Truckin': New ISO Form Covers the Food Truck Industry

When the Who originally rhapsodized of the wonders of “going mobile,” few may have thought “play the tape machine, make the toast and tea” would eventually mean music blasting from the speakers of your local food truck.

Nor did those of us who passed through puberty in an earlier age have dreamed that those once familiar low-budget hot dog and ice cream vendor denizens of beaches and parks would today include top-line culinary feasts on wheels. Although trucks may still tour summer neighborhoods tinkling those bells or playing silly songs to draw kids to their ice cream and popsicles, downtown their more sophisticated brethren are blasting tunes to draw grown-up kids to sushi, BBQ or tapas.

These full-blown restaurants on wheels often require extensive and expensive food preparation facilities and equipment. Needless to say, the cash flow of the more adult offerings also can differ significantly from the relatively small change neighborhood popsicle-mobile.

Yet until recently, there was no standard way of providing insurance coverage for those mobile-derived revenues and income. Technically, ISO's commercial property business income policies did not exclude auto-based property such as the food truck exposure, as long as the loss was due to a covered peril. There was, however, one crucial catch: these forms only applied while the property was at the insured location or within 100 feet. Sort of missed the whole point of a mobile business, wouldn't you say?

So as the food truck evolved from local snack bar to full-blown restaurant segment, owners and operators of these sophisticated meals on wheels emporiums either looked to niche insurance markets for proper business income coverage or, far too often, simply went without.

But no more! ISO has finally risen like yeast to the occasion, and removed from their form ovens a fully baked business income solution: the CA 99 05 02 14, Business Interruption Coverage. This new ingredient available for the commercial auto coverage cake is an endorsement which can be attached to the business auto, auto dealers or motor carrier coverage forms.

Exactly why ISO reverted to the old and stale “business interruption” heading instead of the fresh and clear “business income” is a mystery. But underneath that moldy title lies a truly nourishing repast of needed culinary coverage. Let's take a quick look at the table of ingredients.

Schedule of Coverage. Since coverage is triggered by a covered loss to “scheduled property,” exactly how that property is scheduled becomes key. ISO provides two approaches, similar to ordering from a menu: Option A (obviously for “a la carte”) allows you to separately describe each item of property to be covered, with a limit of insurance for each; Option B (for “buffet”) allows you to list all of the property to be covered, with a single limit of insurance applying for the entire meal. Just as in a restaurant setting, it would make no sense to order both the full buffet and then each menu time separately, ISO requires you to list items of covered property under only one Option, A or B. If for any reason there is duplication of covered property under the two Options, the limit of insurance provided for that particular item will either be (a) the limit most specifically associated with that item (for example, if the item were specifically identified in Option A and then also lumped in with other property in Option B) or (b) the limit that would provide the highest loss payment. So even if errors are made in property descriptions between Option A and B, the insured can never collect duplicate payment; one or the other limit, never both.

Coverage. Similar to the CP 00 30, Business Income (And Extra Expense), the CA 99 05 offers both coverages in a single form.

Coverage for business income is for actual loss due to a necessary “suspension” of the insured's “operations” during a “period of restoration” caused by direct and accidental loss or damage to “scheduled property” arising from a “covered cause of loss.” Extra expense coverage, if added, is triggered the same way.

We discussed how the form defines “scheduled property” earlier. The definition of “period of restoration” is basically a “cut and paste” duplication of the commercial property forms. As for the other key terms, while they track commercial property, they are somewhat modified for the auto exposure. Here is what the CA 99 05 has to say:

3. “Operations” means your business activities described in the Schedule that are dependent on “scheduled property.”

6. “Suspension” means the slowdown or cessation of your “operations.”

Note the “dependent on scheduled property” wording in “operations.” To be covered under the CA 99 05, the triggering loss must be to damage to the vehicles, not simply the business. For example, assume the food truck operation includes an office for the conduct of regular business, running the web site, bookkeeping, etc., and a warehouse for storing supplies and parking the vehicle when off the streets. If damage due to a covered peril is limited to the warehouse or office, and there is no damage to the vehicle (“scheduled property”), the CA 99 05 will ignore the claim.

Under ISO, to respond for a business income or extra expense loss in such a situation would require a separate commercial property form for those properties. It's possible an underwriter may agree to list the office and warehouse on the CA 99 05 as “scheduled property,” but that may depend on how they or you feel about which Covered Causes of Loss are best applied to those properties: the Basic, Broad and Special options under commercial property, or the following.

Covered Causes of Loss. As you might suspect, the CA 99 05 being a commercial auto endorsement, the choices here are the same Comprehensive, Specified Causes of Loss and Collision found in the commercial auto coverage forms to which it is attached. While these may be perfect for your typical vehicle, be sure to address with the underwriter any questions that may arise from non-vehicle property (like our office and warehouse) or specialized additional equipment added to the vehicle the underwriter may want specifically described or scheduled. This extra care to get the schedule sufficiently detailed may prove critical at claim time. Remember the CA 99 05 coverage is not triggered the same as the commercial property forms—“loss of damage to property”—but only if there is “loss or damage to “scheduled property.” Any “gray area” as to what constitutes “scheduled property” may collapse your otherwise beautiful rising angel food cake of coverage into a flattened, inedible slab of rubberized dough.

All in all, the CA 99 05 represents a potential sumptuous repast as your clients' food trucks or other mobile businesses hit the road.

And best of all for you and them? It's available to go.

So let's belt it out with Mad Man Sammy Hagar: “I…CAN'T… WAIT…TO…DRIVE — CA 99 05!!”

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