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 Which types of coverage are important to consider?

Pollution Liability

Loss of Business Income

Employer Practices Liability  

Valuable Papers & Records

Failure to Supply

Hired & Non-Owned Auto Liability

Employee Dishonesty

Contamination Coverage  


Wrongful  & Erroneous Delivery                             

Fuel Tank Truck

Important Considerations in Choosing an Agent to Service Your Organization’s Insurance

Knowledge of the Industry

Experienced Staff

Fast Certificate Processing

Claims Representation

Billing & Finance Options

Support Backup

Access to Multiple Markets

Fuel Oil Dealers and Gasoline Haulers Insurance Essentials

Various Types of Hazardous Materials and Petroleum Prouducts

Bio Fuel - Flex Fuel - Ethanol - Diesel - Natural Gas - Propane

Gasoline - Fuel Oil - Methanol - Dimethyl Ether  - Syngas

Covering petroleum tank haulers is not for every insurance carrier.  Besides the enormous liability exposure for property damage, bodily injury, and pollution liability, there are other concerns that need to be addressed:

How are vehicle overturns handled?  Is there towing coverage as special equipment may be necessary to clear an accident?  How about lay-up or suspension credits which may provide a reduction in premium for the times the vehicles are not used?   If the truck is down as a result of an accident, can coverage be offered to protect against the loss of business income?  

Basically, truckers insurance protects many of the same type of exposures found on a commercial auto policy.  Bodily injury and property damage are most often purchased on a combined single limit basis of $ 1,000,000 affording coverage to third parties.  However this limit can vary from state to state and for type of business insured or the carrier insuring it.   No-fault or personal injury protection (PIP) and additional personal injury protection (APIP) pays for the medical expenses, loss of income and even a small death benefit may be provided for the driver as well as the passengers.  However, there are restrictions along state lines, besides workers’ compensation generally provides primary coverage for the driver if they are an employee of the company (please read the policy for a list of the limitations and exclusions). Then there is Optional Basic Economic Loss (OBEL) which provides additional coverage, generally $ 25,000 to pay for medical expenses and loss of income.  Uninsured and supplemental uninsured motorist (UM/SUM) provides protection to the driver when the offending operator of another vehicles has either no insurance or less insurance than what is covered under the trucker’s policy.  Medical payments is another type of no-fault coverage often providing protection to the driver that can be excluding by no-fault (subject to the terms of the policy). And finally, comprehension, and collision which pays for the cost to repair or replace the vehicles in the event of a covered cause of loss.  

Other types of coverage are often thought to be protected by a trucker’s policy, however generally these can be purchased on a package or inland marine or cargo form (i.e. contamination and loss of product).  Loss of business income on the trucks can be added to many package policies offering loss of business income on the premises.  Rental reimbursement and towing are often excluded, however in the event of an accident or vehicle overturn, this coverage is often granted subject to the terms of the policy.

How is the cost of these policies determined?

Truckers and commercial auto insurance is generally rated on a scheduled vehicle basis.  In other words, the premium is charged based on the description, value, weight, year or age, type of vehicle, radius of operation, product transported, mileage, usage, etc.  However some carriers will rate the vehicles on a fleet basis allowing the operator to add or delete vehicles without specifically scheduling the vehicles and pay the premium subject to an audit usually at year end or on a quarterly basis.  This is typical with larger accounts where many vehicles are changed weekly or even daily.  

Commercial General Liability & Umbrella Insurance

Liability insurance provides coverage for third party liability losses due to bodily injury, property damage, and personal injury (hurting of the persona) caused by accidents and/or acts of negligence by a named insured.  The coverage is subject to the terms, conditions, limitations, and exclusions within the covered territory.  Generally, liability insurance protects an insured for negligent acts caused during or by the business operations, after operations are complete (completed operations), hazards relating to the premises, products sold, and personal & advertising injury.  Unique to petroleum, fuel oil, gas, and other hazardous material operations, are the exclusions that are often added to a policy such as ‘failure to supply,’ ‘erroneous, wrongful or misdelivery,’ and the dreadful ‘pollution exclusion.’  

Failure to supply specifically excludes coverage for damage to property and bodily injury if a delivery is not made whether by accident, neglect, or mistake.   If this coverage is not purchased, a claim can be declined if a fuel oil dealer fails to make a delivery, scheduled or not, whereby the pipes freeze as a result of the fuel oil running out.  Worse yet, coverage can be denied if the inhabitants became ill from the drop in temperature caused by the same scenario.

Erroneous, wrongful, and misdelivery are terms that describe a mistake in where the delivery was intended.  The liability exposure can be enormous as often times, old receptacles are not removed and the fuel oil is pumped in the house or building with no connection or tank at the other end.  Sometimes deliveries are made to the wrong premises, and in certain cases, the wrong type of product is delivered such as delivering diesel in a gas tank.  The damage can range from the cost of contaminating the product in the tanks to the pump out cost, to the clean up costs, excavation, and hauling of the waste or contaminated product.   

Pollution liability coverage is ordinarily excluded on most commercial liability policies but can sometimes be covered if the claim results from the installation, service, and/or repair of heating equipment (refer to the terms of the policy).  In many states, the truckers and/or commercial auto policy removes the pollution exclusion thereby offering coverage for third party liability losses resulting from loading and unloading the petroleum product to and from the vehicle.  However this coverage is generally granted on a third party premises and is not afforded to the property under the care, custody, and control of the insured business.  

An umbrella policy typically adds an additional layer of liability coverage over the underlying or base limits.  A follow form umbrella generally matches the coverage including the limitations and exclusions whereas an excess liability policy defines what is covered that can deviate from the underlying policy.  

How is the cost of these policies determined?

Usually liability policies are rated on the volume of the business such as the number of gallons of petroleum delivered or sold, the salaries of the service mechanics, the overall sales, the amount of content stored or transported, the number deliveries, etc.  The classifications of payroll are determined by the type of jobs and the salaries associated with there respected classes.  Umbrella or excess liability policies are usually rated based on a percentage of cost of the underlying liability insurance including the commercial auto/truck and sometimes the workers’ compensation.   

Commercial Property, Inland/Ocean Marine & Cargo Insurance

Property is defined as what is owned by the insured whether it is the contents or business personal property (BPP), the building, the cargo or what is being hauled, tools and equipment, stock, inventory, accounts receivables, loss of business incomes, monies and securities, etc. Most policies have limitations relating to the distance of the property from the insured premises, usually within 100 feet to be covered by a direct physical loss.  Therefore, it is important to understand that the product being transported is generally excluded on a commercial property policy unless the coverage is purchased under a commercial inland/ocean marine form or cargo insurance.  Inland/ocean marine and cargo forms cover the damage to the product while in the course of transit, at a temporary location, and even at the described premises. Inland covers between the boundaries of oceans and ocean marine covers on the waterways.  Coverage is based on either specifically named perils or on a special form basis (previously known as ‘all risk’) which is defined by the exclusions not the named perils.  

There are other inherent property exposures of fuel oil and gas dealers & haulers, petroleum refiners & terminals, etc. such as protection for damage to underground flues, pipes, drains, and tanks.  Also, damage to the petroleum product due to water run-off or contamination declared by either a state or federal agency.  Also important is loss of income due to a direct physical loss to a vehicle or to the premises which can cover the continuing operating expenses and the net profit before taxes.  Loss of business income from dependent properties can by important if the primary terminal is shut down by a direct physical loss causing a financial loss to the covered business.

Finally, incidental and ancillary lines of coverage for monies and securities, loss of terminal access card, credit card fraud, employee dishonesty, electronic data processing, valuable papers records and research, are all important, but often added as supplemental to the package policy.  If not, a commercial crime form or policy can cover the exposures relating to theft and dishonest acts caused by the employees and/or outsiders of the the organization.  Damage to computer and data processing systems can usually be purchased by endorsement under ‘electronic data processing’ or EDP form.  And finally accounts receivables and valuable papers, records, and research can normally be added by endorsement.         

Workers’ Compensation & Statutory Disability Insurance

All states have workers’ compensation laws that require organizations to provide coverage or a means to pay for it’s employees claims in the event of an on the job injury or illness.  Please refer to the insurance department or the department of labor in the state for which the business operates and the employees are located or work in.  Statutory disability may also be required which provides coverage for off the job injuries and illnesses.

By William F. Schaake, CIC, CRM © 2011 All rights reserved

By William F. Schaake, CIC, CRM

Pollution Liability Insurance

Fuel oil, gas & diesel dealers, haulers, truckers, terminals, distributors, and suppliers have unique exposures that if not properly covered can financially cripple the business handling the petroleum products.  The pollution exposure is inherent to the petroleum industry as spills can cause significant damage to the environment, water supply, and the safety of our citizens. Hence, state and federal agencies such as the DEC and the EPA have been set up to monitor and protect us from violators and those that mishandle petroleum products.  But often they get involved with spills that are purely accidental which is why the businesses handling the petroleum products needs to be properly covered.

Pollution liability policies typically cover claims resulting from spills.  Coverage is provided to pay for the clean-up costs, the disposal of the contaminated product, and any injury or damage to the environment or to a third party.  

How is the cost of these policies determined?

Most pollution liability policies are rated based on the number of gallons of the product being handled or delivered; notwithstanding, the type of product.  However there are other matters to consider.  Is the product stored on premises?  What are the conditions of the tanks? How is the product delivered?  What are the clean-up procedures if there is a spill?  How are the drivers or employees trained in handling the product?  

When a carrier reviews an account for pollution liability insurance, past experience such as claims, location, volume, and years in business are often key determinants in providing coverage. The different hazardous materials handled is also crucial in determining cost and acceptance. Gas has a lower viscosity (thinner) than oil, hence can soak into the ground faster therefore potentially allowing the contaminants to sink deeper and possibly reach the underground water supply. In all likely hood an operation handling gas would cost more than oil for the same limits of liability.  Natural compressed gas or propane have volatile explosion risks unique to it’s own. Therefore, safety measures including recommendations on training, pumping and handling procedures, and mitigation and emergency measures are all utilized to control and reduce risk and rate an account.  

Commercial Auto & Truck Insurance

Insuring a tanker is quite different than covering a vehicle weighing 95% less.  The damage from an 85,000 pound truck hitting an object at high speeds can be severe because of the momentum.  This is why the Department of Transportation periodically inspects extra heavy weight trucks to ensure the safety of the drivers and those that share the road.  In addition, many states have adopted strict pollution measures to ensure the safety of the public and to help protect our environment from fuel spills.  

Continued below

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