third parties insurance via his policy, "the more I didn't like it at all and quit doing it," he said. "It's a terrible practice to get into" for a truck owner, he believes. 

It's not just brokers who might attempt this, but also direct shipper customers, for similarly stated reasons. Yet consider this hypothetical Baker offers as a cautionary tale. 

W. Joel Baker, pictured behind his reefer trailer some years ago when I caught up with him at a Nashville, Tennessee-area cross-dock. He maintains his carrier authority to this day but has sold his equipment and transitioned into An owner-op checks in at his direct customer's facility. "They say back into door 37," Baker said, and "door 37 has an overhang outside of it." While the owner-op's backed in, "the overhang collapses and lands on his trailer."

The customer then claims "hey, we didn't give you that door," saying the owner-op misheard 37 instead of 57. "It's not our fault. You need to contact your insurance company."

The owner-op submits a physical damage claim to his own insurance, yet manages to provide sufficient proof to the insurance company that the failed dock overhang was in fact the one that the shipper sent him to. The insurance company says, "Hey, ACME Widgets Inc., you’re responsible. Pay up or we'll sue" for the cost of the loss.

Because the owner-op added his customer as an additional insured to the policy, however, ACME Widgets' crafty attorneys now believe they have an out from accepting responsibility, Baker said: "You are our insurance company, too, on this same policy," the shipper says.