By Donna Ryun, OOIDA communications manager
Let’s talk about downtime insurance coverage … specifically, why some truck drivers find it’s like pulling teeth to get paid for it when they have a claim.
First, here’s a definition: Downtime insurance indemnifies for loss of earnings resulting from inability to operate because of damage to a tractor or trailer from an insured peril such as a collision or a fire.
If you’re a truck driver who has purchased downtime coverage from your insurance provider, you are probably already aware that your policy has a specific limit that includes a maximum. Therefore, when you file a claim, you’ll have written evidence of coverage limits and conditions for payment. If you have read over the policy and consulted your agent on any coverage questions, you shouldn’t experience any unpleasant surprises when it comes to being paid for your downtime.
Unfortunately, the same is not necessarily true when you get hit by an at-fault driver who causes damage to your truck resulting in downtime for repairs and loss of income for you.
Although the at-fault driver’s liability insurance provider is responsible, some truck drivers have told us that it’s not so easy to collect for their downtime loss.
Why is it so hard to collect for your downtime? After all, it was the other guy’s fault that your truck is out of commission. You can’t make any money if you’re not able to operate your truck because of someone else’s negligence. If the insurance company is supposed to make you “whole” after a claim, why do they often refuse to pay downtime coverage?
I suppose the short answer would be “because they can.” Of course, this is an oversimplification, but it often proves to be true for a number of reasons.
Making you “whole” after a claim might mean different things to different folks … particularly between a trucker suffering from loss of business due to a claim and an adjuster who has the insurance company’s best interests in mind.
On the one hand, the trucker is losing money because his truck is damaged. Bills are piling up that would normally be paid if only he could get on the road again. As long as the truck is not rolling, it is not producing income. The at-fault party should pay for the trucker’s loss of income, but what’s a reasonable amount?
On the other hand, the adjuster wants to keep as much money for the insurance company as he can, so whether or not he hands over a check for downtime will likely depend upon whether the trucker can prove his loss(es).
Did the trucker mitigate (avoid or reduce) the damages by attempting to rent or borrow a truck in order to keep working? (It’s nearly impossible to find a company who is willing to rent to an individual trucker.)
Can the trucker show proof that his loss of income is as much as he claims? Is the trucker dragging his feet on getting the truck repaired or finding a replacement for a total loss? The insurance company wants documentation and lots of it.
According to Chuck Johnston, manager of Commercial Truck Claims Management (CTCM), sometimes unreasonable expectations hinder the payment of downtime.
“You can’t claim you’re losing $700 a day, if your tax returns show your annual gross is $100,000,” says Johnston.
You must be willing and able to prove your loss because the insurance company will deny your claim if you can’t. Because of the speculative nature of trucking, proving loss of business income is no easy task.
Tom Crowley, a compliance agent in OOIDA’s Business Assistance Department, agrees. He has had success in helping members collect downtime losses; however, it isn’t a simple process.
“You’ll need to come up with the documentation to prove your loss of business,” Crowley advises. “Then you should be prepared to negotiate from start to finish.”
Insurance companies may use various formulas to calculate downtime losses. A common method is to determine gross income for 90 days before the accident, then subtract all variable expenses such as fuel, tolls, oil, etc. to figure a net income amount. Next, divide net income by the days actually driven during the 90 days before the truck was disabled in order to get a daily net loss figure. Finally, multiply the daily income times the number of days the truck is in the repair shop to arrive at your lost income amount.
Remember that you must back up your calculations with the necessary documents, such as tax returns, accountant statements, settlement sheets, profit and loss reports, etc. You’ll also need proof of mitigation of damages, such as a rental truck denial.
Keep in mind that the insurance company is concerned with reducing its losses, so get ready for lots of paper shuffling and nitpicking at the dollars and cents.
“Truckers start out all fired up about collecting the downtime that they have coming to them,” says Crowley, “but they often quit when they find out it’s going to be a tough fight to win. Insurance companies count on that and wait them out.”
According to Crowley, it’s easier to get a check for downtime with smaller claim amounts, and it’s not impossible to collect from the insurance company without hiring an attorney. However, if you’re thinking about filing a lawsuit, remember to consider that an attorney will normally retain about a third of any settlement that is reached, so be sure to compare the numbers in order to decide what works to your advantage.
A lawsuit may be the best option if you find you’re not getting anywhere with your negotiations, particularly if your loss numbers are larger. Crowley says he has referred members to Kelsea Eckert, an attorney with Eckert and Associates who has helped them with their downtime claims. Visit Eckert’s website at downtimeclaims.com for more information.
The bottom line is that you can be successful at collecting payment for your downtime after a loss. It likely won’t be easy, so you’ll need perseverance. Be realistic with your settlement expectations and be prepared to provide proof of loss documentation. It certainly wouldn’t hurt to sharpen your negotiating skills as well. LL