Company A had a load to be moved, but no power unit available, so it offered the load to Company B and a deal was struck. Company B's power unit hooked up to company A's trailer and headed off to the consignee. The unit was then involved in a serious accident, due to the negligence of Company B's driver, resulting in $1.7 million dollars in damages.

Note, this was Company B's driver, driving Company B's tractor, with Company B's placards, driving under Company B's operating authority. There was no allegation that Company A's trailer was defective, was loaded improperly, or otherwise contributed to the subject accident. Accordingly, Company A has no exposure, right? Not necessarily.

As it turned out, Company B only had $1 million dollars in commercial auto insurance and, as a practical matter, no assets from which Plaintiff would have been able to recover the excess $700,000 in damages. Plaintiff, accordingly, looked to Company A and its commercial auto policy.

The definition of a "covered auto" in Company A's policy included trailers as a "vehicle", and the definition of a "covered auto" for purposes of the policy included any such vehicle owned by Company A which is used by another with Company A's permission.

The subject trailer clearly met the definition of a covered auto for purposes of the accident, and thus Company A's policy became excess over Company B's $1 million dollar policy. Company A, accordingly, paid out the $700,000 balance, and, as a noted above, Company B had no assets from which Company A would realistically be able to recover any such sums. Moreover, Company A had a large SIR, and thus paid out the $700,000 out of its own pocket.

In case there was any doubt, the foregoing hypothetical was a real case we handled on behalf of Company A. The case teaches several important lessons (expensive ones for Company A in this instance). One needs to carefully consider the definition of "covered auto" in its policy. Moreover, whenever trailers are to be interchanged, one should endeavor to see that those who will be pulling those trailers have adequate coverage.

A provision for indemnification by the entity which will be utilizing the trailer can, and should, be included in the subject contract regarding its use. Of course, indemnification is only as good as the indemnifying party's ability to pay. Another lesson from the claim is that when an entity faces significant liabilities, it should always look to other potential policies which might afford an additional source of payment.