Loaned Trailers and Liability Coverage

We have a customer who has four trailers listed on a PAP with physical damage coverage. We don't offer liability coverage on the PAP for trailers as the trailer gets protection from the towing unit. Iowa is an owners liability state. The customer loans the trailers out to friends and he was wondering how he would be protected if sued by a third party injured while a friend caused it by using a trailer owned by the customer? The policy says in the first sentence “In return for payment of the premium and subject to all terms of the policy, we agree with you as follows:” Since no premium is charged we feel no coverage for liability exists.

Example: I loan my trailer to someone. My trailer is defective; it has worn tires, a defective hitch, and no safety chain. During the use of my trailer it becomes detached from the borrower's power unit, causing an accident with several fatalities. The driver of the pickup and I are named in the lawsuit. Judgment is rendered against both the driver and me. Driver has only minimum limits. Per the interpretation provided by claims management, I would not have any coverage provided by my PP Auto policy for the following reasons: