Canadian Underwriter

Adding Risk

May 1, 2016   by Mandip Hullait, Director, Commercial Auto, RSA Canada

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Modifications to commercial vehicles, especially involving the transportation of hazardous substances, can affect both safety and insurance coverage.

When vehicles are carrying cargo such as fuel, fleet managers need to consider the risk of long-tail liability in the event of a pollution incident, and methods of reducing the risk of spills into bodies of water.

Commercial vehicles are subject to minimum performance standards to ensure their safe operation. Examples include Canada’s National Safety Code standards under the mandate of Transport Canada and the Canada Motor Vehicle Safety Standards.

Evidence of safety fitness certificates (SFCs) are also required by provincial authorities for trucks, tractors or trailers that have a registered gross vehicle weight exceeding 4,500 kilograms.

Mandip Hullait, Director, Commercial Auto, RSA Canada

Mandip Hullait, Director, Commercial Auto, RSA Canada

Whether operating light vehicles or heavy trucks, fleet managers should include the impact of modifications on safety. Examples of modifications that could affect operations include adding a slip tank, welder, crane, bucket or toolbox.

It is also very important to install these components properly to avoid any unsafe conditions. During installation, safety devices must not be disabled or circumvented.

One should also take into careful consideration the types of activities the vehicle is expected to perform and ensure it still meets all the requirements outlined in a company’s fleet safety program.


Clients who have modifications carried out on their vehicles need to be aware of considerations concerning insurance coverage. One is the third-party liability arising out of the operation of the attached equipment that is non-automobile in nature; the other is the physical damage to the attached equipment.

It is important for the broker to speak with the client to ensure the right type of coverage is in place for the type of modifications being completed and the function of the equipment that is separate from transportation and travel.

Modified commercial vehicles may also increase the severity of claims because they inherently are more expensive with their additional equipment or modifications to replace. In addition, the added weight of these vehicles may increase the chances of fatal accidents and loss of life.

Aside from vehicle modifications, another often noted concern around fleet vehicles is adequate environmental protection. While pollution may not be excluded from a commercial auto policy, the client may wish to purchase extra coverage if there is higher risk, given the type of commodities carried in the commercial vehicle.

One example would be a fleet hauling fuel as a core part of its operations.

Insurance Bureau of Canada (IBC) is one source that offers some preventive tips for fleet managers. These tips, on mitigating risk, include implementing policies and procedures, such as incorporating safety training for proper fuel storage and disposal.

For fleets hauling fuel, there are also long-tail liability concerns with pollution if substances spill into nearby lakes or rivers. A common example in Western Canada is in the oil and gas sector, where heavy equipment is loaded with dangerous goods on a regular basis for oilfield operations.

When dangerous goods are being transported, there are several ways of mitigating exposures. For example, fleet managers can pre-plan trips to avoid rough terrain as much as possible.

Another example of a risk mitigation method is to plan alternate routes that will avoid passing near any bodies of water. This can mean the difference between shorter-term, less expensive environmental clean-ups and clean-ups that drag on for years.

When a body of water is involved, the risk is significantly higher, and high claims costs can drive up the overall insurance costs.


IBC offers step-by-step instructions to help clients manage these types of claims most effectively. Risk control consultants can advise fleet managers to make sure they have the right kind of controls and measures in place to mitigate loss.

Brokers need to ask the right types of questions to ensure adequate protection is put in place to control commercial auto exposures in accordance with a business’ unique needs or challenges.


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