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Insurance Basics


CONTENTS

About Service Insurance

3

Physical damage

4

By Tim O’Bryan

General Liability: Does your current policy cover what you think it does?

5

By Tim O’Bryan

Is your maintenance facility covered?

6

By Tim O’Bryan

Avoiding the pitfalls of workers’ comp

7

By Tim O’Bryan

Knowing the legal responsibilities of garage-keepers

8

By Tim O’Bryan

What makes motorcoach insurance unique?

9

By Tim O’Bryan

The lesser-known legal responsibilities of motorcoach operators

10

By Tim O’Bryan

2

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ABOUT Service Insurance

Committed to the Transportation Industry since 1952 Service Insurance Agency, LLC is wholly committed to the transportation industry. It’s our mission to provide the best insurance protection at a competitive price. We strive to provide the most knowledgeable advice and personal service to all of our valued customers. We deal with the public fairly and honestly and to maintain our reputation as a respected member of the transportation community. As a leader in the transportation industry, we have access to numerous insurance carriers that specialize in motorcoach insurance, trucking insurance and limousine insurance. We are motivated and trained insurance professionals ready to assist our customers with their transportation insurance needs.

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INSURANCE BASICS

PHYSICAL

DAMAGE BUSRide recently sat down with Tim O’Bryan, president of Service Insurance Agency, Richmond, VA, to discuss physical damage claims and how they affect the financial health of motorcoach operators and public transit agencies.

Many physical damage claims – and thus, significant accidents, are caused by driver inattentiveness.

What are the primary causes of physical damage claims to an operator’s vehicles? The most costly claims we see are fire claims. Vehicles catch fire for a number of reasons – the two biggest causes are the engine compartment and the wheel assembly. Turbochargers can blow up and catch fire within the engine compartment. Within the wheel assembly, brakes or tires can present fire risk. Bus fires typically don’t result in bodily injury, but there’s a lot of property damage to the vehicle and to whatever property that vehicle is carrying – like luggage, personal belongings, etc. In addition to fire, what are some other examples of physical damage claims? Vehicle fires stay on everybody’s mind because they are big losses, both for the carrier and the insurance company. An operator is going to be without a vehicle for a period of time – it could even be on the side of the road burning, which is obviously very bad for publicity. An operator may also have passengers outside of the vehicle on the side of the road, which is a huge liability exposure. Operators have got to stay current on their maintenance programs; ensuring that all preventative and regularly scheduled maintenance is up to date. This is especially important in the “offseason,” when business is slow. It’s really important to finish preventative maintenance before business gets really busy. From a driver’s standpoint, a lot of physical damage prevention should be completed upon pre-trip inspection – making sure tires are inflated properly, making sure belts aren’t worn and hoses are not loose. The other types of damage are caused by inattentive drivers hitting objects, causing dents and knocking mirrors off. Those are soft costs for operators that are typically under their deductibles. These soft costs add up and, while they may not be insurance claims, they affect the bottom lines of motorcoach and transit operations. 4

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Claims typically fall into three categories – the common ones are driver inattention and maintenance related, and the less common one would be weather related such as lightning, flood and hail damage. What can operators do to mediate this damage? We talk to operators about staying up on preventative maintenance, making sure they’re diligent in their maintenance regiments. If drivers they think they have a problem, they should immediately pull over and check it out – don’t wait. If a tire is going down, for example, don’t keep driving on it. Get it checked. A lot of newer vehicles are coming equipped with new fire suppression systems, either early warning alerts or actual suppressing agents. These systems typically don’t result in any kind of insurance discount, but the savings will come going down the road. If new features prevent accidents or damages from occurring, operators will feel those savings in the long term. Again, the most important directive is diligence with the vehicle fleet, and doing pre-trip and post-trip inspections. Have maintenance staff do the annual preventative maintenance and stay up-to-date during the busy times of the year. As many in the industry say, it’s a nine or 10 month busy season to pay 12 months of bills. Most insurance policies have an internal limit on physical damage. In the event of a catastrophe, most policies have a $1 million catastrophic limit on a policy. Think about how vehicles are positioned in the yard – are there fire breaks between them? Ask your agent and get a quote on excess physical damage coverage – it will raise the catastrophic limit to a number that’s appropriate for your needs. This series will continue next month! Tim O’Bryan serves as president of Service Insurance Agency. Since 1952, the company has been committed to the transportation industry. Service Insurance Company strives to provide the most knowledgeable advice and personal service to all of its valued customers. Visit them online at www.serviceins.com.

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General Liability: Does your current policy cover what you think it does? By Tim O’Bryan

BUSRide recently sat down with Tim O’Bryan, president of Service Insurance Agency, Richmond, VA, to discuss General Liability and how it affects safety and efficiency at motorcoach operations and public transit agencies. General Liability insurance (GL) protects businesses against property damage, bodily injury and other claims.

What circumstances does commercial General Liability cover? Motorcoach operators want to make sure that, whenever possible, they have Auto Liability and General Liability coverage from the same insurance company. The reason is that most people have property coverage for the physical premises of their building. If I slip and fall on their premises, that’s a claim against General Liability / premise coverage. Motorcoach operators should always make sure their lot is secure for this reason, thus reducing the risk of injury for the general public. If operators only have General Liability in conjunction with their property policy and someone slips and falls while getting off a stationary bus away from your business location, then the property / premise coverage may not apply. Many operators can save premium dollars by eliminating the General Liability coverage from their property policy if they have a General Liability policy with same insurance company as the Auto Liability policy. Transit agencies have multiple pick-ups at all of their bus stops. Those are extensions of their property, so they must obviously be maintained, well-lit and generally safe. For a bus company, there’s a lot of grey area between General Liability and Auto Liability. It’s recommended to have your General

Bodily injuries from slips and falls may be protected by your General Liability policy, but grey areas arise depending on where the injury occurs.

“Operators should always make sure their lot is secure.” Liability and Auto Liability policies through the same carrier, to reduce confusion about which company is covering a claim.

What more can agencies and operators do to make the most of their General Liability coverage? It’s not a very expensive coverage. What we’re seeing is that certain motorcoach customers and destinations – airports, school districts, casinos and other groups – want higher limits on General Liability coverage because they think it’s necessary. In the bus business, operators want to make sure they’re meeting these limits and understand the extra expense associated with higher limits.

What other factors should operators stay mindful of? At a transit agency with big facilities, make sure security is up to par. Lot securement is key so that members of the public don’t just walk on to your yard. People do things from time to time that do not make sense, and, if something does happen on your premise and people are injured, they will likely look to you for payment of any injuries they may have sustained. If the yard’s not secure, there could be vandalism or damage to your vehicles as well. This series will continue next month! Tim O’Bryan serves as president of Service Insurance Agency. Since 1952, the company has been committed to the transportation industry. Service Insurance Company strives to provide the most knowledgeable advice and personal service to all of its valued customers. Visit them online at www.serviceins.com.

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INSURANCE BASICS

Is your maintenance facility covered? By Tim O’Bryan The continuing series with Tim O’Bryan, president of Service Insurance Agency, Richmond, VA, turns its attention to the maintenance facility, specifically Garage Liability and Garagekeepers Legal Liability. Both are important policies to consider for any operator conducting third-party maintenance.

With Garagekeepers Legal Liability, insurance an operator should assess the most expensive vehicle their garage works on, then pick a limit to cover the potential total value of that vehicle. There is also a deductible that would apply, much like on their physical damage coverage.

What are the essential elements of insuring a maintenance facility? There are two big policies: Garage Liability and Garagekeepers Legal Liability. Garage Liability is similar to Auto Liability – it’s the liability that your work may have caused. For example: a garage owner or his/her employees are repairing another operator’s bus, but they make an error. An accident occurs and it can be traced back to that garage. In this case, the garage would rely on its Garage Liability insurance. Garagekeeper’s Legal Liability covers more physical damage. In the previous example, one of the garage owner’s employees might back another operator’s vehicle into a pole – causing physical damage and calling for Garagekeeper’s Legal Liability insurance.

Where should garage owners go for these policies? Most major motorcoach insurance companies write their Garage Liability and Garagekeepers Legal Liability policies, because there’s a lot of “Good Samaritan” situations in the industry, for operators who only do this kind of work as a small percentage of their total revenue. Everyone wants to help their neighbor, and it’s the right thing to do, but it leaves garages open to liabilities. Even if it’s just one third-party repair per year, think about coverage – or think about not doing it at all. There’s no third option. “For-hire” garages, or even garages working on many different types of vehicles, should seek a traditional garage policy from a garage insurer, not a motorcoach package. If operators are doing major engine work or major brake work for other people, they need to get the proper insurance coverage. Property coverage on the building is an obvious necessity. Worker’s compensation for garage personnel is also needed. If garage work is subcontracted out, make sure all subcontracted employees are also covered. No matter what, the people on the coach need to be properly insured – either through your policies or verified through their employer.

When should operators obtain Garage Liability and Garagekeepers Legal Liability insurance? There are some carriers that will write standalone policies for Garagekeepers Legal Liability, while others write Garage Liability as a product of completed operations function of General Liability (GL) coverage. It depends on the carrier but at the very least, if an operator is working on other companies’ buses, even if it’s just as a “Good Samaritan” and at very random intervals, that represents an exposure. Operators should invest in, at minimum, a $1 million Garage Liability policy and/or have their GL insurance include Garage Liability with the necessary endorsements. 6

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Tim O’Bryan serves as president of Service Insurance Agency. Since 1952, the company has been committed to the transportation industry. Service Insurance Agency strives to provide the most knowledgeable advice and personal service to all of its valued customers. Visit them online at www.serviceins.com.

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Avoiding the pitfalls of workers’ comp By Tim O’Bryan The continuing series with Tim O’Bryan, president of Service Insurance Agency, Richmond, VA, now focuses on workers’ compensation claims – specifically, the pitfalls of workers’ comp and how motorcoach operators can avoid them. What’s one of the biggest pitfalls that motorcoach operators don’t foresee when dealing with workers’ compensation? Tim O’Bryan: I often see operators confusing contracted workers with employees. The term “contracted” almost implies that they’re not really employees. The fact is, if you give someone a coach and tell them where to go with it, they’re an employee. Regardless of what the contract says, operators need to adjust their payrolls accordingly. In the motorcoach industry, we really don’t have independent contractors in a true sense – not like there are in the trucking business. In trucking, the contractor might own the vehicle and not the load. On the bus side, there’s no true independent contractor so anyone driving your bus needs to be covered under workers’ comp. Workers’ comp has nothing to do with full-time, part-time or seasonal employment. It’s driven by payroll. It’s all well and good to separate your employees that way, but the your workers’ comp carrier just wants to know total payroll. Every state is different as to when you’re required to have workers’ comp. With some states, it’s three employees and the owner is counted in that. In other states it may be more or less. You need to know what your individual state requires. If you only have two people and the states say three, that’s fine. You can still be held liable for that person’s injuries. The only exception is an operator who owns the company, drives the bus, answers the phone and completes all maintenance by himself. Everybody’s got somebody in the office that answers the phone – even if it’s just a family member who doesn’t take a salary. There’s

always someone in the garage so, before you know it, your company already has four or five employees. For this reason, it’s extremely important to know your state’s individual statutes. Operators with locations in different states must be sure to stay abreast of workers’ comp requirements in all of those states. Tell your agency, at the beginning of the policy, about all of your locations and make sure you’re covered properly. How important is payroll upkeep to understanding workers’ comp? O’Bryan: Workers’ comp is a premium based on total payroll, and it’s divided into different classes, depending on the class of employees you have. Every state is different and the state sets the rate. Using the right payrolls is extremely important. Do yourself a favor and don’t monkey around with the payrolls. Don’t try to save money on that, because your workers’ comp carrier is going to get you on audit. Be reasonable, look at what you have on the books and don’t cut corners. In the motorcoach industry, we borrow and/or subcontract buses during the year depending on seasonal needs. Always get a certificate of insurance from the operator you’re borrowing from to make sure they have workers’ comp.  Anyone you’re doing business with must provide you with a certificate of insurance. Keep these certificates in your workers’ comp file, because auditors may come in and ask for them. If you have the certificates, the auditor will likely move along. If not, they’ll start to ask more questions which could lead to additional premium. Tim O’Bryan serves as president of Service Insurance Agency. Since 1952, the company has been committed to the transportation industry. Service Insurance Agency strives to provide the most knowledgeable advice and personal service to all of its valued customers. Visit them online at www.serviceins.com.

Worker’s compensation is often the “first line of defense” for owner-operators.

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Knowing the legal responsibilities of garage-keepers By Tim O’Bryan The continuing series with Tim O’Bryan, president of Service Insurance Agency, Richmond, VA, now centers on the legal responsibilities of garage-keepers. We discussed what operators need to know, expanded liabilities and the ins and outs of Occupational Safety and Health Administration (OSHA) inspections. Please describe the garage-keepers’ liability component in a typical garage insurance policy. The garage policy is the liability portion for the work you perform to repair or maintain a bus or motorcoach of others. The garage-keepers’ portion of the policy covers any physical damage to the vehicle while the bus is in the maintenance facility. For example, a technician backs the bus out of the garage and hits a light pole. The garage-keepers’ liability covers only the physical damage specific to that accident; not a mechanical issue, or having anything to do with the repairs. It is basically comp and collision coverage. What do operators and maintenance personnel need to know about garage-keepers’ insurance? Because the shop is responsible for any damage to any vehicle in its care, a garage-keeper’s policy is generally in tandem with the garage policy, and operators must be cognizant of its legal requisites. The garage policy covers liability for the parts and labor involved in the actual maintenance and repairs. Any damages to the vehicle during that time fall under the garage-keepers’ portion, not unlike an auto liability policy that has the liability amount and the physical damage part. What expanded liabilities consider the work environment and garage personnel? The garage is a dangerous work setting. In accordance with OSHA standards for heavy-duty equipment and fixtures such as lifts and maintenance pits require strict compliancy to ensure their safe operation. The safest garage is always clean and well-maintained with proper storage to help avert trips and falls; as well as safety signage and warning markings; and specified safety gear and emergency mechanisms. Additionally, compliancy includes safety training on the proper use of all shop equipment and safety gear and equipment. What is your “first order” to bus and coach operators in terms of their maintenance operations? While every bus maintenance facility of any size should of course construct, equip and maintain their garage facilities to OSHA standards, this is particularly important for larger operations which are typically 8

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most likely to receive periodic inspections from OSHA. It’s less like OSHA will routinely inspect the smaller operations. Nonetheless, they cannot afford to ignore or take lightly OSHA requirements, as the risks to property and personnel are the same. What do OSHA inspectors look for? OSHA inspectors check to ensure the facility, equipment and tools and products all carry the required safety labels, markings and warnings; safe storage of flammable and hazardous materials; and equipment and tools are in their proper place and in working order. We’ve seen mechanics written up because they took the shields off the grinders. Everyone must be mindful that safety mandates and regulations are in place for a reason. Continual care to the facility and the equipment is the best way to ensure good State of Repair and is not a safety hazard. No one wants the headache that comes with a worker’s comp claim. In your dealings with clients, what issues must keep walking each one through and explaining? The marketplace is well-defined as far as necessary coverage. We seem to keep re-educating the small companies on their need to carry workman’s comp. More than a few companies think they are too small to require it. It’s simply a head count. Whether their employees are fulltime or part-time, once the staff reaches a certain number, state laws require the company to have workman’s comp. Perhaps the greatest challenge is working around a conditional rating where that company becomes more difficult to find insurance. It comes down to taking all compliance matters seriously, and being educated on what it all means and the correct steps and procedures to remain compliant. It is totally upon the company to have it right. Tim O’Bryan serves as president of Service Insurance Agency. Since 1952, the company has been committed to the transportation industry. Service Insurance Agency strives to provide the most knowledgeable advice and personal service to all of its valued customers. Visit them online at www.serviceins.com.

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What makes motorcoach insurance unique? BUSRide’s ongoing series of interviews with Tim O’Bryan, president of Service Insurance Agency, Richmond, VA, now turns to the intricacies of motorcoach operators’ insurance, what makes it unique from other transportation insurance plans, and how adept the industry is at navigating its various pitfalls.

and accessorized semi-rig starting around $150,000. Relatively speaking, the associated costs of physical damage are tremendous. Dealing with equipment five to six times more expensive, coach operators have gravitated to higher deductibles simply to keep their costs down. What is your take on efforts by DOT to increase the requirement for motorcoaches to as high as $20 million? Very few insurance companies would be comfortable with such high limits on motorcoaches. A higher level of insurance coverage does not mean a coach company will necessarily operate more safely than before.

You deal in all transportation modes – what do you notice as unique to the motorcoach industry? Differentiating buses and motorcoaches from what we see in trucking, the biggest separator is the minimum limit of insurance these operators are required to carry. Any carrier transporting 16 or more passengers across state lines must carry $5 million of coverage; whereas for the cargo trucking industry the regulation is $750,000 – although most trucking carriers carry $1 million. Is the higher $5 million stipulation for commercial passenger carriers attributable to their transporting people, as opposed to cargo? It certainly distinguishes the differences in operations for each sector. On the trucking side, we commonly write for auto liability and physical damage on one policy and a separate policy for cargo. Cargo is not property of the trucking company; we view its care as a responsibility in the service for a client. The cost of the equipment is another consideration. New model motorcoaches are upward of $600,000, compared to a fully-equipped

From your experience, what do motorcoach operators need to know or better understand in working with their insurance broker? What advice do you continually try to impart? I think it has mostly to do with relationships, with their agent as well as the insurance company. In this respect, a pretty small group of agents and insurance companies. Seven companies, at the most, write policies for the motorcoach industry. If the agent is doing a good job and the relationship is strong, the company can trust him or her to go out get quotes. Establishing and developing that type of relationship with the insurance company through the agent is very important to operators. The agent can be instrumental in assisting with safety programs and compliance issues; ensuring the company is doing everything right. One of the fastest ways companies can fall out of grace is through low SMS scores. Having a bunch of violations on record clearly shows they are not giving enough attention to safety. They may not have a lot of insurance claims, but if their safety scores are trending poorly, it looks bad to the underwriter. These are supposedly indicators of what the future could hold. The theory is that high number of violations given will ultimately lead to an accident of some kind. In this day and age, it important to pay closer attention to the information and messages conveyed on the company website and social media. For example, party buses are becoming more popular, while insurance companies are not getting overly excited; favoring forwardfacing, two-and-two seating, preferably with seatbelts. One operator thought it would be cool to show a party bus on his website as a possible service. The problem being, he doesn’t run any buses configured as a typical party bus. Still, he’ll have a devil of a time convincing an insurance underwriter that is not the case. As another example, one operator started out running a party bus and managed to evolve into corporate charters over the course of 10 years. However, to this day, he has yet to reflect his progress on his website; which, if for nothing else, makes it a “royal pain” to insure him because he still appears as the party bus guy. The lesson: If anything has changed or is out of date, fix it. It may mean paying a webmaster, but its money saved on the potential insurance premium. Tim O’Bryan serves as president of Service Insurance Agency. Since 1952, the company has been committed to the transportation industry. Service Insurance Agency strives to provide the most knowledgeable advice and personal service to all of its valued customers. Visit them online at www.serviceins.com.

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What are the lesser-known legal responsibilities of motorcoach operators? BUSRide’s ongoing series of interviews with Tim O’Bryan, president of Service Insurance Agency, Richmond, VA, now turns to the lesser known legal and insurance responsibilities of motorcoach operators. From a risk management perspective, can you shed some light on the lesser-known legal responsibilities of motorcoach operators and owners, as they relate to their insurance coverage? One that always concerns us most is contractual liability. Our customers – motorcoach operators – are signing contracts all the time in order to get work. Most of these contracts have an insurance section which will define the motorcoach operator’s responsibilities. Review these insurance requirements with your agent prior to signing so that your agent can evaluate if you have the necessary coverages. The responsibilities are clear: Read all contracts thoroughly before signing. Talk it over with the agent. Have him check all contracts from an insurance standpoint. Employment practices liability is another lesser known area of concern. These types of liabilities arise from the employment process and workplace environment. The most frequent types of claims are wrongful termination, discrimination, and sexual harassment. Motorcoach operators must make every effort to insure that employees are treated fairly and the workplace is not a hostile environment. Motorcoach operators should have a procedure for employees who wish to voice their concerns of unfair treatment, wrongful termination or discriminatory actions of one kind or another. Another area of concern would be cyber security for personal information kept on company computers, whether it’s a client’s information or an employee’s information. Why do these areas and responsibilities seem to be lesser known? Operators often take contractual liability for granted by assuming the fine print in most contracts is all the same; like a boilerplate, they’ve seen thousands. However, a new risk manager may have added in something the company didn’t read carefully — such as holdharmless clauses, or waivers of subrogation which operators must address before signing the contract. As for employment practices liability, issues in this area do not occur that often. Still, the motorcoach company must have some system in place so that people who feel unfairly treated can voice their concern without fear of retaliation.

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What are the inherent dangers in not understanding the importance of these responsibilities, and adhering to policy in these areas? As for contractual liabilities, there are myriad hidden pitfalls for signing or promising anything the company cannot deliver. The trouble is they can be easily missed without a diligent review. Employment practices liability, in this day and age, revolves around issues involving wrongful termination and discrimination. It can lead to consequences that companies cannot afford to dismiss or handle arbitrarily. Also, there can be a danger of a hostile work environment; for instance, employees sharing inappropriate emails and photos — anything that targets other employees or makes them uncomfortable. A company that does not address these issues will have a problem at some point. The wise operator will have additional coverage in this area as a part of the general liability or as a stand alone policy. It’s called Employment Practices Liability Insurance (EPLI). Doing business online and over the internet has become so prevalent it may seem commonplace. However, the cyber security can turn serious if sensitive information is mishandled. Collecting credit card information and employees’ social security numbers must be kept under lock and key. It is critical to safeguard both company information as well as client information with procedures in place to save information and to destroy sensitive account records once they are no longer needed. Our recommendation to operators is to partner with your agent and insurance company. Discuss what you are doing and what is the best way to insure against potential claims. On a final note, we strongly urge operators to implement premises security. Make sure the gates are locked, the lots are well lit and the buses are locked. People who come into the yard and injure themselves in some way can still file a claim, even though they may be trespassing. This may be common sense, but companies can get so caught up in running their businesses that it falls by the wayside. Tim O’Bryan serves as president of Service Insurance Agency. Since 1952, the company has been committed to the transportation industry. Service Insurance Agency strives to provide the most knowledgeable advice and personal service to all of its valued customers. Visit them online at www.serviceins.com.

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