Topic: Auto Policy – Scheduled Drivers

Author: Skip Beard, Joe Fiorenzo and Steve Ortley

Overview:

The Arthur Bird Colamarino (ABC) Corporation is a mid-size family-owned distribution company based in Morristown, New Jersey. ABC Corp.’s current CEO is Arthur Bird Colamarino Jr. (CJ), who has been at the helm for approximately 15 years. During CJ’s tenure he has increased the operations of the company from 40 commercial trucks with one loading facility at the Port of Newark and one warehouse in Morristown to 600 commercial trucks with warehouses all over the Northeast.

They have no risk management department and CJ has been with the same national broker for the last 8 years who handles all lines of insurance renewals for ABC Corp. during that timeframe. For ABC Corp. one of their largest insurance fixed cost programs is their Automotive Policy and over the last 5 years ABC Corp. has been able to decrease the volume of auto claims that they have had. Although the volume of claims is decreasing, the total incurred is staying flat at roughly $1.5 million – $2 million. They have not changed insurers for the last 3 years and have one open claim from last year where the reserves are set at their limits and the excess carrier has been notified. ABC Corp. was not at fault and was one of 3 commercial truckers named in the claim.

While at a World Series game; the broker communicated to CJ that his program this year will likely see an increase overall by approximately 20-30% due to the state of the insurance market and the overall economy. The program will be renewed on February 1st of this next year. CJ, facing a decline in orders from one of his main customers, decided that he needs to look for guidance to help his company

Situation:

As of November 1st your company has been retained as an insurance consultant to assist in the renewal of ABC Corp.’s risk management program and have already promised to wash-out that 20-30% anticipated increase. While analyzing the list of Scheduled Autos you realize that the company also has a red Porsche 911 that is registered to CJ under the commercial auto policy. You then make sure that CJ is listed as a Scheduled Driver. You realize that you will be able to provide value with a competitive process and as of November 15th you have approached markets with your specifications, loss picks and loss history.

Scenario 1:

On Monday morning you get a call from CJ who is irate, that weekend his son was arrested for a DUI while coming home from a football game. He was driving the Porsche 911 and provided ABC Corp.’s proof of insurance to the police officer before being arrested and taken into custody.

The son was an unscheduled driver and CJ is asking you what needs to be done. Although CJ wants to do the right thing he doesn’t want this incident to negatively impact ABC Corp.’s upcoming renewal. What advice would you provide ABC Corp. and CJ and why?

Scenario 2:

On Tuesday morning you get a call from ABC Corp.’s insurer who lets you know that the Porsche was in a parking lot accident and the third-party filed a claim. When you speak to CJ he lets you know that his son was driving the Porsche that weekend and will just pay for the damages but also mentions that on the way home his son was pulled over and cited for speeding.

The son was an unscheduled driver and CJ is asking you what needs to be done. Although CJ wants to do the right thing he doesn’t want this incident to negatively impact ABC Corp.’s upcoming renewal. What advice would you provide ABC Corp. and CJ and why?