In an article for Heavy Duty Trucking, Goldberg Segalla’s Robert M. Hanlon Jr. and Christian A. Cavallo discuss how trucking companies can use “fronting” insurance policies to reduce premium costs and maintain control over their claims, and ensure compliance with federal and state financial regulations.
In the article, Bobby and Chris, partners in the firm’s Transportation practice, talk about how trucking companies remain responsible for their own defense and losses under fronting policies, and how fronting polices are not self-insurance because the insurance company is there to guarantee payment of the loss if the motor carrier becomes insolvent.
“Since the company is responsible for its own losses, the premiums are lower than they otherwise would be for the same policy,” Bobby said. “If it retains essentially all of the risk with a $1 million deductible, its premium will be much less than if it retains just 10% of the risk with a $100,000 deductible.”
Chris added that the surety provided by the insuring company on a fronting policy “means the insurer stands behind the motor carrier. It’s not self-insurance, because the insurance company is on the hook [for the rest of the risk]. But the first impact is on the motor carrier. Only if they cannot pay it does the insurance company handle the obligation under the policy.”
“A trucking company with a higher matching deductible needs to be in contact with their insurance provider [should a crash occur],” Chris said. “They cannot let stuff sit around and not get where it’s needed, such as making sure to send the insurer any time-limited demands made by a third-party claimant or their attorney that the motor carrier pay money as a result of bodily injuries or other damages allegedly sustained by the claimant.”
“How Trucking Fleets Can Escape the Insurance Squeeze,” Heavy Duty Trucking, February 17, 2021
Robert M. Hanlon Jr. co-chairs the firm’s Transportation group and serves as Regional Coordinating Counsel for a multi-national trucking and logistics company. He concentrates his practice on the defense of product liability, transportation, and catastrophic personal injury litigation. He is a Fellow of the American College of Trial Lawyers and has tried more than 30 cases to verdict in nine states. He represents motor carriers, private fleet operators, and their insurers. In product liability matters, he represents manufacturers of automobiles and trucks, trailers, consumer products, and industrial equipment. He has defended cases involving nearly all aspects of automobile design and manufacture.
Christian A. Cavallo is a leader of the Global Insurance Services New Jersey team and of the firm’s Transportation Coverage team. Chris focuses his practice on representing and counseling insurers and other commercial clients in complex, high-exposure matters involving both first- and third-party insurance products, including extracontractual claims and claims arising under consumer protection statutes. Chris regularly writes and presents on emergent insurance industry topics, and he is involved in leadership roles for the firm’s GIS Webinar series and the firm’s insurance blog, The Insurance & Reinsurance Report.