What do downtime policies cover for truck owners?

Businesses that operate trucks can see their livelihoods impacted by unforeseen incidents like mechanical failures, accidents, fires or vehicle thefts.

For properly insured businesses, these incidents may result in downtime claims. And those claims often require careful consideration of limitations — because failure to recognize nuances in accounting practices or unique operating procedures can lead to inappropriate claims calculations.

Downtime coverage refers to an optional coverage policy for loss of income while a truck is inoperable. The coverage is available to self-employed truck drivers, businesses that own a truck or fleet of trucks, or businesses that own machinery equipment.

Downtime is the period when a truck is being repaired, replaced or is otherwise inoperable — often due to mechanical failure, theft, collision or fire. It provides coverage for when a vehicle would have otherwise been available for business operation and profit generation for the policyholder.

Since every business has different operating practices, the number of days a truck is driven throughout the year is calculated based on discussions with insureds and a review of financial documents. Copies of daily logbooks and driving summaries can also help establish operating practices.

For example, let’s say a business operating Mondays through Fridays, except for statutory holidays, experiences a downtime during the 59 days from Jan. 1 to Feb. 28. The insurance period would be 39 days, including Mondays through Fridays, and excluding New Year’s Day and Family Day.

However, if a vehicle was scheduled for routine maintenance during a claimed downtime period, it’s unlikely the insurance company would reimburse the insured, since the truck would not have been operable during that scheduled maintenance.

Insurance companies will likely cover reasonable rental costs for replacements.

But if a business owns more than one truck and fleet capacity is available, the insurer will expect the company to use those vehicles to mitigate the losses of capacity and income.

Kevin Thomas, is a manager of forensics at BDO Canada, and Tony Militello is a director of forensics at BDO Canada. This article is excerpted from one that appeared in the August-September issue of Canadian Underwriter. Feature image by iStock.com/Maudib