Knock-for-Knock Agreement: A Guide for Corporate Fleets

Imagine a busy Monday morning in Chicago. One of your delivery vans is merging onto the highway when a rival logistics truck clips its rear fender. Both drivers are safe, but the metal is crushed. Usually, this starts a paper trail that lasts six months. Your insurer fights their insurer. Lawyers trade emails about skid marks and weather conditions. But what if both companies just walked away? No fighting. No legal bills. That is the magic of a knock-for-knock agreement. It is the insurance world’s version of a “handshake deal” to stop wasting time. In this guide, we will explore how these deals work, why fleet managers love them, and the hidden traps that might actually cost you money.

What Exactly Is a Knock-for-Knock Agreement?

Let’s keep this simple. A knock-for-knock agreement is a deal between two insurance companies. They agree that if their policyholders crash into each other, each insurer will just pay for their own client’s repairs. It doesn’t matter who ran the red light. It doesn’t matter who was speeding.

Normally, insurance works through a process called “subrogation.” If a distracted driver hits your company car, your insurer pays you first. Then, they go after the other driver’s insurance to get that money back. It’s a game of financial tag. Under a knock-for-knock setup, insurers voluntarily quit that game. They waive the right to sue each other for repair costs.

Is Fault Totally Ignored?

Not quite. This is a common point of confusion for students. The “no-fault” part only applies to the physical damage of the vehicles. If a driver was drunk or committed a serious traffic crime, the police still care. If there is a “bodily injury” claim—meaning someone got hurt—this agreement usually steps aside. Those claims are too expensive and serious to handle with a simple handshake.

Why Modern Fleets Rely on This System

Running a fleet is a massive financial burden. According to the Network of Employers for Traffic Safety (NETS), traffic crashes cost U.S. employers over $72 billion annually. That figure covers everything from bent bumpers to lost productivity. When a vehicle sits in a repair shop, it isn’t making money. It’s just an expensive paperweight.

Cutting the Red Tape

The biggest win here is speed. Traditional insurance claims are slow. They require “adjusters” to visit the scene, interview witnesses, and argue over percentages of fault. Was your driver 10% responsible because they didn’t honk? That argument can take weeks. With a knock-for-knock agreement, your insurer skips the debate. They authorize the repair immediately because they know they aren’t getting money from the other side anyway.

Lowering Overhead

Legal fees are a silent killer in corporate budgets. Every hour an insurance lawyer spends on a subrogation case is an hour someone has to pay for. By removing the need to “recover” funds, insurance companies reduce their own operating costs. In a perfect world, these savings lead to lower premiums for the fleet owner.

How It Works When Metal Meets Metal

Let’s look at the actual workflow. Suppose your company, Fleet A, has a van that gets hit by Fleet B. Both are covered by insurers who signed a knock-for-knock deal.

Honestly, it’s a very “clean” way to do business. But you have to remember that this only works if both insurers are part of the same “club.” If you crash into a private citizen insured by a small, local company, the knock-for-knock agreement probably won’t exist. You’re back to the old way of doing things.

The Dark Side: Why It’s Not Always Fair

It sounds great on paper, right? Well, here is the thing. If your driver is a perfect angel and someone else’s reckless driver totals your truck, your insurance company still pays. That can feel wrong.

The Problem of “At-Fault” Records

Even though insurers don’t trade money, they still keep score. Your insurance company will record that your driver was involved in a collision. If you have ten “knock-for-knock” claims in a year, your premium will go up at renewal time. It doesn’t matter that the other guys hit you. The insurer sees you as a “high-risk” fleet because your trucks are constantly in the wrong place at the wrong time.

The No-Claims Bonus Trap

For many fleet drivers, a “No-Claims Discount” (NCD) is a big deal. In some regions, a claim under a knock-for-knock agreement still counts as a claim. Since your insurer couldn’t recover the money from the “at-fault” party, they may take away your discount.

New Challenges: EVs and High-Tech Fleets

The world is changing, and the knock-for-knock agreement is facing some pressure. The main culprit? Technology.

Rising Repair Costs

Electric Vehicles (EVs) are much more expensive to fix. According to CCC Intelligent Solutions, EV repairs can cost 25% to 30% more than traditional gas cars if one insurer is constantly paying $10,000 for EV sensors while the other insurer is only paying $2,000 for old truck bumpers, the “balance” of the agreement breaks. One side starts feeling like they are losing too much money.

The Role of Telematics and Dashcams

In the 1980s, we needed these agreements because we couldn’t prove who caused a crash without a long trial. Today? We have 4K dashcams and GPS data that shows exactly how fast a truck was going. Because fault is now so easy to prove, some insurers are wondering if they should go back to subrogation. If I can prove your driver was texting with 100% certainty, why should my insurer pay for the damage?

The “Total Loss” Exception

Here is a detail many textbooks skip. These agreements usually have a “ceiling.” If a crash causes a “total loss”—meaning the vehicle is completely destroyed—the agreement often expires. If a $200,000 specialized crane is crushed, the insurer isn’t going to just shrug and pay for it. They will likely step outside the knock-for-knock agreement and pursue a full legal claim to recover that massive sum.

What Should a Fleet Manager Ask?

If you are a student or a corporate exec, don’t just assume your policy includes this. You need to be proactive.

• Ask about signatories: “Is my insurer part of a broad knock-for-knock network?”
• Ask about the limit: “At what dollar amount does this agreement stop applying?”
• Check the impact: “How will an ‘unrecovered’ claim affect our fleet’s loss-run report?”

Honestly, the “loss-run report” is what matters most for your budget. If your record looks “bloody” with claims, your next year’s insurance bill will sting.

Wrapping It Up

At the end of the day, a knock-for-knock agreement is a trade-off. You give up the right to get your money back when you’re innocent. In exchange, you get your trucks back on the road faster and avoid a mountain of legal paperwork. It isn’t a perfect system, and it certainly isn’t a “get out of jail free” card for bad drivers.

But for a massive logistics firm with 500 trucks, simplicity is king. You want to spend your time moving freight, not arguing with insurance adjusters over a broken headlight. Just make sure you read the fine print. Know your limits, watch your EV repair costs, and always check how these claims hit your long-term record. The road is messy enough already. Your insurance shouldn’t make it worse.

Would you like me to help you draft a list of specific questions for your insurance broker regarding these agreements?