Is Your Trailer Leasing EXPOSURE Covered?

Freight brokers involved in trailer leasing must contend with a myriad of liabilities that go beyond simple transportation services. These include critical maintenance issues and inadequate insurance coverage, both of which can significantly expose brokers to unexpected risks. Andy Kuchar, President of Centerline Insurance Company, warns that existing contingent insurance policies are unlikely to cover leased trailers, and that this gap often goes unnoticed by both brokers and leasing companies.

During a recent audit, Centerline found that every certificate of insurance it reviewed failed to include coverage for leased trailers.

Kuchar highlights two main reasons trailer leasing elevates liability concerns for brokers. Firstly, maintenance responsibilities typically lie with the lessee, implying that accidents caused by brake or bearing failures — such as those Kuchar personally witnessed on Interstate 24 near Chattanooga — could be attributed to the broker. Secondly, turning equipment leases into a service requires the broker to move beyond the role of a mere transportation arranger and assume additional legal exposure.

From an insurance standpoint, Kuchar advises brokers against relying on motor carrier commercial auto policies. These policies often require listing every trailer's VIN, and a leased trailer's VIN may be omitted. Moreover, premium-financed carrier policies can lapse without the broker's knowledge. Instead, brokers should secure a dedicated policy tailored to trailer-leasing risks, with particular caution for policies labeled as "contingent."

These policies typically have low limits and narrow coverage due to their low cost, similar to a $25 U-Haul damage waiver.

Additionally, Kuchar emphasizes the importance of a documented trailer maintenance schedule, suggesting that visual inspections by truck drivers can detect visible defects, but fail to identify potential bearing failures. Some leasing companies integrate maintenance tiers into their agreements, which can aid brokers in demonstrating proper equipment upkeep.

Lastly, Kuchar notes that leasing companies themselves pose an emerging risk category. In the three to four months preceding the interview, Centerline had issued approximately half a dozen policies to protect lessors directly, not just brokers leasing from them. This trend is largely attributed to the post-Montgomery ruling litigation, where courts have increasingly broadened liability to include shippers, brokers, and now equipment lessors.

As a response, leasing companies typically sign five-year contracts, necessitating annual re-verification of insurance compliance, which can sometimes be overlooked amidst managing numerous client files.