General Liability vs Auto Liability
Given the number of policies with $1 Million General Liability and State Minimum Auto Liability currently popping up, it's a good time to talk about the vast difference between the two types of insurance whether you're an Owner Op, Motor Carrier or Broker.
Auto Liability pays out when you hit someone or something with your vehicle.
The last two Risky Business blogs addressed the type of Auto Liability an Owner Operator needed depending on what type of arrangement he had with a Motor Carrier, i.e. Non-Truck or Primary.
Generally, Owner Operators under the Traditional model hauling for one Motor Carrier buy Non-Truck Auto Liability, and Owner Operators under the Multi/Independent model buy Primary Non-Contributory Auto Liability. The limits in our industry are usually $1 Million.
...So I'm frequently asked to review various policies and recently started to notice a pattern of "General Liability" replacing "Auto Liability" for "proof of insurance."
What I mean by that is Owner Operators offering proof of insurance with $1 Million General Liability vs $1 Million Auto Liability apparently thinking that's what they needed to operate as an Expediter.
In discussing their coverage, I'm told that it was their understanding that this "General" insurance will pay for any lack of Auto Liability if they add "Non-Contributory" to it.
I've explained that Auto Liability pays out when you hit someone or something with your vehicle, and that General Liability does not. Period.
To give them a better picture of what General Liability does cover, here are some examples I use:
- Customers slipping and falling on your premises
- An erroneous delivery of products resulting in damage
- Damages or Fire caused by your actions at a rented location (i.e. motel)
- Libel and Slander
- Using someone else's logo in advertising without permission
So as you can see, this is great extra coverage to have to give you "general" coverage for "generally" off the wall occurrences, but it in no way replaces any coverage whatsoever for accidents while driving.
Folks, if this were a "one off", I wouldn't be commenting on it. There are too many people buying into the concept that if they purchase "Primary and Non-Contributory" on their General Liability policy that it replaces or adds to their coverage for Auto Liability. It does not.
For your purposes and understanding, Auto and General are two different types of insurance that do not cross over.
So what does the "Non-Contributory" mean on a General Liability policy?
Example: An Owner Op accidentally starts a fire in his motel room. The Motor Carrier he's hauling for will not get drawn into a lawsuit when the Owner Op has added "Non-Contributory" to his General Liability policy. The Motor Carrier won't be asked to "Contribute" to paying the claim.
These General Liability policies with upcharge of a couple hundred bucks for "Non-Contributory" are very inexpensive because claims of this type are usually rare. Have you ever even heard of a General Liability claim along the lines of the samples? Probably not, most claims in our world are due to vehicle accidents.
What the Motor Carrier or Broker NEEDS to be worried about is when the Owner Op doesn't have "Non-Contributory" on his AUTO policy.
Most insurance companies will provide "Primary" but NOT "Non-Contributory" on an auto policy, which pretty much guarantees they'll look for other coverage to "Contribute" to paying the claim.
And this is where the Motor Carrier or Broker come into the picture for major accidents when Owner Operators provide their own insurance.
For all parties, understand that General Liability will not protect in an Auto accident, and get proof on the Owner Op's insurance policy itself for "Non-Contributory" on Auto Liability.