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Insurance Community University

Trucking Issues and Solutions

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DisclaimerInsurance forms and endorsements vary based on insurance company;

changes in edition dates; regulations; court decisions; and state jurisdiction. This instructional materials provided by Insight is

intended as a general guideline and any interpretations provided by the instructor or the creator(s) of this material do not modify or

revise insurance policy language. In providing these materials, the authors assume neither liability nor responsibility to any person or

business with respect to any loss that is alleged to be caused directly or indirectly as a result of the instructional materials

provided. Copyright 2010 – 2013 All Rights Reserved

www.insurancecommunitycenter.com

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Your Instructor Today

M Thomas Ruke, JR.,CIC, CPIA, CWISInsurance Business Consultants, Inc.P O Box 2030, Ft Myers, FL 33902

[email protected]

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Polling Question #1

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Trucking/ Motor Carriers

• Terms are important

– Understanding motor carrier terms and how they affect the insurance for a motor carrier should be a part of all agents’ and underwriters’ considerations when providing insurance to motor carriers

– The problem with terms that are commonly used is that they have different means to different people


Vehicle Size Is Important

• Gross vehicle weight (GVW)– Light = 0-10,000

• Pick-up – 2 wheels – 2 axles– Medium = 10,001-20,000

• 6 wheels – 2 axles – Small tires– Heavy = 20,001-45,000

• 6 wheels – 2 axles – Large tires– Extra Heavy = 45,001+

• 10 wheels – 3 axles plus – Large tires– FMCSA’s requirement to register is based on

the “size” of the vehicle:• 10,001 GVW or larger

– And if used in interstate commerce or not


Financial Responsibility And Driver Requirements• 10,000 lb. GVW with six wheels important

– If what is hauled is hazardous• Intrastate “any”• Intrastate “bulk”

– MCS90 – Minimum financial responsibility of motor carrier

• $750,000 for-hire• $1,000,000/5,000,000 if hazardous

– 26,001 lb. GVW – Important because of the government – Also 16 seats or more

– Commercial Driver License (CDL)– DOT requirements


Big Rig


10,000 Gvw With Hazardous Materials


26,001 GVW - CDL


More Than 15 Seats - CDL


Polling Question #2

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What Activity Of Business Does The Federal Government Consider in its

definition of a Motor Carrier?


What Type Of Business Does The Federal Government Consider A Motor Carrier?

• Does this include private?


What Is Interstate?

• When items are being transported across state lines– Either the unit is providing transportation or the

unit is used to provide local movement

• If the definition is met, must have a DOT# and meet responsibilities under UCR

• Could have to meet financial responsibility requirements


How About Intrastate Motor Carriers?

• Yes, some states require intrastate motor carriers to comply with federal requirements and obtain DOT#

– AL, AK, AZ, CO, CT, FL, GA, IN, IA, KS, KY, ME, MD, MI, MN, MO, MT, NY, NE, OH, OR, PA, SC, N, TX, UT, WA, WV, WI and WY

– Some states have registration requirements and FR for intrastate motor carriers


Government Regulation

• Must gain permission from the government to operate in interstate commerce– Who

• Motor carrier – User of auto in interstate commerce 10,001 GVW or larger

– Register• Anyone (private or for-hire) that uses an auto with six

wheels must obtain a Federal DOT# - Some states also have requirements

• Current form – MCS150– Pay a fee

• DOT# holder with interstate units must comply with UCR• If unit is 26,001 or larger used in interstate commerce must

comply with IFTA and IRP – Tax distribution


Motor Carriers

• Motor carriers with FMCSA permission to haul for others, processed goods in interstate commerce (Old ICC) 1/1/96 – 76,000 – today about 170,000 (MC number)– These are interstate motor carriers who haul regulated goods

and have met their financial responsibility requirements by having a 91X sent to the federal government

– This financial responsibility requirement affects vehicles 10,000 GVW or larger

– The MC number no longer has to be displayed on side of truck

• MC#’s are going away• DOT#’s sole identification


Federal Government Requirements

• For-hire motor carrier makes application to the federal government for permission to haul regulated commodities in interstate commerce

• Name and address of motor carrier– Must be accurate – Name/address/docket number the

government knows the motor carrier by• The motor carrier has an insurance company file a

certificate of insurance on their behalf– The certificate of insurance is a BMC91X– Requires MCS90 be attached to policy

• Protection of public even if unit is not scheduled if used with authority


Polling Question #3

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Who is regulated under the Motor Carrier Act of 1980?


The Law

• Motor Carrier Act of 1980– Motor Carrier – 387.5

• All for-hire interstate• All motor carriers if hauling hazardous items

– Who is affected – 387.3 • For-hire – any property in interstate commerce - $750,000• All haulers of hazardous materials – Private and for hire -

$1,000,000/5,000,000• Exception

– Units less than 10,000 GW other than Class A&B explosives or poisonous gas

– If interstate, any quantity if intrastate bulk

– Enforcement – 387.7(d)– Violation and penalty – 387.17

• $11,000 per day


MCS90

Protection of the pubic from the insured’s negligence for use of “autos” that are covered by law1.New definition – Environmental restoration2.Public liability – Include ER3.Public responds to “public liability” on a blanket basis. Public protected by BI, PD and ER for all autos owned or operated by insured4.Recovery – However, endorsement does not provide protection to the insured. Insured must buy policy to protect them or could have to repay insurance company – Watch covered auto-pollution coverage5.Insurance carrier or insured must give the other party 35 days’ notice of cancellation of endorsement


Current Financial Responsibility Requirements• If for-hire hauling processed goods in interstate

commerce– Must provide proof of FR before operating (91X) – Motor

carriers who have a DOT# and a MC# (MC# not required to be on truck – going away 10/2015)

• 91X Considerations– Certificate of insurance– Limits required

• MCS90 Requirements– Must be attached to policy COI is based on– Blanket protection for all occurring within the authority– Cancellation provision (in writing) – 30 days plus mailing– This is not insurance – This is financial responsibility to

operate legally


Current Financial Responsibility Requirements• Financial responsibility only affects claims

when there is no coverage in policy provided by the insurance carrier who furnished the proof of financial responsibility

• Fail safe to the public


FMCSA’s Requirements To Be A Regulated Motor Carrier• Notice! – The federal government considers any

user of a commercial motor vehicle (CMV) to be a motor carrier

• This includes truckers– In the past we used the term to include a “for-hire”

trucker which was a business that used CMV’s to haul property of others

• The FMCSA’s definition includes for-hire as well as private (a business hauling their own property)

• Motor carrier is any user of a commercial motor vehicle


Unified Registration System “Final Rule”

• Long-awaited completion of combining requirements for motor carriers to:

– Register– Pay a fee– Provide proof of financial responsibility

• Will affect all users of autos 10,001 GVW and larger


For A Copy Of The Complete “Law”

• Go to SAFERSYS.org• Right hand side under “Other FMCSA Websites”• FMCSA Home Page• News and Alerts• “FMCSA to Establish Registration System” – 8/23/13• Published in Federal Register/Vol. 78, #164, Friday,

8/23/13 – Rules and Regulations• 49 CFR Parts 360, 365, 366 et al.• Unified Registration System


Updating URS Information

• This final rule requires all regulated entities to update registration information every 24 months

• However, such changes will not relieve an entity of complying with the biennial update requirement

• Beginning November 1, 2013 the agency will issue a warning letter 30 days in advance of a biennial update deadline to notify the entity that its DOT number will be deactivated if it fails to comply with the biennial update requirement


Identification Solely By DOT Number

• FMCSA will use the DOT number as its sole unique identifier for motor carriers, brokers and freight forwarders subject to its regulations

• The URS will discontinue issuance of MC, MX and FF numbers to those entities who register with the FMCSA

• This rule, will not require motor carriers to remove the obsolete numbers from their vehicles and those numbers may be used for other purposes such as advertising or marketing

• The agency does encourage carriers to omit these obsolete numbers from new or repainted vehicles


Evidence Of Financial Responsibility

• The final rule requires all for-hire motor carriers and private motor carriers that transport hazardous materials (HM) in interstate commerce as well as property brokers and freight forwarders to electronically file evidence of financial responsibility to receive DOT registration

• The agency also requires certain private motor carriers transporting HM in interstate commerce to file evidence of financial responsibility with the agency – These carriers are already required by statute and regulations to obtain and maintain BI and PD insurance in the MCA80 – MCS90 requirements


Wrap-up

• The completion of the ICC Termination Act of 1995 is finally here

• Most of the provisions have been pushed off until 2015, but 2015 is not that far off

• New insurance filing requirements– Current for-hire exempt motor carriers (loggers, cattle

haulers, sand and gravel) in interstate commerce as well as cucumber haulers, fruits and vegetable haulers as well as others will have to have an insurance filing in two years

– Currently they are required to have a MCS90 attached to the policy and if so this filing will not be that big of a deal

– If not, it will have to be addressed during renewal in 2014


Private Motor Carriers

• Private motor carriers– This is a new area of focus– Some using 6-wheel units (but not 18-wheel

units) that cross state lines have in most states not been a priority for enforcement officers to stop and make them obtain a DOT#

– This would require them to complete the UCR and pay a fee

– FR requirement 10-2014


Insurance Considerations For MCS90’s

• Must make sure all autos owned and used by the insured are covered under the policy this endorsement is attached to

– Symbols (Any) – Any 10,000 GVW or larger

• Problems if specified• Hired auto coverage – Must have to make sure all

activities are covered


Pollution Coverage

• What is your insurance carrier’s position on providing pollution coverage

– Forms with pollution coverage in the standard endorsement – CA9948

• Within the policy?• Additional cost?

– What is the reimbursement policy of being successful?

• Offer coverage


Meeting Insured’s Needs

• The first step we take to meet the insureds’ needs is by making sure the insured is properly identified and by selecting the autos that will be “covered autos” and what coverages will apply to these “covered autos”

• Entries in item One and Two reflect who the “you” is and the type of autos that must be involved in the accident to have policy respond, the type of coverage that will be afforded and the amount of coverage – If it is not here, then no coverage


Polling Question #4

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Which of the following is a true statement about what symbol typically is available to use for

covering “trucks for hire”?


Symbols 1-9 (19) – Used with Business Auto Coverage FormSymbols 61-71 (79) – Used with Motor Carrier Coverage Form

Symbol Description of Covered Auto Designation Symbols

1,61 “Any” Autos

7,67

Specifically Described “Autos”

Only those “autos” described in item Three of the Declarations of which a premium charge is shown (and for Liability Coverage any “trailers” you don’t own while attached to any power unit described in Item Three)

8,68Hired “Autos” Only

Only those “autos” you lease, hire, rent or borrow. This does not include any private passenger type autos you lease, hire, rent or borrow from any member of your household, any of your “employees”, partners (if you are a partnership), members (if you are a limited liability company), or agents or members of their households

9,71Non-Owned “Autos” Only

Only those “autos” you do not own, lease, hire, rent or borrow that are used in connection with your business. This includes “private passenger type autos” owned by your “employees,” partners (if you are a partnership), members (if you are a limited liability company), or members of their households but only while used in your business or your personal affairs


Named Insured The business operating the covered autos

• Symbols– At accident time auto involved in accident must

meet the definition to be a covered auto– The symbols normally are for for-hire truckers

• Any auto– (Any auto 10,000 GVW or larger)

• Specified– Must be listed to be a covered auto

• Hired– Insured uses part of their business as a motor carrier

• Non-Owned– Auto used by others on behalf of the motor carrier


Coverage

• We will also pay all sums an “insured” legally must pay as a “covered pollution cost or expense” to which this insurance applies, caused by an “accident” and resulting from the ownership, maintenance or use of covered “autos”. However, we will only pay for the “covered pollution cost or expense” if there is either “bodily injury” or “property damage” to which this insurance applies that is caused by the same “accident”


Considerations

• Pollution coverage provided in “standard” ISO forms

• Who qualifies as an “insured”

– Starts with first name in Item One of dec

– Others who qualify under the “Who Is an Insured” provision


Pollution Damage Coverage As Related To:

• Bodily injury and property damage – Pollution damage coverage found in the first insuring agreement when not excluded – Direct damage and loss of use

• Clean-up of pollutants – The 12/90, 6/92, 12/93 and 7/97 BA Coverage Forms add coverage in a second insuring agreement to assure clean-up will be paid if loss meets definition of “covered pollution cost or expenses”


Three Areas Property Causing Pollution Damage Can Come From

• Property that is cargo – In insured’s CCC – Property being carried does damage

• Property used for service of vehicle – Fluids that make covered auto go – Escapes from designed containers and does damage

• Property that is someone else’s property – Third party’s property that an insured causes to escape does damage


Polling Question #5

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Which of the following is a type of “pollution” that would NOT be

covered on an ISO BAP


Pollution

• Limited coverage in current ISO policy– No coverage for pollution caused by insured’s

cargo• Some insurers give protection for pollution all

the time– Included in some coverage forms

• Some carriers – If endorsed – CA9948– Included in quoted premium– Additional premium

• Mandated by law in some states


Who Is An Insured

• You – Named on dec sheet• Anyone else who has permission from the you• Insured’s customers or owners of the legal

entity that is the insured – Vicarious wording – Blanket additional insured

• But– Not owners of non-owned covered “autos”

• BA – All owners of non-owned covered autos• MC – All owners of non-owned covered autos

plus “employees” or agent


Coverage Forms

• The BA (c.) and Motor Carrier (e.) Forms include the following wording in the Who Is An Insured provision, therefore, anyone meeting the requirements will be an insured on the policy just like their name on the dec sheet of the policy

Policy WordingAnyone liable for the conduct of an “insured” described above but only to the extent of that

liability


Considerations

• Vicarious Liability – Anyone liable for the conduct of an insured in an “auto” policy will also be an insured under that policy and will be protected by the policy covering the auto causing the accident


Additional Insured Considerations

• There is nothing we can add to give the customers any more protection for their use of the auto owned and operated by our insured without picking up some of the customers’ liability – All the protection needed is already there – No additional coverage can be provided to the customer of the owner of the auto – Just issue a COI reflecting:– “By virtue of Provision c. of the Who Is an Insured

provision of the above policy (name of customer) is an additional insured”

• (e. in Motor Carrier Form)– This is blanket additional insured


Additional Insured Considerations

– But if they must see their name on something

• CA2408 – Designated Insured

– Only clears up question if certificate holder is an anybody


Designated Insured – CA2048


Named Insured

• Want to be on the named insured line of Item One as Insured because of their ownership of the legal entity

• Why would the owner be named in a suit? – Because they were being held vicariously liable for the activities of the business they own which is an insured

• Therefore, they already have all the coverage they need for owning the legal entity – You give them no additional coverage by adding them to Item One of the dec

• You do complicate the covered auto issue if you do


Additional Considerations

• If insured is a motor carrier using non-owned autos leased with driver as a part of their motor carrier business– The owner or anyone else from whom you hire or

borrow a covered “auto” that is a “trailer” while the “trailer” is connected to another covered “auto” that is a power unit, or, if not connected, is being used exclusively in your business

– The lessor of a covered “auto” that is not a “trailer” or any “employer” agent or driver of the lessor while the “auto” is leased to you under a written agreement if the written agreement between the lessor and you does not require the lessor to hold you harmless and then only when the leased “auto” is used in your business as a “motor carrier” for hire


Does the regulated for-hire motor carrier use autos they do not own as a part of their business?• The Business Auto Coverage Form would require an

endorsement to provide protection to the user of the non-owned covered auto or the Motor Carrier Form because this form changes the “Who Is An Insured” provision and the conditions provision to make policy address these pledges contained in the COI that have been sent to the government when insureds use others’ autos in their motor carrier business within their authority based on the written agreement between the motor carrier and the owner of the non-owned covered auto used in the business of the motor carrier

• The only difference in the current ISO Coverage Forms is how the forms address coverage for owners (their agents or employees) of non-owned covered autos the insured uses as a part of the motor carrier business


Compliance, Safety, Accountability (CSA)

• How is it affecting:– The motor carrier

• Any business with a DOT#

– Rating• Control of operations• Focus on the “small things”

– The driver• History important when “moving” jobs• DSMS/PSPS


CSA

– The shipper• How do they use this information?

– Third party to arrange– Pay more for “safer” motor carriers

– Insurance• Years with Safer and Safestat

– Now what?

• Auto liability– Underwriting and pricing

• Workers compensation– How the safety ratings affect workers compensation


BASIC’s• What are the Behavior Analysis and Safety

Improvement Categories (BASICs)? Which violations correspond to which BASIC?– The Safety Measurement System (SMS) is organized into

seven BASICs, which represent behaviors that can lead to crashes. The BASICs were developed based on information from a number of studies that quantify the associations between violations and crash risk, as well as statistical analysis and input from enforcement subject matter experts.


BASIC’s

• The BASICs are defined as follows:– Unsafe Driving — Operation of commercial motor vehicles (CMVs)

by drivers in a dangerous or careless manner. Example Violations: Speeding, reckless driving, improper lane change, and inattention. (FMCSR Parts 392 and 397)

– Hours-of-Service (HOS) Compliance — Operation of CMVs by drivers who are ill, fatigued, or in noncompliance with the HOS regulations. This BASIC includes violations of regulations pertaining to logbooks as they relate to HOS requirements and the management of CMV driver fatigue. Example Violations: HOS, logbook, and operating a CMV while ill or fatigued. (FMCSR Parts 392 and 395)

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BASIC’s– Driver Fitness Operation of CMVs by drivers who are unfit to operate a CMV

due to lack of training, experience, or medical qualifications. Example Violations: Failure to have a valid and appropriate commercial driver's license and being medically unqualified to operate a CMV. (FMCSR Parts 383 and 391)

– Controlled Substances/Alcohol — Operation of CMVs by drivers who are impaired due to alcohol, illegal drugs, and misuse of prescription or over-the-counter medications. Example Violations: Use or possession of controlled substances/alcohol. (FMCSR Parts 382 and 392)

– Vehicle Maintenance — Failure to properly maintain a CMV and prevent shifting loads. Example Violations: Brakes, lights, and other mechanical defects, improper load securement, and failure to make required repairs. (FMCSR Parts 392, 393, and 396)

– Hazardous Materials (HM) Compliance — Unsafe handling of hazardous materials (HM) on a CMV. Example violations: leaking containers, improper placarding, improperly packaged HM. (FMCSR Part 397 and U.S. DOT HM Regulations Parts 171, 172, 173, 177, 178, 179 & 180)


BASIC’s


BASIC’s• What is a percentile?

– The Safety Measurement System (SMS) calculates a measure for each Behavior Analysis and Safety Improvement Category (BASIC) as described in the SMS Methodology document. The measure is then used to assign a ranking, or percentile, for each motor carrier that has information that could be compared against other similar carriers. This percentile ranking allows the safety behavior of a carrier to be compared with the safety behavior of carriers with similar operations and numbers of safety events.

– The percentile is computed on a 0-100 scale, with 100 indicating the worst performance and 0 indicating the best performance. The carrier in the group with the highest measure will be at the 100th percentile, while the carrier with the lowest measure in the group will be at the 0 percentile. All other carriers in the group will be between these two numbers based on their compliance records.


BASIC’s

BASIC Intervention Thresholds

Passenger HM General

Unsafe driving, HOS compliance, crash indicator

=50% =60% =65%

Driver fitness, controlled substances/alcohol, vehicle maintenance

=65% =75% =80%

HM compliance =80% =80% =80%


BASIC’s• What is a warning letter?

The warning letter provides motor carriers with early notification of potential safety performance issues. Warning letters are based on roadside performance results collected during the previous 24 months. The warning letter is sent to the motor carrier's principal place of business and specifically identifies Behavior Analysis and Safety Improvement Categories that exceed the Federal Motor Carrier Safety Administration's Intervention Threshold relative to the motor carrier's safety event grouping and outlines possible consequences of continued compliance problems.

• What should a motor carrier do after receiving a warning letter?

–Carriers do not need to respond in writing to the Federal Motor Carrier Safety Administration (FMCSA) after receiving a warning letter. FMCSA does encourage motor carriers to log in to the Safety Measurement System (SMS) to examine their data, focusing their attention first on the Behavior Analysis and Safety Improvement Categories that are over or near the Intervention Threshold. Carriers should consider doing all of the following:


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