To Interchange Or To Non-Owned Trailer, That Is The Question

Reference: Going Deeper on insurance requirement unique to power only operations:  Trailer Interchange v. Non-owed Trailer (W.Joel Baker-Jan18th, 2022)

This week NASTC Insurance Services, LLC. and a few of our clients, were reminded that not all coverage is created equal when it pertains to needing Trailer Interchange vs. Non-Owned Trailer coverage.  When an insurance agent is in the discovery process and discussing trailer usage with a prospect, we are asking details about the types of trailers an insured will use in their operation as well as the specific types of cargo commodities that each will haul on a regular basis.  The reason this is important is because not all insurance companies view the coverage the same way. If this information is not communicated properly and understood, it could have disastrous and costly consequences for a motor carrier.  Unfortunately, the term Trailer Interchange is often used as a “loose” term describing any trailer that a motor carrier uses to transport loads when the insured does not own one directly.  Insurance companies and risk managers with large brokerage operations have taken it upon themselves to tell us there is a difference.

Trailer Interchange is used to cover hauling units that are owned by a single company or customer.  The interchange agreement will contain information on scope, usage, and coverage of the trailer while it is in your possession and will typically need to be signed by both parties to be considered valid.  Most insurance companies believe the above items need to be present, to be considered a valid Trailer Interchange agreement.  The cost of Trailer Interchange is also calculated differently than non-owned trailer.  As an agent, we need to know the value limit to cover the trailer for comprehensive and collision, the number of loads or turns per week that will be hauled by the motor carrier, and how many weeks per year usage is needed.  The rating factors used in pricing the interchange coverage can be less than the basic method used for Non-Owned Trailer coverage depending on the usage.  If the trailer type and cargo commodities are the same and a valid interchange agreement exists, a Trailer Interchange can apply to multiple agreements.  The value limit just needs to be high enough to cover the multiple agreements and updated load figures and usage time provided to the insurance company.

Non-Owned trailer coverage is used to provide comprehensive and collision coverage on a trailer that is not owned by the motor carrier.  The trailer is also one that does not have the same vin# used on a regular basis.  As an agent, if we do not have a copy of the interchange agreement from the insured, we are most likely going to put this type of coverage on a policy.  It is important for your insurance agent to know which companies / polices will allow Non-Owned trailer coverage or will only accept a signed Interchange Agreement.  The cost for Non-Owned trailer coverage is typically calculated the same as an “Owned” trailer would be.  All Power units and trailers will have a physical damage rate based on percent of value.  If you have a current physical damage rate of (5%), that rate would also be used to calculate the value of the Non-Owned trailer.  The cost could vary somewhat if you already have a primary rated trailer on policy as the liability cost associated with this trailer might be rated as a spare unit, which would be a small bit less than the primary trailer. 

Until recently, it has been easier for agents and insureds to just have Non-Owned added to their policies so neither had to worry about policing the interchange information required by the insurance companies.  Claims issues and concerns with some insurance and brokerage companies have made it necessary to have both coverages represented on an insurance policy.  One of the larger companies is shifting to Trailer Interchange only coverage when a client is hauling their owned trailers omitting the fact that they have accepted Non-Owned trailer coverage in the past.  So, if you are dealing with some of the larger asset-based brokers moving forward, it may be a requirement for you to have both coverages if their company loads are not 100% of the load volume that you carry.