Trucking Insurance: "Non-Trucking Use," "Bobtail Coverage," in New York

By Lawrence N. Rogak

In the field of trucking insurance, "Bobtail" means the operation of a tractor (the "cab" of a truck) without a trailer, and "Bobtail insurance" means coverage of a tractor when not being used in the operation of a carrier authorized by the Federal Highway Administration.

Authorized trucking companies frequently enter into contracts and leases with others to haul loads. Typically, the trucking insurance issued to the owner contains a "Non Trucking Use Endorsement" which excludes coverage for the vehicle while being used in the business of a lessee.

Whether or not the agreement between the owner and the lessee says so, statutes and regulations require the owner/lessor to assume exclusive control of the operator/lessee's truck. As a common carrier registered with the United States DOT, registration requires motor carriers be willing and able to comply with DOT rules and regulations. 49 U.S.C. § 13902(a)(1)(A)(i). Those rules provide that an “authorized carrier may perform authorized transportation in equipment it does not own only” if there is “a written lease granting the use of the equipment.” 49 C.F.R. § 376.11(a). Federal law further requires that a written lease “provide that the authorized carrier lessee shall have exclusive possession, control, and use of the equipment for the duration of the lease. The lease shall further provide that the authorized carrier lessee shall assume complete responsibility for the operation of the equipment for the duration of the lease.” 49 C.F.R. § 376.12(c)(1). Even if the terms of the lease contradict DOT regulations, the regulations control. Argonaut Midwest Ins. Co. v Morales, 2014 Ill.App. 130745.

In New York, the Bobtail/Non-Trucking Use exclusion is triggered when the owner's truck is operated by a lessee. This type of exclusion has been held to be not valid in New York because it could potentially leave a truck without coverage for at least the minimum liability insurance limits. Royal Indem. Co. v Providence Washington Ins. Co.,  92 NY2d 653 [1998]. However, this type of policy often has a "savings clause" attached to it, which provides in effect that if the non-trucking exclusion is held invalid for any reason, the policy will provide the minimum liability limits of the State which has jurisdiction.

A typical savings clause reads as follows: "We agree with YOU [the insured] that if any of the provisions of the endorsement, 'Truckers Insurance for Non-Trucking Use' are held to be void or unenforceable under the law of any jurisdiction, for reasons of public policy, violation of statute, or otherwise, WE will not pay any sums in excess of the minimum amounts required by the Financial Responsibility Laws of such jurisdiction, and then only after all other valid and collectible insurance available to the Named Insured, or which would be available to the Named Insured in the absence of this policy, has been exhausted."

While some lower New York courts and some Federal district courts have held that a non-trucking exclusion is invalid in New York even if it does have a savings clause, New York's Appellate Division, Second Department has held that policies with that exclusion and a savings clause will be upheld, so that the effect of the exclusion will be that the truck owner's insurer is liable only to the extent of New York's minimum limits of $25,000 per person, $50,000 per accident, plus PIP benefits of $50,000 per person (NY Veh. & Traffic Law section 388). Connecticut Indemnity Co. v Hines, 40 AD3d 903 (2007). For coverage above that minimum, an injured party must look to the lessee's insurance.

In summary, then, when there is a liability claim against the owner of a truck and the operator who is leasing that truck, the owner is vicariously liable under general principles of automobile liability. If the owner's insurance has a bobtail/non-trucking exclusion, that exclusion is only valid in New York if it has a savings clause that provides the minimum New York insurance limits. If it does not have the savings clause, the exclusion is invalid and the owner's policy is liable up to its full limits (the owner and his insurer would then have to look to the lessee/operator for contractual indemnification). If it does have the savings clause, the owner's policy must provide only the minimum statutory limits, and the lessee's policy will provide coverage over and above that.

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For advice and defense regarding your trucking claims, contact Lawrence N. Rogak, Partner, Pillinger, Miller & Tarallo. Offices in New York, New Jersey, Connecticut, Pennsylvania, Colorado and California. https://pmtlawfirm.com/

Lawrence N. Rogak Direct line: 516 322 2470.