Understanding Potential Liabilities for Passenger Transportation

While cargo transportation insurance is incredibly important for any commercial transportation company, passenger transportation insurance can trump even that.

After all, people are undeniably the most valuable cargo of all. Making sure that passengers who contract with your clients' companies are safe and fully insured is one of the most essential things that you can do as an insurance provider.

Commercial passenger transportation companies often use different types of vehicles to help people get from one place to another, and this variation necessitates a different policy types. All these different forms of passenger transportation carry different numbers of people, and some present more inherent risk than others.

No matter what, the goal is to ensure that all passengers and drivers get to their destinations safely, and that everybody is covered in the event of an accident.

Insurance Requirements for Commercial Passenger Transportation

The insurance required for commercial passenger transportation vehicles depends on passenger capacity and type of passenger. For example, the Federal Motor Carrier Safety Administration (FMCSA) requires that for-hire passenger carriers in interstate commerce carrying 15 passengers or fewer, including the driver, must be insured for $1.5 million, while vehicles with 16 or more people must be insured for $5 million or more.¹

The driver of a vehicle that carries 16 or more people must hold a Class C commercial driver's license (CDL) to be covered.

Mitigating Risk in Commercial Passenger Transportation

A FMCSA study found that 87% of commercial transportation accidents that resulted in injuries or fatalities either were caused by the driver, or the driver was part of the "critical reason" for the crash.² Training drivers and enforcing safety policies can help reduce the risk of accidents for which the passenger transportation business is liable, which helps keep commercial insurance rates as low as possible. While commercial trucking and commercial passenger insurance rates aren't as volatile as private auto insurance rates, you can still expect insurance rate hikes of 20% to 40% after a claim.³

When securing coverage for your passenger vehicles, make sure to look closely at the sections that relate to DUIs and DWIs. Some insurance contracts have clauses that exclude payment of a claim based on the driver's blood alcohol content (BAC). Make sure that you know these stipulations and consider funding programs within your organization that encourage your drivers not to drink or use drugs while on the road.

Sources

¹"Minimum Insurance Levels on Passenger Carrier Operations," Federal Motor Carrier Safety Administration, accessed 4 Jan 2024.

²"The Large Truck Crash Causation Study — Analysis Brief," Federal Motor Carrier Safety Administration, Jul 2007.

³Smith, Lisa. "How Filing an Insurance Claim Can Raise Your Rates," Investopedia, updated 24 Aug 2021.