As the trucking market begins to rebound, some insureds are looking for ways to reduce costs. This may come in the form of leasing their units to other trucking companies to remove them from their insurance policies. While this might seem like a smart financial decision on the surface, it’s crucial to understand the potential legal and financial consequences before taking this step.
Here’s what you need to know about leasing your trucking units and the risks involved when something goes wrong.
The Risk of Leasing Your Unit
When you lease your unit to another trucking company, you may assume that the other party assumes full responsibility for the vehicle. However, the reality is far more complicated, especially in the event of an accident.
• Dual Liability: If there is a loss or accident involving the leased unit, the legal and financial repercussions can go to both the party leasing the unit (the lessee) and the party listed on the title (you, the owner). Even if you’ve leased the unit out, your name on the title can make you a target for lawsuits or claims.
• Who is Responsible: In many cases, the other party’s insurance may not provide adequate coverage, or worse, they may not have the right coverage at all. If the lessee fails to manage the claims properly, or meet regulatory requirements, the responsibility could fall back on you.
• Reputational Damage: Accidents or violations involving a unit under your ownership can damage your company’s reputation, even if you had no direct involvement.
Legal Repercussions to Consider
Leasing agreements can be legally complex, and not understanding the details could leave you exposed.
• Lawsuits: If a loss occurs, injured parties or other affected individuals may pursue claims against you as the unit’s owner, regardless of the lease agreement. You could be held partially or fully liable for damages.
• Title Implications: As the title owner of the vehicle, you may still be legally responsible for maintaining proper insurance coverage, depending on your state’s regulations. Failing to do so could lead to fines, legal action, or other penalties.
• Insurance Complications: Leasing your unit may void certain protections under your existing policy. If the lessee’s policy does not include adequate liability or cargo coverage, the financial fallout could come back to you.
How to Protect Yourself
Before leasing your unit to another trucking company, consider these steps to minimize your risk.
• Review the Lease Agreement: Work with an attorney to draft or review the lease agreement. Make sure it clearly outlines the responsibilities of both parties, including maintenance, insurance, and liability.
• Verify Insurance Coverage: Confirm that the lessee has sufficient and appropriate insurance coverage for the unit, including liability and cargo insurance. Request proof of coverage and ensure your name is listed as an additional insured where possible.
• Understand Regulatory Requirements: Stay informed about state and federal regulations that may impact your responsibilities as the titled owner of the unit. Compliance with FMCSA regulations is important in this regard.
• Consult with your Insurance Provider: Talk to your insurance provider about your plans to lease the unit. They can help you understand how it will affect your policy and whether additional coverage is needed to protect you.
Weigh the Risks
While leasing your trucking units might seem like a good way to save on insurance costs, the potential risks, and legal repercussions can outweigh the benefits. In the event of an accident or loss, the consequences can be far-reaching, impacting your finances, reputation, and legal standing.
If you’re considering leasing your units, take the time to fully understand the risks and consult with experts to protect yourself and your business. At Marquee Insurance Group, we’re here to provide guidance and assist you along the way!
