By Joseph W. Lalla, Commercial Lines Coverage Specialist
Georgetown Insurance Service, Inc.
Silver Spring, MD
Having adequate liability coverage should be a top priority for every business, particularly those who operate or drive large vehicles. Accidents are expensive and larger vehicles, such as buses, have the potential to cause millions of dollars in damage. Typically, these businesses can acquire additional liability coverage through an umbrella policy to adequately protect their business just in case an accident occurs or they find themselves the target of a costly lawsuit.
However, this is not currently the case for many of the state’s school bus subcontractors. Due to the terms and conditions found in the statewide insurance pool, these subcontractors have been unable to find an insurance carrier willing to provide them with additional liability coverage.
How Did We Get Here? Bus Contracting and Blanket Coverage in Maryland
The state of Maryland has 23 counties. 18 of those counties pay for and participate in a statewide group insurance pool. While this pool technically offers a legal solution for insuring school buses, it is by no means a comprehensive solution and opens up bus subcontractors to potentially damaging financial liability.
These subcontractors own the buses and the only insurance coverage they typically have is throughout the insurance pool which is paid for by the county. Missing from this pool is an alternate umbrella liability coverage.
Here’s how it works: The state-wide group insurance pool only insures the buses when they are on their direct or assigned school route or going for maintenance or refueling. This means that if the bus driver stops for lunch somewhere in between routes, takes a shortcut, or runs an errand, that bus is no longer covered during that timeframe. Furthermore, the policy only includes one million dollars of liability coverage while the drivers are on their designated routes. If they are not on their designated route, there is no liability coverage in place at all. Finally, since insurance carriers are aware of these gaps in the policy, they are unwilling to issue additional liability coverage to these subcontractors.
While insurance pools can often provide a solution to fulfilling a coverage need, this one falls short. The statewide pool has very strict guidelines about when the coverage applies. These strict guidelines can create gaps in coverage, at times leaving the bus completely uninsured. These gaps are a red flag to insurance carriers and make it impossible for bus contractors to buy additional umbrella liability insurance to augment their policy and cover themselves financially.
The Dangerous Lack of Liability Coverage
Buses are large vehicles that can potentially inflict much more than one million dollars’ worth of damage to property or people. This is one of the reasons why the Department of Transportation, Federal Motor Carrier Safety Administration dictates that any vehicle carrying over 15 passengers is required to have a minimum of five million dollars in liability coverage. There is an exception made to this rule for vehicles transporting school children to and from school. However, just because this exception exists does not mean that it is a prudent or financially sound decision to operate with less coverage.
For these buses to be operating with no liability coverage — or even such a minimal amount — not only opens up the bus owner to significant financial liability, but also the general public. If the subcontractor is unable to cover the damage costs it may be impossible for affected parties to recoup their financial losses.
Recognizing these issues, the team at Georgetown Insurance Services has created a new insurance solution: gap insurance for school buses.
An Insurance Solution to Bridge the Gap
Joseph Lalla, one of our account executives, was approached by a government official with St. Mary’s County, Md, who expressed his concern about the current blanket policy and the gaps in coverage.
Recognizing that this issue affects 18 counties in Maryland and a large number of contractors, Joe set out to find a solution to fill in the gaps, working with one of our partner carriers to customize a coverage option that will allow bus subcontractors throughout the state to first fill the gap, then gain access to the umbrella liability insurance they need to ensure their financial stability.
The premiums for this coverage would depend on driving records and the number of buses the subcontractor owns.
As we’ve seen, the gaps in Maryland’s current group insurance pool are an issue for bus subcontractors and for the schools, counties, and the general public. It is in the best interest of everyone to ensure that all of state’s school buses are fully insured and protected at all times. Happily, we now have a solution. Contact Joseph Lalla for more information.