Hotshot Leasing Trends: Non-Trucking Liability and Physical Damage Challenges

 

We’ve been flooded with non-CDL operations asking for quotes.

Here come the next wave.

Hotshot operators are leasing on to larger carriers as owner operators. And the lease agreements are treating them like full-size tractor operators.

The insurance market is not cooperating.

The Lease Model Was Built for Semis, Not Pickups

A lot of these carriers are requiring:

• Non-trucking liability
• Owner operator physical damage

That model works cleanly for a Class 8 tractor with a CDL driver and an ELD.

Hotshot pickups do not always check those boxes. Underwriting is reacting to the exposure, not just the legal requirement.

The Personal Auto Question

After getting decline after decline on hotshot non-trucking liability coverage we are left wondering, “If the hotshot isn’t under dispatch, we know that is personal use. Could you carry a personal auto policy instead of non-trucking liability?”

In theory, personal auto covers personal use. That part is true.

In reality, most personal policies cap liability at $250,000 or $500,000. Many lease agreements require $1,000,000.

That gap creates the first problem.

Then there is underwriting. A one-ton dually used for for-hire hauling five days a week does not look like a standard personal risk. If a personal carrier decides the vehicle is primarily commercial, they can non-renew or challenge a claim.

That is not a risk we would casually recommend taking.

The Physical Damage Piece Is Where It Gets Risky

The truck is the income-producing asset.

Most personal auto policies exclude physical damage while the vehicle is being used to carry property for a fee. If the truck is damaged while hauling a load, that personal auto policy may not respond.

That is why these leases require the owner operator to carry commercial physical damage.

Yes, standalone physical damage policies can be placed on a commercial form. But now you may have:

• Personal auto handling off-dispatch liability
• The motor carrier handling on-dispatch liability
• A separate commercial policy handling physical damage

Three policies. Three carriers. One accident.

If there is any dispute about dispatch status, everyone is going to look at the file very carefully.

That structure is possible. It just needs to be built intentionally, not thrown together because markets are tight.

Why Non-Trucking Liability Is Tight Right Now

We are seeing:

• Pickups declined for non-trucking liability
• ELD requirements added
• CDL underwriting expectations applied even when a CDL is not legally required

Underwriting models are tightening everywhere. Pickup-based for-hire hauling does not fit neatly into the current boxes for owner operator operations.

The market is adjusting in real time.

This Is Bigger Than the Owner Operator

Motor carriers leasing on hotshot pickups need to step back and review their lease agreements.

If the contract requires coverage that is difficult or unrealistic to obtain in today’s market, operators are going to:

• Walk away
• Piece together fragile insurance structures just to satisfy the lease

Neither option is good for stability. Hotshot leasing is expanding while underwriting appetite is narrowing.

Those two trends are colliding.

Carriers who align their lease requirements with what is actually obtainable in the insurance market are going to avoid a lot of friction.

Because when a serious claim happens, the lease agreement sets expectations. The policy language decides what actually gets paid.

If those two do not match, that is where problems start.

Hotshot leasing is not slowing down. Non-CDL operations are rapidly growing. Carriers want capacity and flexibility. We understand that but lease agreements cannot be built on assumptions about coverage that no longer matches the current insurance market.

If non-trucking liability is declined, if personal auto cannot meet the required limits, and if physical damage has to be placed separately, that is not just an owner operator headache. That is a structural issue.

Main carriers need to sit down with their insurance advisors and review:

• Are the required limits realistic for this unit class?
• Is the off-dispatch liability requirement aligned with what is actually available?
• Does the physical damage requirement create unnecessary fragmentation?
• Does the lease language reflect current underwriting appetite?

If the answer to those questions is no, the agreement needs to evolve.

Because when a serious accident happens, no one cares what the lease “intended.” The policy language controls the outcome.

And if the lease structure and the insurance structure are not aligned, that is where expensive problems begin.

 

We are actively digging into viable markets and alternative structures for hotshot non-trucking liability and standalone physical damage. This segment is evolving quickly, and underwriting appetite is shifting in real time. As we identify workable solutions, we will follow up and share what is actually obtainable in the current market.

If you are a hotshot operator trying to lease on, or a motor carrier building out a pickup-based program, we should review the structure before it goes live.

Call us at 254-294-7798 or email info@trucku.biz and let’s make sure the insurance actually works the way everyone thinks it does.

This post is for educational purposes only. It is not legal advice, insurance advice, or a substitute for calling your agent. Truck U is good, but we are not psychic. Policies vary, laws change, and courtrooms get weird. Do not make decisions based solely on something you read on the internet unless it is from us, in writing, with your name on it.

All opinions are our own and do not represent the views of any carrier, employer, or underwriting department that occasionally wishes we were quieter on LinkedIn.