Excess Liability is the new GL

 

General liability used to be enough to satisfy most contracts.  It can be purchased for $500-$1,000 for the year and on a cert within 24 hours (in most cases). Now the spotlight is on excess over auto layers, and it carries a very different price tag. 

That shift is showing up directly in contract requirements and becoming the norm.

This post focuses on excess liability first because it is more realistic for most carriers. Umbrella coverage is more expensive, harder to place, and deserves its own conversation.

When we see a contract calling for umbrella or excess, we review the agreement line by line before we quote anything. It can be frustrating waiting on us to gather the information needed to structure it correctly, but that upfront review can save weeks of time and money compared to buying the wrong policy.

If excess is acceptable instead of a true umbrella, we then analyze the coverage form. Not all excess policies are structured the same, and the form will directly impact the premium.

We have excess policies that specifically exclude auto liability. Then we have follow form excess that sits directly over the commercial auto policy and follows its terms.

The excess that excludes auto is usually the most affordable option. From a pricing standpoint, we always try to see if that structure will satisfy the contract. If the language allows it, that can mean real savings for the motor carrier.

But if the contract specifically requires follow form over auto, the auto excluded excess will not be accepted. It will get rejected during compliance, and now we are restructuring the program under pressure. These types of quotes take days, sometimes a week or more, to quote, bind, and list correctly on a certificate.

That is why we start with the contract language before we ever start shopping limits.

What Follow Form Excess Actually Does

A follow form excess policy attaches directly over the scheduled commercial auto liability policy.

It follows the same definitions, conditions, and exclusions as the underlying auto policy unless specifically modified.

If your primary auto policy provides $1,000,000 in liability for bodily injury and property damage arising out of the use of a covered auto, the follow form excess continues that same coverage once the primary limit is exhausted.

If a serious accident results in a $3,500,000 verdict, the first $1,000,000 is paid by the primary auto carrier. The remaining $2,500,000 would be paid by the follow form excess, up to its limit.

It is built to stack directly over your auto liability exposure.

What an Auto Excluded Excess Does

An excess policy with an auto exclusion specifically removes coverage for liability arising out of the ownership, maintenance, or use of an auto.

For a trucking company, that means it does not respond to highway accidents at all.

If you have $1,000,000 in commercial auto and $4,000,000 in excess with an auto exclusion, you still only have $1,000,000 available for a trucking accident.

The excess may provide additional limits for non-auto exposures depending on how it is structured, but it does not increase your auto liability limits.

This structure is cheaper because the biggest exposure, which is auto, is carved out. There is nothing inherently wrong with it. It just solves a different problem.

How Your Excess Limits Protect the Contractor, Broker or Shipper (and You)

When a serious crash happens, plaintiffs go after everyone.

They sue the motor carrier, the contractor, the broker, the shipper, and sometimes the warehouse or logistics company. Anyone who can be tied to the movement of that load becomes a target.

Why? Because plaintiffs’ attorneys look for the deepest pocket.

If the motor carrier has $1,000,000 in auto liability and a verdict comes in at $6,000,000, there is a $5,000,000 problem left over.

If the carrier cannot pay it, the pressure of the lawsuit shifts to the broker, shipper, or contractor under theories like negligent hiring, negligent selection, or vicarious liability.

Now their insurance is in play.

Stronger layers in your insurance stack mean more capacity to defend a catastrophic claim, more room to negotiate settlement, and less risk that a verdict wipes out your business. If the auto exposure is properly stacked, your company has a real financial buffer instead of a hard stop at the primary limit.

That buffer can be the difference between surviving a major loss and shutting the doors.

Your Layers of Insurance Reduce Their Exposure

If a catastrophic claim hits, there is more money available within the motor carrier’s program to resolve the loss.

More limits at the carrier level mean higher settlement capacity, less incentive to pursue contractor, broker, or shipper policies, and less pressure to drag in every entity in the chain.

Why Follow Form Specifically Matters to Them

If the excess excludes auto, then the motor carrier still only has $1,000,000 for a trucking accident.

From their standpoint, that is not enough. They are not worried about your office slip and fall limits. They are worried about a multi vehicle highway fatality.

So when they require follow form excess over auto, what they are really saying is, “We want to know there is real money sitting over your auto liability if something catastrophic happens.”

It is risk transfer, and they are pushing the financial buffer down to the motor carrier’s insurance stack.

The Financial Burden on Motor Carriers

Every time a contract requires increased limits or mandates additional policies, the cost lands on the motor carrier.

Those additional layers are not cheap. Underwriting is tight, and more than ever pricing reflects catastrophic risk.

When long term contracts require higher limits with strict follow form language, the motor carrier absorbs that premium increase. In many cases, the freight rates do not increase proportionally.

This squeezes margins and creates a competitive divide. Larger fleets with stronger balance sheets can absorb higher limit requirements more easily. Smaller carriers and owner operators feel it immediately.

Everyone needs to protect their own balance sheets. But it 100 percent shifts financial pressure downstream to the party operating the trucks.

Truck U Take

Your insurance stack is not just about compliance. It is about leverage. If a contract requires follow form excess over auto, that cost needs to be built into freight before you sign it. Long term liability commitments without pricing the insurance stack correctly will crush your margins.

If a direct shipper or contractor just handed you a contract with higher limits or follow form language, do not sign it before you understand what it does to your insurance stack.

Send us the contract and your current dec pages. We will break down what it requires, what it costs, and whether the freight rate supports it.

Call us at 254-294-7798 or email info@trucku.biz. Let’s structure it right before compliance kicks it back.

 

 

 

Disclosure

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.