A foodservice distributor in Lakeland runs refrigerated box trucks to restaurants and schools along the I-4 corridor and a few cargo vans for rush orders. Over one season, three different things go wrong. A van loaded with product is stolen from outside a customer’s back door. A truck’s refrigeration unit fails on a hot afternoon and a full load spoils. And a driver unloading with the liftgate rolls a pallet jack into a restaurant’s walk-in cooler door. The distributor’s auto policy responds to one of the three. The other two depend on coverage sitting on other policies, and whether it was ever put there.
Commercial auto for a wholesaler or distributor is a delivery question as much as a vehicle question. The vehicles carry the business’s own inventory, often to the same customers every week, with drivers handling the product at both ends. Getting it right means insuring the trucks and vans properly and making sure the goods inside them, the loading and unloading and the drivers who aren’t on the payroll are all accounted for somewhere.
The Goods in the Truck Aren’t Covered by the Auto Policy
Business auto physical damage covers the vehicle and equipment permanently attached to it. It generally doesn’t cover the products being carried. When a loaded van is stolen or a truck overturns, the auto policy pays for the vehicle, and the inventory has to be covered elsewhere.
For a distributor hauling its own goods, that’s usually transit coverage on an inland marine form, or a transit extension on the business’s property policy, written to the value of a typical load and the most the business ever has on one vehicle. Motor truck cargo, the coverage trucking companies buy, is designed for carriers hauling other people’s goods for a fee, which is a different situation. Distributors carrying refrigerated or frozen product should confirm whether spoilage from a refrigeration breakdown is covered, since it’s often excluded unless added. And theft coverage for goods in an unattended vehicle frequently comes with conditions, such as the vehicle being locked or showing signs of forced entry. Our articles on inland marine for distributors and cargo theft insurance for distributors go into detail.
Loading and Unloading Sits Between Two Policies
Delivery drivers spend much of their day out of the driver’s seat, handling product at a dock, a back door or a stockroom. Business auto liability generally extends to loading and unloading a covered vehicle, so injury or damage while goods are being moved on or off the truck is often an auto claim, even when the truck is parked. Once the goods are delivered and the driver is stocking shelves, operating a customer’s forklift or setting up a display, the exposure usually moves to general liability. Where that line falls depends on the policy wording, so the auto and general liability policies should be reviewed together. Damage caused by the product itself after delivery is a products liability question for the general liability policy, not the auto policy.
Private Carrier or For-Hire
A distributor hauling only its own goods is generally a private carrier, insured as a wholesaler or distributor running delivery vehicles. That changes if the business starts hauling other companies’ goods for a fee, backhauling freight to fill empty trucks or operating as a carrier for a customer. At that point, it may be treated as a for-hire trucking operation, with different markets, cargo needs and filings. Box trucks and tractors above certain weights, and any vehicles crossing state lines, can also bring federal and state registration, driver licensing and safety requirements even for a private carrier. Our articles on interstate vs. intrastate trucking rules and truck physical damage and cargo explain where those lines are.
The Vehicles Determine the Market
Cargo vans, box trucks, refrigerated trucks, pickups with trailers and tractor-trailers are each rated differently, and weight matters most. Trucks of 26,000 pounds or more face Florida financial responsibility minimums set by weight, and heavier trucks generally require drivers with a commercial driver’s license. A distributor with a mix of light vans and heavy trucks may find that some carriers will write the vans and not the trucks, which is one reason distribution fleets are often placed with specialty markets. Progressive and GEICO write many light commercial vehicles directly, and heavier fleets typically go through specialty commercial auto markets. Our article on cargo van insurance covers the light end.
Drivers Drive the Price
Delivery work tends to bring driver turnover, tight schedules and drivers who take vehicles home. Carriers will want every regular driver listed and will review each one’s motor vehicle record, and a single driver with serious violations can change the price of the whole fleet or the markets willing to write it. Checking records before hiring, keeping a written policy on who may drive and whether vehicles go home at night, and telling the carrier when drivers change all keep a fleet insurable. Telematics, which some carriers use to rate fleets on how vehicles are actually driven, can help a distributor with a good safety culture prove it; our business auto telematics page explains how it works.
Couriers, Contractors and Employees’ Own Cars
Many distributors supplement their own fleet with independent couriers, owner-operators or employees using their own cars for small deliveries. Each one carries an exposure back to the distributor. Hired and non-owned auto coverage protects the business when employees drive their own vehicles or rented vehicles on its behalf. Independent couriers and owner-operators should carry their own commercial auto and cargo coverage, and a distributor using them should collect certificates and, where possible, be named as additional insured, since an injured party may still look to the business that arranged the delivery. Our guides to hired and non-owned auto insurance and delivery and courier insurance cover those arrangements.
Customer Contracts and the Umbrella
Large customers such as grocery chains, restaurant groups, schools and hospitals often require distributors to carry specific auto limits, name them as additional insured and waive subrogation, and they expect an umbrella above the auto policy. A serious accident with a loaded box truck can produce claims well beyond a primary auto limit, which is why umbrella coverage is standard for distribution fleets. The umbrella should sit above the auto policy as well as general liability and employer’s liability. Our article on umbrella insurance for wholesale businesses explains how to size it.
When the Trucks Stop, So Does Revenue
A distributor that loses several trucks in a storm or a fire at the warehouse can lose the ability to deliver, even if every vehicle is insured. Business income coverage on the property policy addresses income lost after covered property damage at the premises. Losing vehicles alone typically isn’t covered there, so distributors should know how quickly they could rent replacement trucks and whether rental reimbursement on the auto policy is enough for commercial vehicles. Our article on business interruption insurance for distributors goes into detail.
What Distributors Should Confirm
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Is inventory in transit covered on an inland marine or property transit form, at a limit that matches your largest load?
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Is spoilage from refrigeration breakdown covered for refrigerated product?
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What conditions apply to theft of goods from an unattended vehicle?
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Do your auto and general liability policies coordinate on loading, unloading and work at the customer’s location?
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Do you haul anything for others for a fee?
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Are heavy trucks rated correctly, and do drivers hold the right licenses?
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Has every driver’s record been checked, and are new drivers reported to the carrier?
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Do couriers and owner-operators you use carry their own coverage, with certificates on file?
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Do you carry hired and non-owned auto for employees using their own cars?
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Does your umbrella sit above the auto policy, at limits your customers require?
For more, see our wholesaler and distributor insurance, warehousing and logistics insurance and business auto insurance pages, warehouse vs. distributor insurance, wholesaler and distributor insurance in Medley, commercial auto vs. personal auto and business auto insurance in Miami.
General information only, not legal advice. Policy forms, endorsements, cargo and transit terms, and federal and Florida motor carrier requirements vary and change; refer to your policies and the applicable regulations for the terms that apply to your business.
Talk to Prestige Insurance Group
Prestige Insurance Group insures wholesalers and distributors across Miami, Doral, Medley, Lakeland, Orlando and Tampa, from a single cargo van to mixed fleets of refrigerated and heavy trucks. We write Progressive and GEICO directly and work with over 100 MGAs and specialty markets for heavier fleets and harder drivers. Send us your vehicle list, drivers, current declarations and a note on what you carry and where, and we’ll show you how the auto, transit, general liability and umbrella coverage fit together and where they don’t.
Distributors that sell products under their own brand can be treated as the manufacturer in a lawsuit. Our page on manufacturer insurance explains how that changes the coverage.
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Miami: 305-969-8776
Stuart: 772-247-3788
Prestige Insurance Group, License L057894
