In November, the Federal Motor Carrier Safety Administration (FMCSA) announced it was seeking comment from the public, liability insurance providers, motor carriers, brokers and freight forwarders on the financial impacts of revising minimum levels of financial responsibility.
Some may question raising federal requirements for carrier liability protection, which for most companies will translate to higher insurance premiums. Yet, a cursory review of existing requirements, the cost of a single incident, and a Google search for “truck accident lawyers,” brings into stark contrast the balance between risks and protections.
An April 2014
Meanwhile, most carriers need $750,000 of public liability coverage. Yet, the numbers for most carriers simply don’t add up. Most large carriers self-insure at much higher levels. Yet, for a small family-owned business with a few trucks, $750,000 in coverage means a single catastrophic event could wipe them out financially. Layer atop that a hazardous waste or environmental release, and potential exposure spikes higher.
“Current insurance limits do not adequately cover these costs,” the FMCSA wrote.
Current levels are too low. The cost of accidents has ballooned over the last decade and the required minimums are insufficient to protect carriers and drivers involved in a catastrophic accident. Moreover, many small business owners and even their insurance companies may not be proficient in evaluating the implications or related vulnerabilities of existing insurance levels.
Raising the average combined single limit (CSL) coverage can be smart business. For those trying to keep costs in check, options include:
- Raising deductibles to keep premiums lower
- Increasing training, accountability programs and monitoring, including the use of telematics, to help protect against preventable accidents and resulting exposures or egregious violations (think the Walmart / Tracy Morgan accident, where the driver reportedly was fatigued from exceeding his hours); and
- Implementing plans for corrective action when drivers or their supervisors violate company policy or federal regulations.
Today, insurance companies and plaintiffs’ attorneys alike have access to the last two years of accident reports. A single act or pattern of negligence can lead to claims of negligent endorsement or negligent entrustment stemming from a driver operating amid unsafe conditions, or with a track record the carrier should have known would pose a risk.
Raising minimum levels of coverage will add costs at a time when carriers are looking to reduce them. Ultimately, though, higher coverages may protect carriers from exposure to damage claims that could put them out of business. In an environment where the public and attorneys hold no sympathy for carriers, ask yourself: If your company were found at fault beyond your ability to pay, would you be forced to also ask yourself, “What assets do we have to sell off if we lose?”
Written By Andrew Leavitt
Andrew Leavitt ([email protected]) is a Senior Manager of Safety and Loss Prevention for Ryder System, Inc. Andrew often hosts webinars on Department of Transportation (DOT) compliance and motor carrier liability, as he strives to help Ryder customers and others understand critical industry regulations.
