We get asked all the time to explain Non-Trucking coverage. The below is a simple and great explanation as told by Zurich.
Non-trucking liability insurance does not apply to bodily injury or property damage while a covered auto is used to carry property in any business or while a covered auto is used in the business of anyone to whom the auto is leased or rented.
Background – In most cases when an independent trucker signs a contract leasing his services to another trucking firm, primary insurance coverage is provided by that trucking company, but only while the vehicle is being operated under their authority. This creates a need for the independent trucker to have his own coverage that applies when it is not being used for business purposes.
Eligibility – Non-trucking coverage is available to any trucker that has signed a contract leasing his unit to another trucking company for a period of 30 days or more. This would typically apply to only tractors, trailers, and heavy trucks are eligible for coverage.
Notes – This coverage is low priced because it is very restrictive. If the independent trucker is transporting goods or in any way operating the vehicle for business purposes, there is no coverage. Hired and non-owned coverage & hazardous materials cannot be written in conjunction with a non-trucking policy. Additional insured endorsements should not be issued with non-trucking policies, with the exception of loss payable interests. When physical damage is provided for owner-operators as part of a non-trucking policy, the physical damage coverage applies whether the owner-operator is using the vehicle for business purposes or not.
Wednesday, December 30, 2009
Tuesday, December 22, 2009
Cargo Theft 101- The simple problem and the simple solution
Cargo theft is an often discussed issue in transportation insurance. One of our companies has written a treatise to address the issue and prevention. While it is written with the trucking insured in mind, it should not be construed to be a comprehensive policy. In the end, prevention should dovetail insurance coverage. Note the article does not address the many technological solutions that are out there for truckers, brokers, and shippers. Even so, it gives a very nice overview of the problem and a solution.
Motor Truck Cargo Theft
Cargo theft is a crime of opportunity. Goods transported along our nation’s highways are abundant and easy to access, offering cargo thieves low risk of detection and a potentially lucrative career. Law enforcement and industry officials estimate cargo theft costs the U.S. shipping industry $25 billion a year(1.)
Trends
Pharmaceuticals, building supplies, consumer electronics, computers, food and drugs are the most frequently targeted cargos in the shipping industry. The rate of theft of these types of cargos tends to increase during a depressed economy.
Cargo theft occurs most frequently in cargo terminals, transfer facilities and cargo consolidation areas. Other high-target areas include truck stops, parking lots, warehouses and trucks parked on the street. Although cargo theft occurs throughout the U.S., the most highly targeted theft states are Texas, Georgia, Tennessee, California and Florida(1).
Methods of Cargo Theft
A variety of methods are used to steal cargo(2.):
• Terminal robbery - organized groups enter a trucking facility, hold security guards or employees hostage and steal one or more loaded vehicles.
• Hijacking - cargo thieves conduct surveillance on a target after receiving “inside” information on the load. Once the driver stops, one or more gunman enters the cab, detain the driver and transport the load to a pre-determined destination.
• Burglary - a “theft group” enters a facility, posts one or more individuals to act as lookout then opens trailers or containers searching for valuable goods.
• Driver/insider information – a driver or employee stages a hijacking using advance knowledge of a specific trailer or container load and provides cargo and transportation information to a group preparing for a heist.
• Counterfeit shipping documents - drivers, acting as independent contractors, present counterfeit paperwork to security guards and flee with valuable loads of cargo from terminals.
• Grab and run - favored by criminals targeting trucks loaded with high-tech equipment, an individual or group follows a targeted truck in a van. Once the truck comes to a stop, suspects exit the van, open trailer doors and off-load cargo before the truck takes off.
Methods used to steal cargo(2.) (continued):
• Warehouse stolen cargo - stolen rigs are taken to a pre-designated storage facility for off-loading and storage. Warehouses include industrial storage facilities, public storage facilities, restaurants, pallet yards, single-family houses, apartments and abandoned or condemned buildings.
• Stealth Technology - battery powered GPS transmitters are installed to track pre-selected trailer loads. Criminals follow the signal and wait for it to be detected "at rest” then advance toward trailer and either off-load cargo or move the trailer to a safe harbor for unloading.
What Is Being Done:
The US Patriot Improvement and Reauthorization Act, passed in 2006, increased prison terms for those convicted of cargo theft. Theft of cargo worth less than $1,000 is punishable by three years in prison and up to 15 years in prison for theft of cargo worth more than $1,000. The law also requires cargo theft be listed under its own code in the Uniform Crime Reporting System, a national database used by the FBI.(3)
Prevention Measures
Prevention measures play an important role in limiting opportunities for theft. Actions that should be taken to help limit exposure to theft include:
a)Personnel
Pre-employment screening can be the first line of defense against cargo theft. Informants within an organization are often a major cause of cargo and vehicle thefts. Follow these basic practices to avoid hiring applicants who are likely to engage in cargo theft.
• Require every applicant to provide a list of previous employers and contact information going as far back in their work experience as possible
• Look for employment gaps that may indicate attempts to hide unfavorable references or unemployment
• Require applicants to provide motor vehicle reports, credit history and criminal background investigations, or request an authorization to obtain such reports
• Require controlled substance and alcohol testing for each applicant
• Provide initial and ongoing employee training
• Use locks or other protective devices to restrict employee access
b)Operations
Unattended vehicles
• Vehicles should be equipped with alarm systems
• Lock the vehicle up to and immediately following departure inspection
Operating in high risk areas or transporting valuable cargo
• Security procedures and precautions should be elevated to the highest level feasible
• Unauthorized stops in non-secured areas should be prohibited
• Vehicles should be manned by two drivers
• Drivers should move in convoys
• Ensure two-way communication with a home base
– Consider the use of a security escort in the convoy
Route schedule
• Schedule the most direct route from point A to point B with a minimum number of stops.
• Give instructions never to leave the cargo unattended for any period of time in a non-secured area.
• Routing and scheduling considerations:
- Geographic scope
- Travel to/through known or likely theft and hijacking areas
- Equipment changes and driver or team changes
• Deviations from the specified route must be reported to the company
• Loads or shipments should not be sub-contracted to third party without written permission
Secure information
• Educate all employees about the dangers of sharing any information on cargos being transported
• Determine communication responsibilities among shippers and truckers
• Consider inviting a local law enforcement agency to assess security
c)Equipment
• Examine equipment for integrity and condition prior to use
• Seal/lock trailers or containers
• Seal trailers or containers which are loaded but not immediately picked up or offloaded and back them securely against a solid wall
• Document the cargo loading process with video or photographic files
d)Driving rules
• Require photo identification at all facilities before cargo is tendered
• Equip all drivers with cell phones or use of a two way radio
• Monitor communication from a base operation
e)Facilities
• Require adequate lighting around the loading/unloading areas and parking lots
• Establish fencing or other barriers to prevent unauthorized entry
• Utilize gate and automated yard locks
• Deploy automated fire, burglar and video cameras systems
• Provide security personnel, or a central station monitored alarm system, subject to periodic audit by carrier personnel or authorized agents
Preparation and prevention can mean the difference between cargo arriving safely at its destination or ending up in the hands of thieves. Take time to understand the risks and protect your business.
1 FreightWatch International, 2009 Global Cargo Theft Summary Report, FreightWatch International February 11, 2009.
2 California Highway Patrol, Commercial Vehicle Section, Cargo Theft Interdiction Program,
http://www.chp.ca.gov/programs/ctip.html, 2009.
3 Federal Bureau of Investigation, CARGO THEFT'S HIGH COST Thieves Stealing Billions Annually
Motor Truck Cargo Theft
Cargo theft is a crime of opportunity. Goods transported along our nation’s highways are abundant and easy to access, offering cargo thieves low risk of detection and a potentially lucrative career. Law enforcement and industry officials estimate cargo theft costs the U.S. shipping industry $25 billion a year(1.)
Trends
Pharmaceuticals, building supplies, consumer electronics, computers, food and drugs are the most frequently targeted cargos in the shipping industry. The rate of theft of these types of cargos tends to increase during a depressed economy.
Cargo theft occurs most frequently in cargo terminals, transfer facilities and cargo consolidation areas. Other high-target areas include truck stops, parking lots, warehouses and trucks parked on the street. Although cargo theft occurs throughout the U.S., the most highly targeted theft states are Texas, Georgia, Tennessee, California and Florida(1).
Methods of Cargo Theft
A variety of methods are used to steal cargo(2.):
• Terminal robbery - organized groups enter a trucking facility, hold security guards or employees hostage and steal one or more loaded vehicles.
• Hijacking - cargo thieves conduct surveillance on a target after receiving “inside” information on the load. Once the driver stops, one or more gunman enters the cab, detain the driver and transport the load to a pre-determined destination.
• Burglary - a “theft group” enters a facility, posts one or more individuals to act as lookout then opens trailers or containers searching for valuable goods.
• Driver/insider information – a driver or employee stages a hijacking using advance knowledge of a specific trailer or container load and provides cargo and transportation information to a group preparing for a heist.
• Counterfeit shipping documents - drivers, acting as independent contractors, present counterfeit paperwork to security guards and flee with valuable loads of cargo from terminals.
• Grab and run - favored by criminals targeting trucks loaded with high-tech equipment, an individual or group follows a targeted truck in a van. Once the truck comes to a stop, suspects exit the van, open trailer doors and off-load cargo before the truck takes off.
Methods used to steal cargo(2.) (continued):
• Warehouse stolen cargo - stolen rigs are taken to a pre-designated storage facility for off-loading and storage. Warehouses include industrial storage facilities, public storage facilities, restaurants, pallet yards, single-family houses, apartments and abandoned or condemned buildings.
• Stealth Technology - battery powered GPS transmitters are installed to track pre-selected trailer loads. Criminals follow the signal and wait for it to be detected "at rest” then advance toward trailer and either off-load cargo or move the trailer to a safe harbor for unloading.
What Is Being Done:
The US Patriot Improvement and Reauthorization Act, passed in 2006, increased prison terms for those convicted of cargo theft. Theft of cargo worth less than $1,000 is punishable by three years in prison and up to 15 years in prison for theft of cargo worth more than $1,000. The law also requires cargo theft be listed under its own code in the Uniform Crime Reporting System, a national database used by the FBI.(3)
Prevention Measures
Prevention measures play an important role in limiting opportunities for theft. Actions that should be taken to help limit exposure to theft include:
a)Personnel
Pre-employment screening can be the first line of defense against cargo theft. Informants within an organization are often a major cause of cargo and vehicle thefts. Follow these basic practices to avoid hiring applicants who are likely to engage in cargo theft.
• Require every applicant to provide a list of previous employers and contact information going as far back in their work experience as possible
• Look for employment gaps that may indicate attempts to hide unfavorable references or unemployment
• Require applicants to provide motor vehicle reports, credit history and criminal background investigations, or request an authorization to obtain such reports
• Require controlled substance and alcohol testing for each applicant
• Provide initial and ongoing employee training
• Use locks or other protective devices to restrict employee access
b)Operations
Unattended vehicles
• Vehicles should be equipped with alarm systems
• Lock the vehicle up to and immediately following departure inspection
Operating in high risk areas or transporting valuable cargo
• Security procedures and precautions should be elevated to the highest level feasible
• Unauthorized stops in non-secured areas should be prohibited
• Vehicles should be manned by two drivers
• Drivers should move in convoys
• Ensure two-way communication with a home base
– Consider the use of a security escort in the convoy
Route schedule
• Schedule the most direct route from point A to point B with a minimum number of stops.
• Give instructions never to leave the cargo unattended for any period of time in a non-secured area.
• Routing and scheduling considerations:
- Geographic scope
- Travel to/through known or likely theft and hijacking areas
- Equipment changes and driver or team changes
• Deviations from the specified route must be reported to the company
• Loads or shipments should not be sub-contracted to third party without written permission
Secure information
• Educate all employees about the dangers of sharing any information on cargos being transported
• Determine communication responsibilities among shippers and truckers
• Consider inviting a local law enforcement agency to assess security
c)Equipment
• Examine equipment for integrity and condition prior to use
• Seal/lock trailers or containers
• Seal trailers or containers which are loaded but not immediately picked up or offloaded and back them securely against a solid wall
• Document the cargo loading process with video or photographic files
d)Driving rules
• Require photo identification at all facilities before cargo is tendered
• Equip all drivers with cell phones or use of a two way radio
• Monitor communication from a base operation
e)Facilities
• Require adequate lighting around the loading/unloading areas and parking lots
• Establish fencing or other barriers to prevent unauthorized entry
• Utilize gate and automated yard locks
• Deploy automated fire, burglar and video cameras systems
• Provide security personnel, or a central station monitored alarm system, subject to periodic audit by carrier personnel or authorized agents
Preparation and prevention can mean the difference between cargo arriving safely at its destination or ending up in the hands of thieves. Take time to understand the risks and protect your business.
1 FreightWatch International, 2009 Global Cargo Theft Summary Report, FreightWatch International February 11, 2009.
2 California Highway Patrol, Commercial Vehicle Section, Cargo Theft Interdiction Program,
http://www.chp.ca.gov/programs/ctip.html, 2009.
3 Federal Bureau of Investigation, CARGO THEFT'S HIGH COST Thieves Stealing Billions Annually
Wednesday, December 9, 2009
Contingent Auto Liability 101- a trucking insurance sales opportunity
If you are not writing Contingent Auto Liability and Contingent Cargo Coverage for Truck Brokers, you are missing an important sales and service opportunity for your trucking clients.
Truck Brokers
Truck brokers are licensed by the Federal Motor Carrier Safety Administration. They do not operate trucks and merely serve as an intermediary between the shipper and the trucker. In essence, they arrange or "place" loads for a shipper with truckers wanting to haul freight. Since truckers may not always have freight for a return trip or "backhaul" arranged, they often call a truck broker find a shipment to haul to make sure they log as few non-revenue producing miles as possible.
A truck broker helps the trucking community have greater utilization and profitability. Since a truck broker is essence a middleman, the trucker ends up getting less revenue per mile than they would have had they arranged for the transportation of freight directly with the shipper.
For that reason, truckers try to utilize truck brokers as little as possible. However, they recognize that truck brokers have a ready source of freight shipments that the truckers wouldn't obtain on their own and operating with a reduced revenue is better than returning home without freight and revenue, otherwise known as "deadheading."
Truckers With Brokerage Authority
Many truckers have their own brokerage operations. Why? On occasion, truckers will find that they have a shipment to one destination or "headhaul" that is profitably priced, however, they are not able to find any suitable freight to carry back for their "backhaul."
Rather than send one of their own trucks out to the boondocks and deadhead back without a paying load or strand the driver and truck there for several days while trying to arrange a profitable backhaul, some truckers, in their capacity as a freight broker, will offer the load to another trucker who is better situated to handle the shipment and grateful for the business.
Risk Exposures
The freight broker arranges the shipment of the cargo by naming the trucker on the bill of lading. The responsibility for providing auto liability coverage and cargo coverage rests upon the trucker. In compliance with regulations, the trucker is required to have certain minimum amounts of insurance in-force. The broker typically makes certain that the auto liability is in-force and at the minimum required limit by obtaining a certificate of insurance. Similarly, the broker verifies that the limit of trucker's cargo coverage is adequate to cover the value of the load being transported.
Coverage
Contingent Auto Liability coverage provides indemnity and optional defense to a truck broker for third-party liability claims. Contingent Cargo coverage provides indemnity and defense to a truck broker for third-party cargo claims. An example of where coverage applies is a case where the broker relies upon a certificate of insurance for a trucker to be valid and it turns out to be bogus- or the trucker is out of business ( actual claim). A claim ensues and the truck broker is brought into the fracas. The contingent policy provides for indemnity and optional defense.
Most insurers do not want to write this coverage and product scarcity leaves the truck broker exposed, not to mention a potential errors and omissions exposure for the insurance agent.
GTU Offers Contingent Auto Liability and/or Contingent Cargo Coverage
We have three facilities for the contingent auto liability and five facilities for the contingent cargo. We also write the GL, E & O and contents Coverages are specifically designed for the truck brokers and truckers with brokerage authority. All facilities are A rated.
Consider your clients' needs and examine your book of business and see which accounts have brokerage operations. Review your prospects and see who has brokerage authority but have no coverage. A sales and service opportunity becomes available and you can demonstrate your risk management abilities to your prospects and clients.
Truck Brokers
Truck brokers are licensed by the Federal Motor Carrier Safety Administration. They do not operate trucks and merely serve as an intermediary between the shipper and the trucker. In essence, they arrange or "place" loads for a shipper with truckers wanting to haul freight. Since truckers may not always have freight for a return trip or "backhaul" arranged, they often call a truck broker find a shipment to haul to make sure they log as few non-revenue producing miles as possible.
A truck broker helps the trucking community have greater utilization and profitability. Since a truck broker is essence a middleman, the trucker ends up getting less revenue per mile than they would have had they arranged for the transportation of freight directly with the shipper.
For that reason, truckers try to utilize truck brokers as little as possible. However, they recognize that truck brokers have a ready source of freight shipments that the truckers wouldn't obtain on their own and operating with a reduced revenue is better than returning home without freight and revenue, otherwise known as "deadheading."
Truckers With Brokerage Authority
Many truckers have their own brokerage operations. Why? On occasion, truckers will find that they have a shipment to one destination or "headhaul" that is profitably priced, however, they are not able to find any suitable freight to carry back for their "backhaul."
Rather than send one of their own trucks out to the boondocks and deadhead back without a paying load or strand the driver and truck there for several days while trying to arrange a profitable backhaul, some truckers, in their capacity as a freight broker, will offer the load to another trucker who is better situated to handle the shipment and grateful for the business.
Risk Exposures
The freight broker arranges the shipment of the cargo by naming the trucker on the bill of lading. The responsibility for providing auto liability coverage and cargo coverage rests upon the trucker. In compliance with regulations, the trucker is required to have certain minimum amounts of insurance in-force. The broker typically makes certain that the auto liability is in-force and at the minimum required limit by obtaining a certificate of insurance. Similarly, the broker verifies that the limit of trucker's cargo coverage is adequate to cover the value of the load being transported.
Coverage
Contingent Auto Liability coverage provides indemnity and optional defense to a truck broker for third-party liability claims. Contingent Cargo coverage provides indemnity and defense to a truck broker for third-party cargo claims. An example of where coverage applies is a case where the broker relies upon a certificate of insurance for a trucker to be valid and it turns out to be bogus- or the trucker is out of business ( actual claim). A claim ensues and the truck broker is brought into the fracas. The contingent policy provides for indemnity and optional defense.
Most insurers do not want to write this coverage and product scarcity leaves the truck broker exposed, not to mention a potential errors and omissions exposure for the insurance agent.
GTU Offers Contingent Auto Liability and/or Contingent Cargo Coverage
We have three facilities for the contingent auto liability and five facilities for the contingent cargo. We also write the GL, E & O and contents Coverages are specifically designed for the truck brokers and truckers with brokerage authority. All facilities are A rated.
Consider your clients' needs and examine your book of business and see which accounts have brokerage operations. Review your prospects and see who has brokerage authority but have no coverage. A sales and service opportunity becomes available and you can demonstrate your risk management abilities to your prospects and clients.
Monday, December 7, 2009
Truck Insurance Pricing Barometer- December 2009
Most transportation insurance rates in the third quarter were decreasing as marketplace competition has increased, according to a brokerage firm survey.
The NIP Group Inc. in Woodbridge, N.J., said that was the finding of its Transportation Insurance Pricing Survey (TIPS), which contacted transportation insurance brokers, wholesalers and underwriters involved with “thousands of account placements.”
Although survey respondents have seen fewer new entrants into the transportation marketplace than last quarter, “the overall view on the direction of rates is grim,” NIP reported.
The firm said, “This is evidenced by the fact that the number of respondents reporting rate decreases has gone up since last quarter across all account sizes. Similarly, the number of rate increases being reported has abated.”
Richard Augustyn, NIP chief executive officer, said survey results indicate that the market has reversed direction and is softer now compared to last quarter. “This change in direction is not what we were expecting based on last quarter’s results. We will continue to monitor TIPS results to see how this plays out during the key January renewal period.”
The survey measured premium changes across ten different transportation segments, including:
• Trucking Operations Intermodal Carriers
• Messenger/Courier Services Ambulance/Paratransit
• School Bus Contractors Bulk Transportation
• Airport Ground Transportation Charter/Tour Bus Operators
• Specialized Carriers & Riggers Limousine Services
Nearly all segments have experienced rate decreases over the past quarter, with bulk transportation seeing somewhat better results.
For that segment 34.78 percent reported no change in premiums, and 8.7 percent said they were up by 1-to-10 percent. Another 34.78 percent said they were down 1-to-10 percent, 8.7 percent said they were down 10-to-20 percent, and 13.04 said premiums were down 20-to-30 percent.
Respondents who found prices soft or softer totaled 53.66 percent, and 45.06 percent found “more” or “many more” insurers were writing insurance for the transportation sector.
The NIP Group Inc. in Woodbridge, N.J., said that was the finding of its Transportation Insurance Pricing Survey (TIPS), which contacted transportation insurance brokers, wholesalers and underwriters involved with “thousands of account placements.”
Although survey respondents have seen fewer new entrants into the transportation marketplace than last quarter, “the overall view on the direction of rates is grim,” NIP reported.
The firm said, “This is evidenced by the fact that the number of respondents reporting rate decreases has gone up since last quarter across all account sizes. Similarly, the number of rate increases being reported has abated.”
Richard Augustyn, NIP chief executive officer, said survey results indicate that the market has reversed direction and is softer now compared to last quarter. “This change in direction is not what we were expecting based on last quarter’s results. We will continue to monitor TIPS results to see how this plays out during the key January renewal period.”
The survey measured premium changes across ten different transportation segments, including:
• Trucking Operations Intermodal Carriers
• Messenger/Courier Services Ambulance/Paratransit
• School Bus Contractors Bulk Transportation
• Airport Ground Transportation Charter/Tour Bus Operators
• Specialized Carriers & Riggers Limousine Services
Nearly all segments have experienced rate decreases over the past quarter, with bulk transportation seeing somewhat better results.
For that segment 34.78 percent reported no change in premiums, and 8.7 percent said they were up by 1-to-10 percent. Another 34.78 percent said they were down 1-to-10 percent, 8.7 percent said they were down 10-to-20 percent, and 13.04 said premiums were down 20-to-30 percent.
Respondents who found prices soft or softer totaled 53.66 percent, and 45.06 percent found “more” or “many more” insurers were writing insurance for the transportation sector.
Wednesday, December 2, 2009
More on CargoNet
More information has come out about what exactly CargoNet will do which is a joint venture between ISO and the National Insurance Crime Bureau
From an article in National Underwriter.
Insurance Industry Tackles Cargo Theft
ISO and the National Insurance Crime Bureau (NICB) announced today their intent to create a national information sharing system to combat cargo crime. By networking existing databases and adding secure reporting and analytic functions, the new system will enable more efficient, accurate, and timely sharing of cargo-theft information between theft victims, their insurers, and law enforcement.
Cargo theft is a multibillion-dollar economic drain that exploits existing gaps in the nation’s information-sharing framework. When theft victims are unable to provide timely and accurate information concerning their losses, it hampers law enforcement’s ability to conduct an effective investigation. Aside from the immediate loss of merchandise, cargo theft affects insurers and their policyholders through added costs that are ultimately borne by consumers.
Even more troubling are the indirect costs of cargo theft through supply-chain interruption, which can jeopardize product safety when goods are taken from a controlled environment and resold to an unsuspecting public.
For the first time, a nationally coordinated data-sharing system is being built to take into account the needs of insurers, law enforcement, transportation companies, manufacturers, retailers, and their many agents and service providers. The core of the network is a new database called CargoNetTM, which will be launched in early 2010. The network will also encompass training and investigative support for law enforcement, as well as theft prevention services and analytics.
Vincent Cialdella, ISO senior vice president, explained, “ISO’s track record of building and managing sophisticated and secure systems to share sensitive loss and crime data is ideally suited to building CargoNetTM. We are greatly encouraged by the strong support we are receiving from leading cargo insurers. This initiative would not be possible without it. We are also encouraged by discussions we have had with transportation companies, manufacturers, and retailers, given the crucial role they play in this initiative.”
Joe Wehrle, president and chief executive officer of NICB, added, “This is a critical step in the plan that the industry and law enforcement mapped out in November 2006, when the National Cargo Theft Task Force recommended the development of intelligence databases and information sharing. Working with our members and law enforcement, NICB has been making progress against cargo theft on many fronts. We have recovered stolen cargo, developed intelligence, and dissolved organized groups behind the thefts. If CargoNet were in place today, I’m sure we’d be seeing a lot more recoveries, and we’d be making thieves think twice about stealing these loads.”
From an article in National Underwriter.
Insurance Industry Tackles Cargo Theft
ISO and the National Insurance Crime Bureau (NICB) announced today their intent to create a national information sharing system to combat cargo crime. By networking existing databases and adding secure reporting and analytic functions, the new system will enable more efficient, accurate, and timely sharing of cargo-theft information between theft victims, their insurers, and law enforcement.
Cargo theft is a multibillion-dollar economic drain that exploits existing gaps in the nation’s information-sharing framework. When theft victims are unable to provide timely and accurate information concerning their losses, it hampers law enforcement’s ability to conduct an effective investigation. Aside from the immediate loss of merchandise, cargo theft affects insurers and their policyholders through added costs that are ultimately borne by consumers.
Even more troubling are the indirect costs of cargo theft through supply-chain interruption, which can jeopardize product safety when goods are taken from a controlled environment and resold to an unsuspecting public.
For the first time, a nationally coordinated data-sharing system is being built to take into account the needs of insurers, law enforcement, transportation companies, manufacturers, retailers, and their many agents and service providers. The core of the network is a new database called CargoNetTM, which will be launched in early 2010. The network will also encompass training and investigative support for law enforcement, as well as theft prevention services and analytics.
Vincent Cialdella, ISO senior vice president, explained, “ISO’s track record of building and managing sophisticated and secure systems to share sensitive loss and crime data is ideally suited to building CargoNetTM. We are greatly encouraged by the strong support we are receiving from leading cargo insurers. This initiative would not be possible without it. We are also encouraged by discussions we have had with transportation companies, manufacturers, and retailers, given the crucial role they play in this initiative.”
Joe Wehrle, president and chief executive officer of NICB, added, “This is a critical step in the plan that the industry and law enforcement mapped out in November 2006, when the National Cargo Theft Task Force recommended the development of intelligence databases and information sharing. Working with our members and law enforcement, NICB has been making progress against cargo theft on many fronts. We have recovered stolen cargo, developed intelligence, and dissolved organized groups behind the thefts. If CargoNet were in place today, I’m sure we’d be seeing a lot more recoveries, and we’d be making thieves think twice about stealing these loads.”
Wednesday, November 25, 2009
Operational Metrics- The Business of Trucking
Insurance agents generally really do not understand the financial benchmarks that allows truckers to assess their viability and profitability. Here are 4 tools courtesy of RLI Marine:
1. Average length of haul.
Shorter lengths of haul frequently involve higher rates per mile from customers, fewer miles per truck, and a greater percentage of non-revenue miles caused by re-positioning of equipment.
2. Average freight revenue per total mile (excluding fuel surcharges).
Average freight revenue per loaded mile + Non-Revenue miles (excluding fuel surcharge revenue).
3. Average miles per tractor.
4. Average freight revenue per tractor per week (excluding fuel surcharges).
Average freight revenue per tractor per week (excluding fuel surcharges) is a key measure of asset productivity. This operating metric takes into account the effects of freight rates, non-revenue miles, and miles per tractor. Calculating average freight revenue per tractor using all trucks takes into account the percentage of fleet that is unproductive due to lack of drivers, repairs, and other factors.
Operating high quality, late-model equipment contributes to operating efficiency, helps recruit and retain drivers, and is an important part of providing excellent service to customers. Operating tractors while under warranty minimizes repair and maintenance costs and reduces service interruptions caused by breakdowns. Order equipment with uniform specifications reduces parts inventory and facilitates maintenance.
1. Average length of haul.
Shorter lengths of haul frequently involve higher rates per mile from customers, fewer miles per truck, and a greater percentage of non-revenue miles caused by re-positioning of equipment.
2. Average freight revenue per total mile (excluding fuel surcharges).
Average freight revenue per loaded mile + Non-Revenue miles (excluding fuel surcharge revenue).
3. Average miles per tractor.
4. Average freight revenue per tractor per week (excluding fuel surcharges).
Average freight revenue per tractor per week (excluding fuel surcharges) is a key measure of asset productivity. This operating metric takes into account the effects of freight rates, non-revenue miles, and miles per tractor. Calculating average freight revenue per tractor using all trucks takes into account the percentage of fleet that is unproductive due to lack of drivers, repairs, and other factors.
Operating high quality, late-model equipment contributes to operating efficiency, helps recruit and retain drivers, and is an important part of providing excellent service to customers. Operating tractors while under warranty minimizes repair and maintenance costs and reduces service interruptions caused by breakdowns. Order equipment with uniform specifications reduces parts inventory and facilitates maintenance.
Tuesday, November 24, 2009
Texting, Cell Phones and Truckers
You want to help your trucker lead the way to safety- how about coming up with a policy to not text, to drive hands-free without a cell phone and commit and write in their safety manual that a driver will not do such things. By the way, it is going to be legislated that way sooner or later and is already law in many states. See why from Teresa Long's article in the Insurance Journal below:
Cell phones, Blackberrys and iPods now infiltrate
work life as well as leisure time. These devices are
affecting job safety, a not-so-good vibration being felt,
literally, from coast to coast.
A Boston trolley driver is distracted while sending a text
message and slams into another car, injuring scores of passengers.
Even more horrific is the operator
of a commuter train in Los
Angeles who, while looking down to
send a text message, hits another
train and kills 20 people.
Virginia Tech Transportation
Institute researchers revealed that a
trucker looking down while texting
for a mere six seconds while motoring
at 55 miles per hour will travel
the length of a football field, and not
realize he traveled so far, so fast.
No longer is it only intoxicated drivers who are dangerous, it
is the “intexticated” drivers, as well.
The Harvard Center of Risk Analysis estimates that cell
phone activity contributes to 636,000 motor vehicle crashes,
330,000 injuries, and 2,600 fatalities each year. Although it’s hard
to put a number on how many of those are work-related, it is
safe to say employers need to be aware of potential ramifications.
A few years ago a company settled for $16 million because
one of its salespeople killed a person when driving while talking
on a cell phone.
Some businesses have already banned cell phones. They
understand the potential liability. Unfortunately, there are still
employers who fail to realize the urgency of the matter. Too
many believe that salespersons or the local delivery persons
can’t work fast enough unless they are multi-tasking.
But it’s time to wake up and smell the risk. Because most
assuredly the insurance company and their underwriters are
standing downwind and it’s only a matter of time before they
start sniffing around to see if employers have language in place
prohibiting the use of cell phones while driving.
Several politicians and the American Transportation
Association have already introduced legislation aimed at banning
texting while operating a vehicle. The proposed bill will
penalize states in violation of the law with the risk of losing 25
percent of their federal highway funding.
It’s not only the inappropriate use of cell phones that’s causing
undo risk, it’s also injuries to workers listening to iPods
while on the job. It’s when an employee is listening to ABBA
instead of a listening to a co-worker yelling out a warning or
hearing the beep-beep-beep of a forklift backing up. One aerospace
manufacturer took a proactive approach by banning 1,500
of its employees from using iPods at work, even though there
have been no incidents.
Human resources departments need to
know the ramifications of the new technology
in the workplace, put specific policy
language into the employee handbook,
properly train employees, and vigorously
enforce those policies. By doing
so, they can protect themselves from liability
by showing that the employee
knowingly violated a written safety rule.
Companies are putting themselves at
risk should a distracted employee be
involved in an accident. Plus, it is very
likely that there would be a workers’ compensation claim.
We can’t idiot-proof the world. But we can add protection in
the workplace and for the public. Nothing drives home this
point better than the story of a 25 year old truck driver from
upstate New York who was talking on a cell phone with one
hand and texting with the other. He
came up one hand short and lost control
of his vehicle, careened across a
front lawn and plunged his truck into
a swimming pool, injuring a woman
and her 8 year-old niece.
We can only hope that the company
he worked for had the foresight to
have an up-to-date policy on the do’s
and don’ts of the new technology.
Because recent cases have shown language
is not enough. The company
must also show it has enforced the
policy and properly educated the
employee.
Cell phones, Blackberrys and iPods now infiltrate
work life as well as leisure time. These devices are
affecting job safety, a not-so-good vibration being felt,
literally, from coast to coast.
A Boston trolley driver is distracted while sending a text
message and slams into another car, injuring scores of passengers.
Even more horrific is the operator
of a commuter train in Los
Angeles who, while looking down to
send a text message, hits another
train and kills 20 people.
Virginia Tech Transportation
Institute researchers revealed that a
trucker looking down while texting
for a mere six seconds while motoring
at 55 miles per hour will travel
the length of a football field, and not
realize he traveled so far, so fast.
No longer is it only intoxicated drivers who are dangerous, it
is the “intexticated” drivers, as well.
The Harvard Center of Risk Analysis estimates that cell
phone activity contributes to 636,000 motor vehicle crashes,
330,000 injuries, and 2,600 fatalities each year. Although it’s hard
to put a number on how many of those are work-related, it is
safe to say employers need to be aware of potential ramifications.
A few years ago a company settled for $16 million because
one of its salespeople killed a person when driving while talking
on a cell phone.
Some businesses have already banned cell phones. They
understand the potential liability. Unfortunately, there are still
employers who fail to realize the urgency of the matter. Too
many believe that salespersons or the local delivery persons
can’t work fast enough unless they are multi-tasking.
But it’s time to wake up and smell the risk. Because most
assuredly the insurance company and their underwriters are
standing downwind and it’s only a matter of time before they
start sniffing around to see if employers have language in place
prohibiting the use of cell phones while driving.
Several politicians and the American Transportation
Association have already introduced legislation aimed at banning
texting while operating a vehicle. The proposed bill will
penalize states in violation of the law with the risk of losing 25
percent of their federal highway funding.
It’s not only the inappropriate use of cell phones that’s causing
undo risk, it’s also injuries to workers listening to iPods
while on the job. It’s when an employee is listening to ABBA
instead of a listening to a co-worker yelling out a warning or
hearing the beep-beep-beep of a forklift backing up. One aerospace
manufacturer took a proactive approach by banning 1,500
of its employees from using iPods at work, even though there
have been no incidents.
Human resources departments need to
know the ramifications of the new technology
in the workplace, put specific policy
language into the employee handbook,
properly train employees, and vigorously
enforce those policies. By doing
so, they can protect themselves from liability
by showing that the employee
knowingly violated a written safety rule.
Companies are putting themselves at
risk should a distracted employee be
involved in an accident. Plus, it is very
likely that there would be a workers’ compensation claim.
We can’t idiot-proof the world. But we can add protection in
the workplace and for the public. Nothing drives home this
point better than the story of a 25 year old truck driver from
upstate New York who was talking on a cell phone with one
hand and texting with the other. He
came up one hand short and lost control
of his vehicle, careened across a
front lawn and plunged his truck into
a swimming pool, injuring a woman
and her 8 year-old niece.
We can only hope that the company
he worked for had the foresight to
have an up-to-date policy on the do’s
and don’ts of the new technology.
Because recent cases have shown language
is not enough. The company
must also show it has enforced the
policy and properly educated the
employee.
Thursday, November 19, 2009
CSA 2010- First Look and Who Cares? You Will.
CSA 2010 is an acronym for Comprehensive Safety Analysis 2010- which is a major safety initiative by the Federal Motor Carrier Safety Administration. While there are many goals of the CSA 2010, it in essence means more regulations for truckers, and more opportunities for a trucker to be fined and put out of business. The end game should be that the CSA 2010 will make our roads safer. CSA will be phased in various states throughout 2010.
What does this mean to truck underwriting? More data and thus more tools to be able to discern insurability and pricing.
Loss cost data will become available to those insurance companies that capture it. Look for insurance applications to be changed to ask this information.
One would believe that more regulation on both trucking companies and drivers would result in less substandard operations. That does not mean that trucking losses will be less necessarily- but the viability and fines for those truckers and drivers who are not in compliance will be in question most certainly.
I really like the summary by Professional Safety Consulting has done on CSA 2010 and attach it here for everyone's benefit:
CSA 2010 – What Is It?
Comprehensive Safety Analysis (CSA) 2010 is a new FMCSA safety initiative to more effectively identify and quickly intervene with truck and bus drivers and carriers who are not complying with safety rules. CSA 2010 will replace SafeStat and the current safety rating methodology process with a new Safety Measurement System (SMS). In February 2008, FMCSA launched its first field test of the program in Colorado, Missouri, Georgia and New Jersey, followed by Minnesota and Montana in May 2009. More test states were added in October 2009. Full implementation in all states is scheduled to begin in July 2010 and slated for completion near the end of 2010.
CSA 2010 will enable FMCSA and its state partners to assess the safety performance of a greater segment of the industry and to intervene with more carriers to change unsafe behavior early. The CSA 2010 Operational Model is the new way compliance and enforcement programs will be carried out. The Operational Model is characterized by (1) a more comprehensive measurement system, (2) a proposed safety fitness determination methodology that is based on performance data, and (3) a comprehensive intervention process designed to more efficiently and effectively correct safety problems.
The new Safety Measurement System (SMS) will measure the previous two years of roadside performance data and calculate a score in six behavior categories, called BASICs (Behavioral Analysis and Safety Improvement Categories). The BASICs are categories of behaviors measured in the SMS to rank entities’ performance relative to their peers. The BASICs represent behaviors that can lead to crashes: unsafe driving, fatigued driving (hours-of-service), driver fitness, controlled substances and alcohol, vehicle maintenance and cargo related. For example, with this new program, an inspection in which a driver received no Driver Fitness violations (i.e. a “clean inspection”) would have a positive impact on the Driver Fitness BASIC. Additionally, the SMS evaluates an entity’s crash involvement (Crash Indicator) relative to its peers, which may indicate a problem with the entity that warrants intervention. The Crash Indicator looks for histories or patterns of high crash involvement, including frequency and severity, based on information from state-reported crash reports.
FMCSA is developing a Safety Fitness Determination (SFD) methodology, to replace the current system, which is solely dependent on onsite compliance review results. The SFD will expand the use of on-road performance as calculated in the SMS and include results of all investigations. One of three Safety Fitness Determination (SFD) ratings will be assigned to a carrier: Continue to Operate, Marginal, and Unfit. With the implementation of CSA 2010, an on-site compliance review will not required to issue or change an SFD rating.
Using the CSA 2010 Operational Model, FMCSA and State partners will identify carriers for interventions. These interventions will offer an expanded suite of tools, ranging from warning letters to comprehensive on-site investigations that supplement the labor-intensive compliance review, to better address the specific safety problems identified. Under the new system, higher scores will cause a motor carrier to enter, or remain in the pool of carriers with deficient BASICs. Increased scores may make a carrier subject to more severe interventions.
Initial feedback from test states has suggested that achieving an acceptable rating under the new program will be a challenge, even for motor carriers currently operating under satisfactory safety ratings and acceptable SafeStat scores. All the more reason that carriers should begin preparing for CSA 2010 now, by analyzing their safety programs and the elements of BASICs that will be evaluated next year to determine their safety fitness. For more information, go to: http://csa2010.fmcsa.dot.gov
There are six important differences between the new Safety Measurement System (SMS) and the current measurement system, SafeStat:
1)SMS is organized by specific behaviors (BASICs)& Crash Indicator while Safestat was organized into four broad Safety Evaluation Areas (SEAs)
2)SMS identifies safety performance problems to determine the intervention level while Safestat identified carriers for a compliance review
3)SMS emphasizes on-road performance using all safety-based inspection violationswhile Safestat used only out-of-service and selected moving violations
4) SMS Uses risk-based violation weightings; Safestat has no such system for utilizing the weightings
5)SMS will be used to propose adverse safety fitness determination based on a carrier’s own data while Safestat has no such system for utilizing such data and therefore it has no impact on an entity’s safety fitness rating
6) SMS Includes two distinct safety measurement system: Carriers and Drivers; Safestat only sssesses only carriers
Initial feedback from test states has suggested that achieving an acceptable rating under the new program will be a challenge, even for motor carriers currently operating under satisfactory safety ratings and acceptable SafeStat scores. All the more reason that carriers should begin preparing for CSA 2010 now, by analyzing their safety programs and the elements of BASICs that will be evaluated next year to determine their safety fitness. For more information, go to: http://csa2010.fmcsa.dot.gov
What does this mean to truck underwriting? More data and thus more tools to be able to discern insurability and pricing.
Loss cost data will become available to those insurance companies that capture it. Look for insurance applications to be changed to ask this information.
One would believe that more regulation on both trucking companies and drivers would result in less substandard operations. That does not mean that trucking losses will be less necessarily- but the viability and fines for those truckers and drivers who are not in compliance will be in question most certainly.
I really like the summary by Professional Safety Consulting has done on CSA 2010 and attach it here for everyone's benefit:
CSA 2010 – What Is It?
Comprehensive Safety Analysis (CSA) 2010 is a new FMCSA safety initiative to more effectively identify and quickly intervene with truck and bus drivers and carriers who are not complying with safety rules. CSA 2010 will replace SafeStat and the current safety rating methodology process with a new Safety Measurement System (SMS). In February 2008, FMCSA launched its first field test of the program in Colorado, Missouri, Georgia and New Jersey, followed by Minnesota and Montana in May 2009. More test states were added in October 2009. Full implementation in all states is scheduled to begin in July 2010 and slated for completion near the end of 2010.
CSA 2010 will enable FMCSA and its state partners to assess the safety performance of a greater segment of the industry and to intervene with more carriers to change unsafe behavior early. The CSA 2010 Operational Model is the new way compliance and enforcement programs will be carried out. The Operational Model is characterized by (1) a more comprehensive measurement system, (2) a proposed safety fitness determination methodology that is based on performance data, and (3) a comprehensive intervention process designed to more efficiently and effectively correct safety problems.
The new Safety Measurement System (SMS) will measure the previous two years of roadside performance data and calculate a score in six behavior categories, called BASICs (Behavioral Analysis and Safety Improvement Categories). The BASICs are categories of behaviors measured in the SMS to rank entities’ performance relative to their peers. The BASICs represent behaviors that can lead to crashes: unsafe driving, fatigued driving (hours-of-service), driver fitness, controlled substances and alcohol, vehicle maintenance and cargo related. For example, with this new program, an inspection in which a driver received no Driver Fitness violations (i.e. a “clean inspection”) would have a positive impact on the Driver Fitness BASIC. Additionally, the SMS evaluates an entity’s crash involvement (Crash Indicator) relative to its peers, which may indicate a problem with the entity that warrants intervention. The Crash Indicator looks for histories or patterns of high crash involvement, including frequency and severity, based on information from state-reported crash reports.
FMCSA is developing a Safety Fitness Determination (SFD) methodology, to replace the current system, which is solely dependent on onsite compliance review results. The SFD will expand the use of on-road performance as calculated in the SMS and include results of all investigations. One of three Safety Fitness Determination (SFD) ratings will be assigned to a carrier: Continue to Operate, Marginal, and Unfit. With the implementation of CSA 2010, an on-site compliance review will not required to issue or change an SFD rating.
Using the CSA 2010 Operational Model, FMCSA and State partners will identify carriers for interventions. These interventions will offer an expanded suite of tools, ranging from warning letters to comprehensive on-site investigations that supplement the labor-intensive compliance review, to better address the specific safety problems identified. Under the new system, higher scores will cause a motor carrier to enter, or remain in the pool of carriers with deficient BASICs. Increased scores may make a carrier subject to more severe interventions.
Initial feedback from test states has suggested that achieving an acceptable rating under the new program will be a challenge, even for motor carriers currently operating under satisfactory safety ratings and acceptable SafeStat scores. All the more reason that carriers should begin preparing for CSA 2010 now, by analyzing their safety programs and the elements of BASICs that will be evaluated next year to determine their safety fitness. For more information, go to: http://csa2010.fmcsa.dot.gov
There are six important differences between the new Safety Measurement System (SMS) and the current measurement system, SafeStat:
1)SMS is organized by specific behaviors (BASICs)& Crash Indicator while Safestat was organized into four broad Safety Evaluation Areas (SEAs)
2)SMS identifies safety performance problems to determine the intervention level while Safestat identified carriers for a compliance review
3)SMS emphasizes on-road performance using all safety-based inspection violationswhile Safestat used only out-of-service and selected moving violations
4) SMS Uses risk-based violation weightings; Safestat has no such system for utilizing the weightings
5)SMS will be used to propose adverse safety fitness determination based on a carrier’s own data while Safestat has no such system for utilizing such data and therefore it has no impact on an entity’s safety fitness rating
6) SMS Includes two distinct safety measurement system: Carriers and Drivers; Safestat only sssesses only carriers
Initial feedback from test states has suggested that achieving an acceptable rating under the new program will be a challenge, even for motor carriers currently operating under satisfactory safety ratings and acceptable SafeStat scores. All the more reason that carriers should begin preparing for CSA 2010 now, by analyzing their safety programs and the elements of BASICs that will be evaluated next year to determine their safety fitness. For more information, go to: http://csa2010.fmcsa.dot.gov
Friday, November 13, 2009
Truck Insurance Underwriting- Data on Tank Operations
Most agents are understandably a bit bored with respect to underwriting. You hear about flatbed accounts being worse for liability writers and refrigerated carriers having worse cargo losses. That being said, the government is getting better with their data. Take the case of tank operations. Here is what you got ( from Professional Safety Consulting discussion):
• Over 1,300 cargo tank rollovers are reported each year
• 31% of ALL fatal commercial truck rollovers involve cargo tanks
• 93% of cargo tank rollovers occur on dry road surfaces
• Over 50% of cargo tank rollovers involve leaving the road
• 28% of cargo tank accidents involve driving too fast for conditions
• 44% of cargo tank rollovers occur on curves (including ramps); 56% on straight roads
• 25% of cargo tank rollovers involve straight trucks
• 66% of cargo tank rollovers involve drivers with more than ten years driving experience
• 78% of cargo tank rollovers involve some kind of driver error
The US DOT is working with its partners in industry, including carriers and vehicle manufacturers to significantly reduce rollover accidents.
Here is the challenge for our industry. We need to know what this all means.What was the insurance cost and the non-insurance cost of 1300 cargo tank rollovers and therefore what would be the loss cost? What is the insurance cost and the non-insurance cost of all the cargo tank fatalities? Should an underwriter or actuary impose a higher severity factor on cargo tank operations based on these statistics? What is the frequency of loss ( I assume it is much lower than your standard trucker.)?
The bottom line is this data makes us more knowledgable; however, it does not point to a particular solution or epiphany. We will get there with more data. Stay tuned.
• Over 1,300 cargo tank rollovers are reported each year
• 31% of ALL fatal commercial truck rollovers involve cargo tanks
• 93% of cargo tank rollovers occur on dry road surfaces
• Over 50% of cargo tank rollovers involve leaving the road
• 28% of cargo tank accidents involve driving too fast for conditions
• 44% of cargo tank rollovers occur on curves (including ramps); 56% on straight roads
• 25% of cargo tank rollovers involve straight trucks
• 66% of cargo tank rollovers involve drivers with more than ten years driving experience
• 78% of cargo tank rollovers involve some kind of driver error
The US DOT is working with its partners in industry, including carriers and vehicle manufacturers to significantly reduce rollover accidents.
Here is the challenge for our industry. We need to know what this all means.What was the insurance cost and the non-insurance cost of 1300 cargo tank rollovers and therefore what would be the loss cost? What is the insurance cost and the non-insurance cost of all the cargo tank fatalities? Should an underwriter or actuary impose a higher severity factor on cargo tank operations based on these statistics? What is the frequency of loss ( I assume it is much lower than your standard trucker.)?
The bottom line is this data makes us more knowledgable; however, it does not point to a particular solution or epiphany. We will get there with more data. Stay tuned.
Wednesday, November 4, 2009
The MCS-90 Made Simple
Truckers buy commercial auto liability insurance due to the MCS-90 which requires insurance to protect the public. But is the MCS-90 endorsement insurance? No. The attached article is one of the best I have seen on the subject and should be a required read for anyone writing trucking insurance.
The MCS-90 Is NOT Insurance
By Christopher J. Boggs, CPCU, ARM, ALCM
November 2, 2009
Twenty-eight years after its June 1981 introduction, the MCS-90 endorsement remains a highly misunderstood form. Apparent judicial misapplications of the intended meaning and purpose of the form have added to the confusion.
The MCS-90 was designed to assure that an at-fault "for-hire" or public motor carrier could fulfill its financial responsibility to the public, regardless of the insured's failure to comply with the underlying insurance policy's terms and/or conditions. But it was not designed or intended to extend coverage to non-insureds or create coverage where none existed. Above all, the MCS-90 was not created to and does not currently provide any insurance coverage within the wording of the form - insurance protection is extended only from the policy to which the endorsement is attached.Attachment of the MCS-90 does nothing more than a guarantee that there will be some source of funds available to pay for bodily injury, property damage or environmental restoration (collectively referred to as "public liability" in the MCS-90) made necessary by the negligence of the insured and its employees. However, this guarantee does not constitute insurance for one crucial reason: the insurance carrier issuing the MCS-90 has the right to recover from the entity named in the endorsement any payment made as a direct consequence of the provisions of the form.
In essence, the MCS-90 is more closely related to a surety bond "guaranteeing" that the insured has and will continuously maintain the coverages types and amounts mandated by law. And if the insured fails to maintain the required insurance coverage, the issuer of the MCS-90 will stand in the insured's place - for the public good. But the issuer of the MCS-90 can and will likely seek full reimbursement from the insured named in the endorsement.
The Motor Carrier Regulatory Reform and Modernization Act, signed into law by President Jimmy Carter on July 1, 1980, and the impetus for the MCS-90, requires motor carriers that transport hazardous materials to maintain "public liability" coverage of either $1 million or $5 million (depending on the material). As evidenced by the MCS-90's inclusion of "environmental restoration" within the definition of "public liability," the endorsement essentially "guarantees" that the motor carrier has pollution liability protection or a source of funds to cover a pollution loss as required by the law.
If, however, the motor carrier fails to maintain the required pollution coverage and there is a pollution loss, the MCS-90 issuing insurer will stand in place of the insured and pay the loss up to the legally required amount. But since the motor carrier failed to comply with the law, the insurer can then recover payment from the motor carrier.
To reiterate, the MCS-90 is not insurance; it is a financial guarantee protecting the public from the financial consequences of a motor carrier's failure to carry the statutorily required insurance protection. Any payment made solely under the provisions of the MCS-90 is recoverable from the defaulting motor carrier.
Remember, the burden to meet the statutory financial requirements placed on motor carriers engaged in interstate commerce is on the motor carrier, not the insurance carrier. When the MCS-90 is endorsed to a business auto policy, the insurance carrier takes on two roles; the first as insurer and the second as surety. These competing requirements and roles coupled with the fact that a few of the "guarantees" provided by the MCS-90 are broader than the coverage provided by the underlying business auto policy (BAP)necessitates that the insurer carefully underwrite and confirm the underlying coverages that are to be maintained by the motor carrier.
Where the MCS-90 is Potentially Broader
Pollution: Pollution losses are essentially excluded in the BAP. There are a few exceptions to the exclusions that do not extend to cover damage caused by materials being hauled. As stated in the above example, the MCS-90's definition of "public liability" includes environmental restoration - a pollution coverage. Since the insurance carrier issuing the MCS-90 has "guaranteed" that the motor carrier can pay for a pollution loss, it is incumbent upon the underwriter (and agent) to verify the necessary coverage.
Scheduled / Unscheduled Autos: Business auto policies written on a "scheduled vehicle" basis can also be expanded by the attached MCS-90. The endorsement states that it covers all vehicles owned, operated or maintained by the insured "regardless of whether or not each motor vehicle is specifically described in the policy…." If the insured with a symbol "7" or "46" forgets to list or add a vehicle to the BAP, the insurer is normally not required to provide coverage for a loss. However, the MCS-90 negates this policy provision and requires the insurer to pay the loss. Since the insurer is acting as a surety in such a case, they may be able to recover from the insured.
Drivers: The MCS-90 does not stipulate that individuals driving any vehicle or towing any trailer subject to the Motor Carrier Act have to be listed on the policy, qualify as an "insured" or even be considered "permitted users." In fact, the MCS-90 doesn't even address drivers, which has lead to unique court rulings.
Cancellation: Thirty-five days notice of cancellation is required by the endorsement, even for non-payment of premium. If the insured motor carrier is subject to Federal Motor Carrier Safety Administration registration, the FMCSA must get 30 days notice before the cancellation is effective. The catch is, the 30 days does not begin to toll until the FMCSA receives the cancellation notice in its Washington DC office. This is much longer than the standard notice of cancellation for non-payment of premium (between 10 and 15 days based on state law); so the insurance carrier may be "on the hook" longer than required by the underlying BAP.
Court Decisions Can Alter the MCS-90's Intent and Purpose
John Deere Insurance Company v. Nueva (found on OpenJurist.org) expanded the MCS-90 definition of "insured" to include an entity that was not even a party (a "stranger") to the underlying BAP. The Ninth Circuit Court ruled that "insured" status under the MCS-90 extended to include an entity that had use of the named insured's trailer after it had been sold.
John Deere's insured (Baljit Singh Sahota DBA Sahota Trucking) sold a trailer to Gurmukh Garcha DBA Blue Star Transportation. Before title on the trailer was transferred, it was involved in an at-fault accident caused by Blue Star; but even though Sahota no longer had possession of the trailer and was not a party to its use (contractual or otherwise), the court ruled that the provisions of the MCS-90 extended coverage to the trailer since the title had not passed. The purchaser became an "insured" on the policy per the court. In 2002, the Supreme Court issued an opinion that the Ninth Circuit's findings were incorrect, but at this point, the ruling stands as issued in 2000.
Deere v. Nueva is only one example of how courts can substantially alter the purpose and intent of the MCS-90. Some court rulings serve to cement the intended use of the endorsement. A recent Tenth District Court of Appeals case reversed and vacated 20 years of bad precedent in that district created by its 1989 finding in Empire Fire & Marine Ins. Co. v. Guaranty National Ins. Co.
Carolina Casualty Insurance Company v. Yeates saw the Tenth District court in California join the majority opinion in stating that the MCS-90 does not create coverage in an underlying BAP where no coverage existed. In fact, the court laid out two tests that must be satisfied before the MCS-90 can be called upon to respond to a loss:
the underlying [auto] insurance policy to which the endorsement is attached does not provide coverage for the motor carrier's accident; and
the motor carrier's insurance coverage is either not sufficient to satisfy the federally prescribed minimum levels of financial responsibility or is non-existent.
Conclusion
The intent of the MCS-90 appears rather self-evident on its surface; it is not insurance, simply a safety net for innocent parties injured by the negligence of the named insured. However, sympathetic juries and judges have expanded the protection.
Knowing how the form is designed to work should allow agents to effectively explain the need for the endorsement to the insured; beyond just, "because the government requires it." Also, being able to provide the necessary underlying protection will serve your client and make the underwriter more comfortable with the risk.
The MCS-90 Is NOT Insurance
By Christopher J. Boggs, CPCU, ARM, ALCM
November 2, 2009
Twenty-eight years after its June 1981 introduction, the MCS-90 endorsement remains a highly misunderstood form. Apparent judicial misapplications of the intended meaning and purpose of the form have added to the confusion.
The MCS-90 was designed to assure that an at-fault "for-hire" or public motor carrier could fulfill its financial responsibility to the public, regardless of the insured's failure to comply with the underlying insurance policy's terms and/or conditions. But it was not designed or intended to extend coverage to non-insureds or create coverage where none existed. Above all, the MCS-90 was not created to and does not currently provide any insurance coverage within the wording of the form - insurance protection is extended only from the policy to which the endorsement is attached.Attachment of the MCS-90 does nothing more than a guarantee that there will be some source of funds available to pay for bodily injury, property damage or environmental restoration (collectively referred to as "public liability" in the MCS-90) made necessary by the negligence of the insured and its employees. However, this guarantee does not constitute insurance for one crucial reason: the insurance carrier issuing the MCS-90 has the right to recover from the entity named in the endorsement any payment made as a direct consequence of the provisions of the form.
In essence, the MCS-90 is more closely related to a surety bond "guaranteeing" that the insured has and will continuously maintain the coverages types and amounts mandated by law. And if the insured fails to maintain the required insurance coverage, the issuer of the MCS-90 will stand in the insured's place - for the public good. But the issuer of the MCS-90 can and will likely seek full reimbursement from the insured named in the endorsement.
The Motor Carrier Regulatory Reform and Modernization Act, signed into law by President Jimmy Carter on July 1, 1980, and the impetus for the MCS-90, requires motor carriers that transport hazardous materials to maintain "public liability" coverage of either $1 million or $5 million (depending on the material). As evidenced by the MCS-90's inclusion of "environmental restoration" within the definition of "public liability," the endorsement essentially "guarantees" that the motor carrier has pollution liability protection or a source of funds to cover a pollution loss as required by the law.
If, however, the motor carrier fails to maintain the required pollution coverage and there is a pollution loss, the MCS-90 issuing insurer will stand in place of the insured and pay the loss up to the legally required amount. But since the motor carrier failed to comply with the law, the insurer can then recover payment from the motor carrier.
To reiterate, the MCS-90 is not insurance; it is a financial guarantee protecting the public from the financial consequences of a motor carrier's failure to carry the statutorily required insurance protection. Any payment made solely under the provisions of the MCS-90 is recoverable from the defaulting motor carrier.
Remember, the burden to meet the statutory financial requirements placed on motor carriers engaged in interstate commerce is on the motor carrier, not the insurance carrier. When the MCS-90 is endorsed to a business auto policy, the insurance carrier takes on two roles; the first as insurer and the second as surety. These competing requirements and roles coupled with the fact that a few of the "guarantees" provided by the MCS-90 are broader than the coverage provided by the underlying business auto policy (BAP)necessitates that the insurer carefully underwrite and confirm the underlying coverages that are to be maintained by the motor carrier.
Where the MCS-90 is Potentially Broader
Pollution: Pollution losses are essentially excluded in the BAP. There are a few exceptions to the exclusions that do not extend to cover damage caused by materials being hauled. As stated in the above example, the MCS-90's definition of "public liability" includes environmental restoration - a pollution coverage. Since the insurance carrier issuing the MCS-90 has "guaranteed" that the motor carrier can pay for a pollution loss, it is incumbent upon the underwriter (and agent) to verify the necessary coverage.
Scheduled / Unscheduled Autos: Business auto policies written on a "scheduled vehicle" basis can also be expanded by the attached MCS-90. The endorsement states that it covers all vehicles owned, operated or maintained by the insured "regardless of whether or not each motor vehicle is specifically described in the policy…." If the insured with a symbol "7" or "46" forgets to list or add a vehicle to the BAP, the insurer is normally not required to provide coverage for a loss. However, the MCS-90 negates this policy provision and requires the insurer to pay the loss. Since the insurer is acting as a surety in such a case, they may be able to recover from the insured.
Drivers: The MCS-90 does not stipulate that individuals driving any vehicle or towing any trailer subject to the Motor Carrier Act have to be listed on the policy, qualify as an "insured" or even be considered "permitted users." In fact, the MCS-90 doesn't even address drivers, which has lead to unique court rulings.
Cancellation: Thirty-five days notice of cancellation is required by the endorsement, even for non-payment of premium. If the insured motor carrier is subject to Federal Motor Carrier Safety Administration registration, the FMCSA must get 30 days notice before the cancellation is effective. The catch is, the 30 days does not begin to toll until the FMCSA receives the cancellation notice in its Washington DC office. This is much longer than the standard notice of cancellation for non-payment of premium (between 10 and 15 days based on state law); so the insurance carrier may be "on the hook" longer than required by the underlying BAP.
Court Decisions Can Alter the MCS-90's Intent and Purpose
John Deere Insurance Company v. Nueva (found on OpenJurist.org) expanded the MCS-90 definition of "insured" to include an entity that was not even a party (a "stranger") to the underlying BAP. The Ninth Circuit Court ruled that "insured" status under the MCS-90 extended to include an entity that had use of the named insured's trailer after it had been sold.
John Deere's insured (Baljit Singh Sahota DBA Sahota Trucking) sold a trailer to Gurmukh Garcha DBA Blue Star Transportation. Before title on the trailer was transferred, it was involved in an at-fault accident caused by Blue Star; but even though Sahota no longer had possession of the trailer and was not a party to its use (contractual or otherwise), the court ruled that the provisions of the MCS-90 extended coverage to the trailer since the title had not passed. The purchaser became an "insured" on the policy per the court. In 2002, the Supreme Court issued an opinion that the Ninth Circuit's findings were incorrect, but at this point, the ruling stands as issued in 2000.
Deere v. Nueva is only one example of how courts can substantially alter the purpose and intent of the MCS-90. Some court rulings serve to cement the intended use of the endorsement. A recent Tenth District Court of Appeals case reversed and vacated 20 years of bad precedent in that district created by its 1989 finding in Empire Fire & Marine Ins. Co. v. Guaranty National Ins. Co.
Carolina Casualty Insurance Company v. Yeates saw the Tenth District court in California join the majority opinion in stating that the MCS-90 does not create coverage in an underlying BAP where no coverage existed. In fact, the court laid out two tests that must be satisfied before the MCS-90 can be called upon to respond to a loss:
the underlying [auto] insurance policy to which the endorsement is attached does not provide coverage for the motor carrier's accident; and
the motor carrier's insurance coverage is either not sufficient to satisfy the federally prescribed minimum levels of financial responsibility or is non-existent.
Conclusion
The intent of the MCS-90 appears rather self-evident on its surface; it is not insurance, simply a safety net for innocent parties injured by the negligence of the named insured. However, sympathetic juries and judges have expanded the protection.
Knowing how the form is designed to work should allow agents to effectively explain the need for the endorsement to the insured; beyond just, "because the government requires it." Also, being able to provide the necessary underlying protection will serve your client and make the underwriter more comfortable with the risk.
Thursday, October 29, 2009
Reconsidering Truckers' Hours of Service?
from Insurance Journal
The Obama administration has agreed to reconsider a rule that allows long-haul truckers to drive for up to 11 hours straight, bowing to safety advocates who say longer hours could lead to greater fatigue and more accidents.
The Federal Motor Carrier Safety Administration signed an agreement late Monday with safety and labor groups pledging to revise the rule that became final in the waning days of the Bush administration.
"We believe that starting over and developing a rule that can help save lives is the smart thing to do,'' said Transportation Secretary Ray LaHood.
For 60 years, truckers were allowed to drive a maximum of 10 hours at a time. The Bush administration and the trucking industry wanted to let truckers have an extra hour of driving time. The rule also cut rest and recovery time at the end of a work week from 50 or more hours off duty to as little as 34 hours off-duty.
The transportation agency isn't saying exactly what it will do, but opponents of expanded hours are hopeful a new rule will be closer to the original limits.
"We are pleased that the government has decided to take seriously its responsibility to protect truck drivers and the public from unsafe driving conditions instead of bending to the interests of the trucking industry,'' said Greg Beck, an attorney for the consumer group Public Citizen.
The FMCSA says it will propose a new rule within the next nine months.
A federal appeals court struck the rule down twice, saying the government did not adequately explain its reasoning for adding the extra hour. But the Bush administration reinstated the rule each time.
Public Citizen, Parents Against Tired Truckers, Citizens for Reliable and Safe Highways, Advocates for Highway and Auto Safety and the International Brotherhood of Teamsters sued to get the rule thrown out.
"We will continue to push for a rule that protects trucks drivers, instead of the greed of the trucking industry,'' said Teamsters president Jim Hoffa. "Longer hours behind the wheel are dangerous for our members and the driving public.''
Clayton Boyce, spokesman for American Trucking Associations, said the number of truck-involved fatalities and injuries on highways has decreased since the new rules took effect.
"It's been shown during that time that the rules as they are constructed are safe,'' Boyce said.
The Obama administration has agreed to reconsider a rule that allows long-haul truckers to drive for up to 11 hours straight, bowing to safety advocates who say longer hours could lead to greater fatigue and more accidents.
The Federal Motor Carrier Safety Administration signed an agreement late Monday with safety and labor groups pledging to revise the rule that became final in the waning days of the Bush administration.
"We believe that starting over and developing a rule that can help save lives is the smart thing to do,'' said Transportation Secretary Ray LaHood.
For 60 years, truckers were allowed to drive a maximum of 10 hours at a time. The Bush administration and the trucking industry wanted to let truckers have an extra hour of driving time. The rule also cut rest and recovery time at the end of a work week from 50 or more hours off duty to as little as 34 hours off-duty.
The transportation agency isn't saying exactly what it will do, but opponents of expanded hours are hopeful a new rule will be closer to the original limits.
"We are pleased that the government has decided to take seriously its responsibility to protect truck drivers and the public from unsafe driving conditions instead of bending to the interests of the trucking industry,'' said Greg Beck, an attorney for the consumer group Public Citizen.
The FMCSA says it will propose a new rule within the next nine months.
A federal appeals court struck the rule down twice, saying the government did not adequately explain its reasoning for adding the extra hour. But the Bush administration reinstated the rule each time.
Public Citizen, Parents Against Tired Truckers, Citizens for Reliable and Safe Highways, Advocates for Highway and Auto Safety and the International Brotherhood of Teamsters sued to get the rule thrown out.
"We will continue to push for a rule that protects trucks drivers, instead of the greed of the trucking industry,'' said Teamsters president Jim Hoffa. "Longer hours behind the wheel are dangerous for our members and the driving public.''
Clayton Boyce, spokesman for American Trucking Associations, said the number of truck-involved fatalities and injuries on highways has decreased since the new rules took effect.
"It's been shown during that time that the rules as they are constructed are safe,'' Boyce said.
Monday, October 26, 2009
The National Electric Code
Frequently we see losses, especially during road paving season where the insured tops a bridge or in this case a electric conductor. Most insurance carriers simply pay for the losses and many times the trucker is not liable. Here is why:
Truckers are typically allowed ( depending on the state) to be able to haul a load that measures 16'6" if traveling on a non-restricted highway. The National Electric Code requires vertical clearance from the ground service conductors have to have a minimum clearance of 18 feet. Many installers do not follow the rules and as such if a service conductor were hit that was less than this height, the trucker would not be legally liable.
When roads are paved, sometimes they are not scraped and as such the distance from the road to the bridges or overhangs are reduced. This leads to more claims where a trailer tops the structure. Do not always assume your insured is legally liable especially on a non-restricted highway.
Truckers are typically allowed ( depending on the state) to be able to haul a load that measures 16'6" if traveling on a non-restricted highway. The National Electric Code requires vertical clearance from the ground service conductors have to have a minimum clearance of 18 feet. Many installers do not follow the rules and as such if a service conductor were hit that was less than this height, the trucker would not be legally liable.
When roads are paved, sometimes they are not scraped and as such the distance from the road to the bridges or overhangs are reduced. This leads to more claims where a trailer tops the structure. Do not always assume your insured is legally liable especially on a non-restricted highway.
Friday, October 23, 2009
State of Transportation Insurance- October 2009
from American Agent and Broker
Double-digit rate decreases are nearing the end in transportation insurance, after a long stretch of declines. The market appears to be in a transitional phase as established transportation underwriters attempt to hold the line on rates for key business. While it is too early to tell, this may be encouraging news for commercial insurance agents and brokers nationwide because the transportation insurance market tends to act as a leading indicator of the direction of rates in the general commercial insurance market.
The recently published results of NIP Group’s Transportation Insurance Pricing Survey (TIPS) provide statistics to support this theory. The survey (available at http://www.nipgroup.com/SurveyResults.aspx) benchmarks changes in rates and availability in the transportation insurance market. Every quarter, TIPS questions the nation’s leading transportation insurance brokers, wholesalers and underwriters representing thousands of accounts. Respondents provide detailed information about trends they see with the rates on their accounts based on size, transportation industry segment and coverage type.
TIPS results from the second quarter of 2009 indicate that rate decreases are starting to level off, with rates down on average between 1 and 10 percent. In addition, more participants have reported modest rate increases across several segments, account sizes and lines of coverage during the second quarter. New insurance carrier entrants also are gaining market share as established transportation underwriters try to hold the line on rates and are less likely to lower rates significantly below expiring levels.
The majority of respondents believe rates in the transportation insurance market are beginning to moderate as observed by the slight firming of auto liability and motor truck cargo rates.
The driving forces
There are a number of factors that have joined together and contributed to the persistent downward pressure on both transportation rates and premiums during the past few years. Competition for premium dollars, the economic crisis, even advances in safety technology all have helped drive rates down. Though individual clients will be affected by different issues, one thing remains constant: The competition and mixed signals on rates raise uncertainty for brokers, adding to their anxiety.
Intense competition
The main factor that has driven rates to possibly unprofitable levels has been competition among insurance carriers.Transportation insurance is more widely available today as more insurers have entered the market than have exited it over the past 2 years.
In addition to contending with more entrants in the space, there is fierce competition among the key players for premium and accounts, with insurers and brokers focused on keeping their business. To make matters worse, several TIPS survey respondents indicated that in some cases underwriting standards are being compromised. One respondent reported seeing pricing wars among trucking markets, and that “underwriting seems to have taken a back seat in the fight for market share.”
Another survey participant’s comments clearly communicate frustration with the current situation: “More companies are writing the class but less are underwriting the class. That’s one of the problems in today’s market. If more insurers were underwriting and pricing based on the true potential profitability of the account, we would be able to get increased pricing on accounts that deserve to pay more.”
From an underwriter’s perspective, this continues to be a very challenging environment in which to underwrite and price business. Rates are low, competition is fierce for almost every account, the number of clients and their exposures are shrinking and claim costs continue to rise. They are feeling the pressure.
Economic pressure
Due to the recession, many transportation companies, especially truckers, have been forced to downsize their operations because of decreased demand for their services. There are fewer trucks and employees to insure, resulting in less demand for insurance capacity, which has kept renewal premiums down, even in cases where carriers have been successful in increasing rates. As one TIPS respondent noted, “Premiums are continuing to drop, but mainly because of decreases in exposures. Rates are actually flat to small increases, so the premium drops are usually based on the exposures decreasing drastically.”
Today, trucking companies have thinner margins and many are having more difficulty managing their cash flow. Last year, they first struggled with soaring fuel prices, which seriously damaged profits, and then had to deal with the effects of the worsening recession. According to the American Transportation Research Institute’s “Analysis of the Operational Costs of Trucking,” fuel costs make up nearly 40 percent of the total operational costs of trucking. When oil prices spiked to record highs of more than $140 per barrel in July 2008, it put tremendous pressure on the entire transportation industry, with trucking companies feeling it worst of all.
By the end of the year, fuel prices had come down substantially, but the nation was well into the worst recession in decades. Retailers are experiencing sluggish sales, a problem that may continue for a while. Low retail sales mean fewer items to ship which translates into fewer trips on the road, especially for long-haul truckers.
If there is a silver lining for transportation insurance brokers in this cloudy market, it is that the competitive market enables them to help clients lower their costs so they can survive this extremely difficult point in the business cycle.
New technology
In recent years, there have been many technological advances in equipment that trucking companies can use for safety and logistical purposes. The improvements in safety technology have had a direct impact on insurance rates for a number of reasons.
Frequency of claims continues to decrease as more and more trucks are equipped with the latest safety devices. Systems such as Drivecam (on-board recording of driver behavior) keep drivers in check, encouraging them to operate more safely when on the road. Also, enhanced braking technologies enable trucks to stop faster and handle better, which has helped reduce accidents and save lives. These types of improvements lower rates for insureds in the long run.
Carriers also are offering upfront rate discounts for fleets for investing in these types of safety advances.
In these uncertain times, the general consensus among experts is that no one knows for sure what will happen with rates in the commercial insurance market. However, as demonstrated by TIPS, many market participants believe that rates in the transportation corner of the market are starting to level off, so there is hope in the industry that this is the beginning of general upward trend.
Double-digit rate decreases are nearing the end in transportation insurance, after a long stretch of declines. The market appears to be in a transitional phase as established transportation underwriters attempt to hold the line on rates for key business. While it is too early to tell, this may be encouraging news for commercial insurance agents and brokers nationwide because the transportation insurance market tends to act as a leading indicator of the direction of rates in the general commercial insurance market.
The recently published results of NIP Group’s Transportation Insurance Pricing Survey (TIPS) provide statistics to support this theory. The survey (available at http://www.nipgroup.com/SurveyResults.aspx) benchmarks changes in rates and availability in the transportation insurance market. Every quarter, TIPS questions the nation’s leading transportation insurance brokers, wholesalers and underwriters representing thousands of accounts. Respondents provide detailed information about trends they see with the rates on their accounts based on size, transportation industry segment and coverage type.
TIPS results from the second quarter of 2009 indicate that rate decreases are starting to level off, with rates down on average between 1 and 10 percent. In addition, more participants have reported modest rate increases across several segments, account sizes and lines of coverage during the second quarter. New insurance carrier entrants also are gaining market share as established transportation underwriters try to hold the line on rates and are less likely to lower rates significantly below expiring levels.
The majority of respondents believe rates in the transportation insurance market are beginning to moderate as observed by the slight firming of auto liability and motor truck cargo rates.
The driving forces
There are a number of factors that have joined together and contributed to the persistent downward pressure on both transportation rates and premiums during the past few years. Competition for premium dollars, the economic crisis, even advances in safety technology all have helped drive rates down. Though individual clients will be affected by different issues, one thing remains constant: The competition and mixed signals on rates raise uncertainty for brokers, adding to their anxiety.
Intense competition
The main factor that has driven rates to possibly unprofitable levels has been competition among insurance carriers.Transportation insurance is more widely available today as more insurers have entered the market than have exited it over the past 2 years.
In addition to contending with more entrants in the space, there is fierce competition among the key players for premium and accounts, with insurers and brokers focused on keeping their business. To make matters worse, several TIPS survey respondents indicated that in some cases underwriting standards are being compromised. One respondent reported seeing pricing wars among trucking markets, and that “underwriting seems to have taken a back seat in the fight for market share.”
Another survey participant’s comments clearly communicate frustration with the current situation: “More companies are writing the class but less are underwriting the class. That’s one of the problems in today’s market. If more insurers were underwriting and pricing based on the true potential profitability of the account, we would be able to get increased pricing on accounts that deserve to pay more.”
From an underwriter’s perspective, this continues to be a very challenging environment in which to underwrite and price business. Rates are low, competition is fierce for almost every account, the number of clients and their exposures are shrinking and claim costs continue to rise. They are feeling the pressure.
Economic pressure
Due to the recession, many transportation companies, especially truckers, have been forced to downsize their operations because of decreased demand for their services. There are fewer trucks and employees to insure, resulting in less demand for insurance capacity, which has kept renewal premiums down, even in cases where carriers have been successful in increasing rates. As one TIPS respondent noted, “Premiums are continuing to drop, but mainly because of decreases in exposures. Rates are actually flat to small increases, so the premium drops are usually based on the exposures decreasing drastically.”
Today, trucking companies have thinner margins and many are having more difficulty managing their cash flow. Last year, they first struggled with soaring fuel prices, which seriously damaged profits, and then had to deal with the effects of the worsening recession. According to the American Transportation Research Institute’s “Analysis of the Operational Costs of Trucking,” fuel costs make up nearly 40 percent of the total operational costs of trucking. When oil prices spiked to record highs of more than $140 per barrel in July 2008, it put tremendous pressure on the entire transportation industry, with trucking companies feeling it worst of all.
By the end of the year, fuel prices had come down substantially, but the nation was well into the worst recession in decades. Retailers are experiencing sluggish sales, a problem that may continue for a while. Low retail sales mean fewer items to ship which translates into fewer trips on the road, especially for long-haul truckers.
If there is a silver lining for transportation insurance brokers in this cloudy market, it is that the competitive market enables them to help clients lower their costs so they can survive this extremely difficult point in the business cycle.
New technology
In recent years, there have been many technological advances in equipment that trucking companies can use for safety and logistical purposes. The improvements in safety technology have had a direct impact on insurance rates for a number of reasons.
Frequency of claims continues to decrease as more and more trucks are equipped with the latest safety devices. Systems such as Drivecam (on-board recording of driver behavior) keep drivers in check, encouraging them to operate more safely when on the road. Also, enhanced braking technologies enable trucks to stop faster and handle better, which has helped reduce accidents and save lives. These types of improvements lower rates for insureds in the long run.
Carriers also are offering upfront rate discounts for fleets for investing in these types of safety advances.
In these uncertain times, the general consensus among experts is that no one knows for sure what will happen with rates in the commercial insurance market. However, as demonstrated by TIPS, many market participants believe that rates in the transportation corner of the market are starting to level off, so there is hope in the industry that this is the beginning of general upward trend.
Sunday, October 18, 2009
New Driver Pre-Employment Screening Program
From Professional Safety
U.S. Transportation Secretary Announces Driver Pre-Employment Screening Program
The Federal Motor Carrier Safety Administration (FMCSA) announced October 7, 2009 that it will launch a new Driver Pre-Employment Screening Program which will allow commercial motor carrier companies to electronically access driver inspection and crash records as a part of the hiring process. The program is expected to begin in December 2009.
By using driver safety information during pre-employment screening, motor carriers will be able to better assess potential safety risks of a prospective driver-employee, and drivers will have additional opportunities to verify the data in their driving history and correct any discrepancies.
Commercial driver safety records are currently available to federal and state law enforcement personnel, and accessible to drivers through the Freedom of Information Act (FOIA). Once the pre-employment screening program is launched, driver safety records will be readily available to motor carriers regardless of state or jurisdiction. In accordance with federal privacy laws, drivers must first give written consent in order for their records to be released.
The Driver Pre-Employment Screening Program will be populated by FMCSA’s Motor Carrier Management Information System (MCMIS). The MCMIS is comprised of driver performance data including roadside inspection and compliance review results, enforcement data, state-reported crashes, and motor carrier census data.
U.S. Transportation Secretary Announces Driver Pre-Employment Screening Program
The Federal Motor Carrier Safety Administration (FMCSA) announced October 7, 2009 that it will launch a new Driver Pre-Employment Screening Program which will allow commercial motor carrier companies to electronically access driver inspection and crash records as a part of the hiring process. The program is expected to begin in December 2009.
By using driver safety information during pre-employment screening, motor carriers will be able to better assess potential safety risks of a prospective driver-employee, and drivers will have additional opportunities to verify the data in their driving history and correct any discrepancies.
Commercial driver safety records are currently available to federal and state law enforcement personnel, and accessible to drivers through the Freedom of Information Act (FOIA). Once the pre-employment screening program is launched, driver safety records will be readily available to motor carriers regardless of state or jurisdiction. In accordance with federal privacy laws, drivers must first give written consent in order for their records to be released.
The Driver Pre-Employment Screening Program will be populated by FMCSA’s Motor Carrier Management Information System (MCMIS). The MCMIS is comprised of driver performance data including roadside inspection and compliance review results, enforcement data, state-reported crashes, and motor carrier census data.
Friday, October 9, 2009
Coverage Question- Cargo loss from a hole in the trailer
From Fireman's Fund
Wetness is a common exclusion under motor truck cargo. Note the attached question relative to insurance and the legal liability of the trucker.
If water enters a dry van trailer, due to a hole, would cargo coverage apply to damaged product as a result of the water? Would an insured be
legally liable for the damage sustained due to the hole in trailer? Or, would the claim be denied by application of the above "Causes of Loss Not Covered" item?
• Specifically, if water entered a dry van trailer, due to a hole, would cargo coverage apply to damaged product as a result of the water?
No. The policy specifically excludes damage caused by rain.
• Would an insured be legally liable for the damage sustained due to the hole in trailer.
Yes. The insured is legally liable for damages sustained to cargo while in their possession as a carrier for hire, unless there is a valid defense to liability.
• Or, would the claim be denied by application of the above "Causes of Loss Not Covered" item?
Yes. If water enters thru a hole in the trailer, the policy exclusion would apply and the claim would be denied.
The assured would be legally liable for ANY water damage to cargo sustained while in their possession, whether the water came in thru a hole in the container, or got on the cargo some other way. Motor carriers are responsible for prompt & safe delivery of all goods entrusted to them for shipment. If during the transit, there is a collision or impact or some other event or occurrence that causes physical damage to the container/trailer resulting in a hole in that container/trailer that lets in the water, the assured would be legally liable for the damages to cargo, and would also have coverage under the policy. An example of this would be driver hitting a low handling limb that rips a hole in the trailer, or collision with another vehicle or stationary object. These are examples of situations where there is both (1) legal liability on the part of the assured and (2) coverage under the motor truck cargo policy.
If an insured transports a load of goods in a trailer that has a hole in it, and there is no covered event that created the hole or opening, then there is no coverage under the motor truck cargo policy, but assured would very likely still be legally liable for the damages to cargo, unless the assured could show that the shipper was at fault for improper maintenance of a shipper-owned container. Proper maintenance of the trailers/containers is key to avoiding this type of exclusion being applied in a loss event.
Wetness is a common exclusion under motor truck cargo. Note the attached question relative to insurance and the legal liability of the trucker.
If water enters a dry van trailer, due to a hole, would cargo coverage apply to damaged product as a result of the water? Would an insured be
legally liable for the damage sustained due to the hole in trailer? Or, would the claim be denied by application of the above "Causes of Loss Not Covered" item?
• Specifically, if water entered a dry van trailer, due to a hole, would cargo coverage apply to damaged product as a result of the water?
No. The policy specifically excludes damage caused by rain.
• Would an insured be legally liable for the damage sustained due to the hole in trailer.
Yes. The insured is legally liable for damages sustained to cargo while in their possession as a carrier for hire, unless there is a valid defense to liability.
• Or, would the claim be denied by application of the above "Causes of Loss Not Covered" item?
Yes. If water enters thru a hole in the trailer, the policy exclusion would apply and the claim would be denied.
The assured would be legally liable for ANY water damage to cargo sustained while in their possession, whether the water came in thru a hole in the container, or got on the cargo some other way. Motor carriers are responsible for prompt & safe delivery of all goods entrusted to them for shipment. If during the transit, there is a collision or impact or some other event or occurrence that causes physical damage to the container/trailer resulting in a hole in that container/trailer that lets in the water, the assured would be legally liable for the damages to cargo, and would also have coverage under the policy. An example of this would be driver hitting a low handling limb that rips a hole in the trailer, or collision with another vehicle or stationary object. These are examples of situations where there is both (1) legal liability on the part of the assured and (2) coverage under the motor truck cargo policy.
If an insured transports a load of goods in a trailer that has a hole in it, and there is no covered event that created the hole or opening, then there is no coverage under the motor truck cargo policy, but assured would very likely still be legally liable for the damages to cargo, unless the assured could show that the shipper was at fault for improper maintenance of a shipper-owned container. Proper maintenance of the trailers/containers is key to avoiding this type of exclusion being applied in a loss event.
Wednesday, September 30, 2009
Physical Damage Explanation of Comprehensive Versus Collision Coverage
from Canal
I am surprised how few people can actually explain the difference. Why would an agent ever sell specified perils when comprehensive is available? Plus there is an E & O exposure selling specified perils coverage.
So what is the difference. In specified perils, only the losses S-P-E-C-I-F-I-E-D are covered. Well that is pretty easy. So what is not covered that would be covered in a comprehensive policy?
*larceny
*glass breakage
*contact with a bird or animal ( how about a deer)
*riot or civil commotion
*substances in tanker that contaminate the trailer
*tanker acid leak that causes damage to the framer or tires
*cargo leaking into the trailer that had to be cleaned
*acid rain damaging the trucks paint
*implosion
*oder from a dead animal in the truck cab
*vermin eating the seats
While some of these types of losses are very far fetched, some are not and if you think a trucker is going to understand if his loss is not covered, I would be surprised.
Sell coverage that is available.
I am surprised how few people can actually explain the difference. Why would an agent ever sell specified perils when comprehensive is available? Plus there is an E & O exposure selling specified perils coverage.
So what is the difference. In specified perils, only the losses S-P-E-C-I-F-I-E-D are covered. Well that is pretty easy. So what is not covered that would be covered in a comprehensive policy?
*larceny
*glass breakage
*contact with a bird or animal ( how about a deer)
*riot or civil commotion
*substances in tanker that contaminate the trailer
*tanker acid leak that causes damage to the framer or tires
*cargo leaking into the trailer that had to be cleaned
*acid rain damaging the trucks paint
*implosion
*oder from a dead animal in the truck cab
*vermin eating the seats
While some of these types of losses are very far fetched, some are not and if you think a trucker is going to understand if his loss is not covered, I would be surprised.
Sell coverage that is available.
Cargo Theft Database Coming in 2010- CargoNet
From Fleetowner
Do you think our insurance carriers will have an interest in this?
As more and more attention is paid to cargo theft, the lack of a comprehensive national database tying individual states together with local and federal authorities, insurance companies and carriers alike, has become a roadblock to reducing the crime.
But ISO and the National Insurance Crime Bureau (NICB) are looking to combat that problem by launching what they said is the first “nationally coordinated data-sharing system” to meet the needs of all the affected parties. The groups said the new database, called CargoNet, will launch in early 2010.
“This is a critical step in the plan that the industry and law enforcement mapped out in November 2006, when the National Cargo Theft Task Force recommended the development of intelligence databases and information sharing,” said Joe Wehrle, president & CEO of NICB. “Working with our members and law enforcement, NICB has been making progress against cargo theft on many fronts. We have recovered stolen cargo, developed intelligence, and dissolved organized groups behind the thefts. If CargoNet were in place today, I’m sure we’d be seeing a lot more recoveries, and we’d be making thieves think twice about stealing these loads.”
The organizations said that creation of the national database will allow local, state and federal law enforcement to respond quickly to reports of theft by networking existing databases with secure reporting and analytic functions. ISO, which is a risk management firm, has seen first-hand the damage the multi-billion cargo theft racket has wrought.
“ISO’s track record of building and managing sophisticated and secure systems to share sensitive loss and crime data is ideally suited to building CargoNet,” said Vincent Cialdella, ISO senior vp. “We are greatly encouraged by the strong support we are receiving from leading cargo insurers. This initiative would not be possible without it. We are also encouraged by discussions we have had with transportation companies, manufacturers, and retailers, given the crucial role they play in this initiative.”
The new network will also include training and investigative support for law enforcement as well as theft prevention services, the organizations said.
NICB is a non-profit dedicated to preventing insurance fraud and vehicle theft. It is supported by more than 1,000 property and casualty insurance companies and self-insured organizations.
Do you think our insurance carriers will have an interest in this?
As more and more attention is paid to cargo theft, the lack of a comprehensive national database tying individual states together with local and federal authorities, insurance companies and carriers alike, has become a roadblock to reducing the crime.
But ISO and the National Insurance Crime Bureau (NICB) are looking to combat that problem by launching what they said is the first “nationally coordinated data-sharing system” to meet the needs of all the affected parties. The groups said the new database, called CargoNet, will launch in early 2010.
“This is a critical step in the plan that the industry and law enforcement mapped out in November 2006, when the National Cargo Theft Task Force recommended the development of intelligence databases and information sharing,” said Joe Wehrle, president & CEO of NICB. “Working with our members and law enforcement, NICB has been making progress against cargo theft on many fronts. We have recovered stolen cargo, developed intelligence, and dissolved organized groups behind the thefts. If CargoNet were in place today, I’m sure we’d be seeing a lot more recoveries, and we’d be making thieves think twice about stealing these loads.”
The organizations said that creation of the national database will allow local, state and federal law enforcement to respond quickly to reports of theft by networking existing databases with secure reporting and analytic functions. ISO, which is a risk management firm, has seen first-hand the damage the multi-billion cargo theft racket has wrought.
“ISO’s track record of building and managing sophisticated and secure systems to share sensitive loss and crime data is ideally suited to building CargoNet,” said Vincent Cialdella, ISO senior vp. “We are greatly encouraged by the strong support we are receiving from leading cargo insurers. This initiative would not be possible without it. We are also encouraged by discussions we have had with transportation companies, manufacturers, and retailers, given the crucial role they play in this initiative.”
The new network will also include training and investigative support for law enforcement as well as theft prevention services, the organizations said.
NICB is a non-profit dedicated to preventing insurance fraud and vehicle theft. It is supported by more than 1,000 property and casualty insurance companies and self-insured organizations.
Monday, September 28, 2009
Helping Truckers Fix their CSP ( Company Safety Profile)
Most trucking agents are aware that the SAFER report is one of the most scrutinized public tools available to underwriters. But what most agents are not aware of what the insured should do to fix it. The Safer reports are not perfect and can penalize an insured greatly at renewal time. While the insured should know what to do, it would be smart for you as an agent to know how as well.
It would be very smart to:
1) ask the insured if there are any errors in SAFER when working on a submission
2) finding out if the insured has sent documented evidence to correct the issue
3) getting a copy of the documented evidence and getting it to the insurance company
From Professional Safety Consulting
MONITOR YOUR CARRIER’S PERFORMANCE
The Company Safety Profile (CSP) is the most comprehensive summary of a carrier’s safety performance. It includes operational data, history of Safety/Compliance Reviews and Federal safety ratings, accident history and roadside inspection data.
Carriers should periodically obtain their CSP and conduct a thorough review. A CSP can be ordered online through SAFER (Safety And Fitness Electronic Records) at http://safer.fmcsa.dot.gov. Under “FMCSA Services” click “Company Safety Profile”, enter your DOT number and e-mail address, and follow the instructions.
If you find inaccurate information on your profile:
1.
Write to the agency that conducted the inspection or completed the accident report.
2.
Explain in your letter what data or record is in error, and submit documentation to support your correction request. The agency is then responsible for making the correction and keeping you informed of the status.
Or, you can file your concern online through the FMCSA DataQs system at https://dataqs.fmcsa.dot.gov. Through this system, your concerns are automatically forwarded to the appropriate agency for resolution.
It would be very smart to:
1) ask the insured if there are any errors in SAFER when working on a submission
2) finding out if the insured has sent documented evidence to correct the issue
3) getting a copy of the documented evidence and getting it to the insurance company
From Professional Safety Consulting
MONITOR YOUR CARRIER’S PERFORMANCE
The Company Safety Profile (CSP) is the most comprehensive summary of a carrier’s safety performance. It includes operational data, history of Safety/Compliance Reviews and Federal safety ratings, accident history and roadside inspection data.
Carriers should periodically obtain their CSP and conduct a thorough review. A CSP can be ordered online through SAFER (Safety And Fitness Electronic Records) at http://safer.fmcsa.dot.gov. Under “FMCSA Services” click “Company Safety Profile”, enter your DOT number and e-mail address, and follow the instructions.
If you find inaccurate information on your profile:
1.
Write to the agency that conducted the inspection or completed the accident report.
2.
Explain in your letter what data or record is in error, and submit documentation to support your correction request. The agency is then responsible for making the correction and keeping you informed of the status.
Or, you can file your concern online through the FMCSA DataQs system at https://dataqs.fmcsa.dot.gov. Through this system, your concerns are automatically forwarded to the appropriate agency for resolution.
Cell Phones and Truckers- Like Nancy said, "Just say no".
From the Insurance Journal
I question even if cell phones are banned if it will be hard to catch them in the act. It would seem to make sense that if indeed cell phones are banned that there is a fine or penalty for having a cell phone without a wireless or bluetooth to it. Here are excerpts from the article:
Safety investigators told federal regulators three years ago that it was dangerous for bus drivers to talk on cell phones while driving and recommended a ban.
Yet the regulatory agency that would write new rules on cell phone use by commercial drivers, the Federal Motor Carrier Administration, has done little more than study the issue.
Now, after several high profile accidents that focused public attention on using cell phones on the road, the Obama administration has decided to act on the recommendation, which was left hanging by the Bush administration.
Transportation Secretary Ray LaHood will convene a two-day summit next week on distracted driving and plans to announce actions to address cell phone use by bus and truck drivers, said spokeswoman Jill Zuckman.
The agency responded that it would not only conduct studies to learn whether a new rule was needed and whether cell phone use by all commercial drivers, including truck drivers, should be prohibited. It hoped to have answers last October.
An official for the motor carrier administration declined comment when contacted by The Associated Press.
Research clearly shows that cell phone use distracts drivers, safety experts said.
"When you are texting and talking on the phone, you might be going through the motions of doing what you need to be doing, but your head is not in the game,'' Hersman said.
As research has mounted, industry's resistance to regulation has faded.
The American Trucking Associations is neutral on a ban on cell phone use by truck drivers until they see the wording of a proposal, but "we think cell phones and other electronic equipment should have some policies and regulations on them to prevent their misuse,'' said spokesman Clayton Boyce.
Even the wireless industry, formerly opponents of restrictions, supports a texting ban and is neutral on restricting cell phone use by drivers.
Seventeen states and Washington prohibit school bus drivers from using cell phones while driving. Eighteen states and Washington have passed laws making texting while driving illegal.
A group of Democratic members of Congress introduced a bill this summer requiring states to ban texting or e-mailing while operating a moving vehicle or lose 25 percent of their annual federal highway funding. It would be patterned after Congress' requirement that states adopt a national drunken driving ban.
I question even if cell phones are banned if it will be hard to catch them in the act. It would seem to make sense that if indeed cell phones are banned that there is a fine or penalty for having a cell phone without a wireless or bluetooth to it. Here are excerpts from the article:
Safety investigators told federal regulators three years ago that it was dangerous for bus drivers to talk on cell phones while driving and recommended a ban.
Yet the regulatory agency that would write new rules on cell phone use by commercial drivers, the Federal Motor Carrier Administration, has done little more than study the issue.
Now, after several high profile accidents that focused public attention on using cell phones on the road, the Obama administration has decided to act on the recommendation, which was left hanging by the Bush administration.
Transportation Secretary Ray LaHood will convene a two-day summit next week on distracted driving and plans to announce actions to address cell phone use by bus and truck drivers, said spokeswoman Jill Zuckman.
The agency responded that it would not only conduct studies to learn whether a new rule was needed and whether cell phone use by all commercial drivers, including truck drivers, should be prohibited. It hoped to have answers last October.
An official for the motor carrier administration declined comment when contacted by The Associated Press.
Research clearly shows that cell phone use distracts drivers, safety experts said.
"When you are texting and talking on the phone, you might be going through the motions of doing what you need to be doing, but your head is not in the game,'' Hersman said.
As research has mounted, industry's resistance to regulation has faded.
The American Trucking Associations is neutral on a ban on cell phone use by truck drivers until they see the wording of a proposal, but "we think cell phones and other electronic equipment should have some policies and regulations on them to prevent their misuse,'' said spokesman Clayton Boyce.
Even the wireless industry, formerly opponents of restrictions, supports a texting ban and is neutral on restricting cell phone use by drivers.
Seventeen states and Washington prohibit school bus drivers from using cell phones while driving. Eighteen states and Washington have passed laws making texting while driving illegal.
A group of Democratic members of Congress introduced a bill this summer requiring states to ban texting or e-mailing while operating a moving vehicle or lose 25 percent of their annual federal highway funding. It would be patterned after Congress' requirement that states adopt a national drunken driving ban.
Tuesday, September 22, 2009
Collision Repair Costs Down
From American Agent and Broker
Thought just the economy was down and trucking insurance rates were down, how about collision repair costs?
Well they are down too. 3% as a matter of fact.
The decrease us due to recession-related factors and reflects the aging fleet and lower actual cash values.
The average gross collision value of a private passenger vehicle is $2729 ( probably higher if a tractor-trailer hits it). The average cash value of vehicles appraised for collision losses is $11,995.
The average gross third party property damage appraisal caused by an insured driver is $2156 (again probably higher if hit by a tractor-trailer). The average cash value for vehicles involved in property damage claims is $10,741.
Thought just the economy was down and trucking insurance rates were down, how about collision repair costs?
Well they are down too. 3% as a matter of fact.
The decrease us due to recession-related factors and reflects the aging fleet and lower actual cash values.
The average gross collision value of a private passenger vehicle is $2729 ( probably higher if a tractor-trailer hits it). The average cash value of vehicles appraised for collision losses is $11,995.
The average gross third party property damage appraisal caused by an insured driver is $2156 (again probably higher if hit by a tractor-trailer). The average cash value for vehicles involved in property damage claims is $10,741.
Monday, September 14, 2009
Owner-Operator Agreements- Best Practices
If you are talking to your truckers, it is important to understand the contractural relationship and help them understand what needs to be a part of a lease to protect a truckers interest.
See the attached article from Robert Franklin from Big Truck TV
In working with motor carriers and private fleet operators, one of the most frequently overlooked issues we encounter is the failure to have an effective equipment lease in use with owner operators. There have been a number of lawsuits filed by OOIDA based on defective leases. Although the amount owed to any one contractor may be relatively small, such a case often qualifies for class action status, which can easily result in millions of dollars in exposure. Worse yet, you generally will have no insurance for such a lawsuit. Some such suits have driven motor carriers to bankruptcy.
The regulations governing equipment leases (49 CFR 376.12) are very specific in terms of minimum "do's and don'ts". The most frequently encountered deficiencies are failure to include the required language regarding the carrier's "exclusive possession, control and use" of the equipment during the lease; failure to pay interest on escrow funds; and failure to disclose "admin fees" charged in conjunction with insurance purchased through the carrier.
In addition to compliance with the applicable regulations, the lease is, after all, a contract, and there are a number of other important provisions which should be addressed. For example, one will generally want to include provisions regarding confidentiality and non-competition, in order to avoid having the contractor "back solicit" the carrier's customers. One should also include language prohibiting markings on the equipment, other than those required by DOT, without the carrier's prior written agreement, as such markings may increase exposure for the motor carrier in a related accident. For example, having "monster jaws" on the grill of the tractor may have an extremely inflammatory impact on a jury when that power unit is involved in a serious accident. One may also wish to include an indemnification requirement for accidents and fines caused by the contractor. There are many other typical contract issues (e.g. choice of law, venue, arbitration, etc.) which should also be addressed.
Additional issues arise when the contractor is subject to a "lease-purchase" contract regarding his or her tractor. That contract must give the contractor sufficient control over the tractor in order to properly qualify him as an "owner" for FMCSR purposes, and as an independent contractor for tax and workers' compensation purposes. Moreover, if the carrier wants to be able to deduct sums owed by the contractor from his or her settlement checks (which it almost certainly will want to be able to do), the regulations require that the terms of the lease-purchase agreement be incorporated into the lease's charge-back provision. That can usually be accomplished by attaching a copy of the lease purchase to the lease and incorporating it by reference.
If you haven't had your equipment lease reviewed and updated for some time, you should do so as soon as possible. While there is a cost associated with doing so, that cost is minimal, and pales in comparison to the exposure which the carrier may face without a proper equipment lease in place.
See the attached article from Robert Franklin from Big Truck TV
In working with motor carriers and private fleet operators, one of the most frequently overlooked issues we encounter is the failure to have an effective equipment lease in use with owner operators. There have been a number of lawsuits filed by OOIDA based on defective leases. Although the amount owed to any one contractor may be relatively small, such a case often qualifies for class action status, which can easily result in millions of dollars in exposure. Worse yet, you generally will have no insurance for such a lawsuit. Some such suits have driven motor carriers to bankruptcy.
The regulations governing equipment leases (49 CFR 376.12) are very specific in terms of minimum "do's and don'ts". The most frequently encountered deficiencies are failure to include the required language regarding the carrier's "exclusive possession, control and use" of the equipment during the lease; failure to pay interest on escrow funds; and failure to disclose "admin fees" charged in conjunction with insurance purchased through the carrier.
In addition to compliance with the applicable regulations, the lease is, after all, a contract, and there are a number of other important provisions which should be addressed. For example, one will generally want to include provisions regarding confidentiality and non-competition, in order to avoid having the contractor "back solicit" the carrier's customers. One should also include language prohibiting markings on the equipment, other than those required by DOT, without the carrier's prior written agreement, as such markings may increase exposure for the motor carrier in a related accident. For example, having "monster jaws" on the grill of the tractor may have an extremely inflammatory impact on a jury when that power unit is involved in a serious accident. One may also wish to include an indemnification requirement for accidents and fines caused by the contractor. There are many other typical contract issues (e.g. choice of law, venue, arbitration, etc.) which should also be addressed.
Additional issues arise when the contractor is subject to a "lease-purchase" contract regarding his or her tractor. That contract must give the contractor sufficient control over the tractor in order to properly qualify him as an "owner" for FMCSR purposes, and as an independent contractor for tax and workers' compensation purposes. Moreover, if the carrier wants to be able to deduct sums owed by the contractor from his or her settlement checks (which it almost certainly will want to be able to do), the regulations require that the terms of the lease-purchase agreement be incorporated into the lease's charge-back provision. That can usually be accomplished by attaching a copy of the lease purchase to the lease and incorporating it by reference.
If you haven't had your equipment lease reviewed and updated for some time, you should do so as soon as possible. While there is a cost associated with doing so, that cost is minimal, and pales in comparison to the exposure which the carrier may face without a proper equipment lease in place.
Wednesday, September 2, 2009
Auto Hauler Cargo Question
From Markel
Most insurance companies write specified perils coverage on auto haulers- as there are too many times they pay losses for cargo coverage that are due to employee error and these insurance carriers want to limit their losses from these situations.
What about Collision of the load which is usually covered versus collision with a curb which is excluded. What is the difference?
Note this generally has to do with Flat Bed loads, as Van type trailers would enclose the cargo and the trailer would have to collide with the bridge so coverage is afforded. If on flat bed, the "covered property" would be exposed and this would allow coverage for that exposed "covered property" if it struck the bridge ("any other object") and the tractor ("vehicle") or trailer ("vehicle") did not. The bridge is considered "any other object", therefore coverage afforded. The exclusionary language of "Collision of Covered Property" is referring to collision that is proximately caused by collision with the "vehicle" (i.e., Load shift, improper securing of load, etc) or proximately caused by "collision with adjacent curbing, or collision with the rails or ties of street, steam or other railroad". If the "vehicle" overturns and "covered property" strikes any of the excluded objects there would be coverage for the "covered property" because the proximate cause of loss was the overturn, not the striking of the excluded objects.
The last explanation, if needed, is for "Collision will not include traverse off a road or pathway". Basically, if "vehicle" is chosen to be pulled from "road or pathway" being traveled as a parking area, shortcut, avoiding an animal, etc, and this rough ride causes damage to the "covered property" this will not be considered a "collision" and coverage will not be provided.
Collision of Covered Property is extended to include as a Peril, the accidental collision of the Covered Property with any other object, excluding collision with the vehicle, or collision with any portion of the road or pathway being traveled by the vehicle, or collision with adjacent curbing, or collision with the rails or ties of street, steam or other railroad. Collision will not include traverse off a road or pathway.
Most insurance companies write specified perils coverage on auto haulers- as there are too many times they pay losses for cargo coverage that are due to employee error and these insurance carriers want to limit their losses from these situations.
What about Collision of the load which is usually covered versus collision with a curb which is excluded. What is the difference?
Note this generally has to do with Flat Bed loads, as Van type trailers would enclose the cargo and the trailer would have to collide with the bridge so coverage is afforded. If on flat bed, the "covered property" would be exposed and this would allow coverage for that exposed "covered property" if it struck the bridge ("any other object") and the tractor ("vehicle") or trailer ("vehicle") did not. The bridge is considered "any other object", therefore coverage afforded. The exclusionary language of "Collision of Covered Property" is referring to collision that is proximately caused by collision with the "vehicle" (i.e., Load shift, improper securing of load, etc) or proximately caused by "collision with adjacent curbing, or collision with the rails or ties of street, steam or other railroad". If the "vehicle" overturns and "covered property" strikes any of the excluded objects there would be coverage for the "covered property" because the proximate cause of loss was the overturn, not the striking of the excluded objects.
The last explanation, if needed, is for "Collision will not include traverse off a road or pathway". Basically, if "vehicle" is chosen to be pulled from "road or pathway" being traveled as a parking area, shortcut, avoiding an animal, etc, and this rough ride causes damage to the "covered property" this will not be considered a "collision" and coverage will not be provided.
Collision of Covered Property is extended to include as a Peril, the accidental collision of the Covered Property with any other object, excluding collision with the vehicle, or collision with any portion of the road or pathway being traveled by the vehicle, or collision with adjacent curbing, or collision with the rails or ties of street, steam or other railroad. Collision will not include traverse off a road or pathway.
Tuesday, September 1, 2009
How much does it cost to maintain a truck
from Big Truck TV
Insurance is an expense for a trucker and so is vehicle maintenance. When you look at older and younger fleets, it's important to understand how much it cost the trucker to run his fleet from a maintenance perspective.
Maintenance is a major part of every trucking company’s operation. The cost of maintaining a truck increasing as it ages – from 2 cents per mile for a new truck to 10 cents per mile for a truck 5 years old or older. This represents a 400% increase in annual maintenance expenses in just 5 years! With a tightened credit market more carriers are unable to finance new trucks and as a result are either holding on to their older trucks longer or are buying used. This inevatibly puts a strain on maintenance budgets.
Insurance is an expense for a trucker and so is vehicle maintenance. When you look at older and younger fleets, it's important to understand how much it cost the trucker to run his fleet from a maintenance perspective.
Maintenance is a major part of every trucking company’s operation. The cost of maintaining a truck increasing as it ages – from 2 cents per mile for a new truck to 10 cents per mile for a truck 5 years old or older. This represents a 400% increase in annual maintenance expenses in just 5 years! With a tightened credit market more carriers are unable to finance new trucks and as a result are either holding on to their older trucks longer or are buying used. This inevatibly puts a strain on maintenance budgets.
Monday, August 31, 2009
Are Insurance Limits Too Low/ Should you be selling umbrellas?
From the Insurance Journal
A new analysis of government data reveals that more than 28,000 motor carrier companies that operate 200,000 trucks have violated federal safety regulations.
The trial bar association, the American Association for Justice (AAJ), said it found commuters are sharing roads with trucks that have incurred thousands of safety violations, such as defective brakes, bald tires, loads that dangerously exceed weight limits and drivers with little or no training or drug and alcohol dependencies.
The group also said that current minimum insurance requirements for truckers are inadequate.
AAJ said it obtained data on the safety performance of U.S. trucking companies from the Federal Motor Carrier Safety Administration (FMCSA).
States found to have a rate of companies in violation of safety requirements above the national average include West Virginia, North Dakota, Nebraska, Vermont, Iowa, Montana, Delaware, Idaho, Arkansas, Connecticut, Kentucky, Minnesota, North Carolina, Oregon, Indiana, Mississippi, Wisconsin, and South Dakota.
According to the FMCSA, more than 4,000 people die every year in collisions with trucks and 80,000 more are seriously injured. Also, though trucks make up less than four percent of all passenger vehicles on U.S. roads, they are involved in 12 percent of all motor vehicles fatalities.
AAJ also maintains that the minimum insurance requirements for commercial trucks are "completely inadequate to compensate those who have been seriously injured in a collision involving multiple vehicles or multiple injured individuals." In 1980, Congress set the minimum level of insurance to $750,000; when adjusted for inflation, $750,000 is just $292,000 in 1980 dollars, according to the analysis.
While large trucking companies may carry more than the required level of coverage, smaller companies often carry just the bare minimum, according to the AAJ. AAJ's analysis of the U.S. trucking industry found that 87 percent of the companies in violation of safety standards are small companies that have fleets of 10 trucks or less.
The AAJ said that many deadly accidents involving unsafe trucks are never recorded as safety violations. A 2005 Government Accountability Office (GAO) study found that nearly one-third of commercial motor vehicle crashes that states are required to report to the federal government were never recorded. Additionally, state crash reports were not always accurate.
The analysis by AAJ follows a July 2009 GAO study which found that more than 1,000 commercial trucking firms that were ordered out of service because of federal safety violations evaded compliance by operating under a different name, but often using the same owner, address and employees.
A new analysis of government data reveals that more than 28,000 motor carrier companies that operate 200,000 trucks have violated federal safety regulations.
The trial bar association, the American Association for Justice (AAJ), said it found commuters are sharing roads with trucks that have incurred thousands of safety violations, such as defective brakes, bald tires, loads that dangerously exceed weight limits and drivers with little or no training or drug and alcohol dependencies.
The group also said that current minimum insurance requirements for truckers are inadequate.
AAJ said it obtained data on the safety performance of U.S. trucking companies from the Federal Motor Carrier Safety Administration (FMCSA).
States found to have a rate of companies in violation of safety requirements above the national average include West Virginia, North Dakota, Nebraska, Vermont, Iowa, Montana, Delaware, Idaho, Arkansas, Connecticut, Kentucky, Minnesota, North Carolina, Oregon, Indiana, Mississippi, Wisconsin, and South Dakota.
According to the FMCSA, more than 4,000 people die every year in collisions with trucks and 80,000 more are seriously injured. Also, though trucks make up less than four percent of all passenger vehicles on U.S. roads, they are involved in 12 percent of all motor vehicles fatalities.
AAJ also maintains that the minimum insurance requirements for commercial trucks are "completely inadequate to compensate those who have been seriously injured in a collision involving multiple vehicles or multiple injured individuals." In 1980, Congress set the minimum level of insurance to $750,000; when adjusted for inflation, $750,000 is just $292,000 in 1980 dollars, according to the analysis.
While large trucking companies may carry more than the required level of coverage, smaller companies often carry just the bare minimum, according to the AAJ. AAJ's analysis of the U.S. trucking industry found that 87 percent of the companies in violation of safety standards are small companies that have fleets of 10 trucks or less.
The AAJ said that many deadly accidents involving unsafe trucks are never recorded as safety violations. A 2005 Government Accountability Office (GAO) study found that nearly one-third of commercial motor vehicle crashes that states are required to report to the federal government were never recorded. Additionally, state crash reports were not always accurate.
The analysis by AAJ follows a July 2009 GAO study which found that more than 1,000 commercial trucking firms that were ordered out of service because of federal safety violations evaded compliance by operating under a different name, but often using the same owner, address and employees.
Texting and Trucking
The Virginia Tech Transportation Institute released its study on the impact of text messaging while driving. To know ones surprise texting while driving is dangerous. Truckers who text are 23 times more likely to be involved in a crash
Wednesday, August 26, 2009
Transportation Insurance Market Soft, But Leveling Off
According to NIP Group Inc.'s Transportation Insurance Pricing Survey (TIPS) for the second quarter of 2009, more participants have reported modest rate increases across many segments, account sizes and lines of coverage during the second quarter of 2009. New entrants are also gaining market share as established transportation underwriters are holding the line on rates and are less likely to lower rates appreciably below expiring levels, the survey revealed.
The majority of respondents believe rates in the transportation insurance market are beginning to level out as observed by the slight firming of auto liability and motor truck cargo rates. Rate increases have also begun to emerge in some market segments especially ambulance/paratransit, airport ground transporters and specialized carriers.
The survey measures premium changes across 10 different transportation segments, including: trucking operations, intermodal carriers, messenger/courier services, ambulance/paratransit, school bus contractors, bulk transportation, airport ground transportation, charter/tour bus operators, specialized carriers and riggers, and limousine services.
"TIPS results show signs of a transportation insurance market where rates are beginning to level out," said Richard Augustyn, CEO of NIP Group. "The market appears to be in a transitional phase being led by established transportation underwriters trying to selectively drive up rates on key lines of business. It will be interesting to see in future TIPS results if this is an ongoing trend."
The majority of respondents believe rates in the transportation insurance market are beginning to level out as observed by the slight firming of auto liability and motor truck cargo rates. Rate increases have also begun to emerge in some market segments especially ambulance/paratransit, airport ground transporters and specialized carriers.
The survey measures premium changes across 10 different transportation segments, including: trucking operations, intermodal carriers, messenger/courier services, ambulance/paratransit, school bus contractors, bulk transportation, airport ground transportation, charter/tour bus operators, specialized carriers and riggers, and limousine services.
"TIPS results show signs of a transportation insurance market where rates are beginning to level out," said Richard Augustyn, CEO of NIP Group. "The market appears to be in a transitional phase being led by established transportation underwriters trying to selectively drive up rates on key lines of business. It will be interesting to see in future TIPS results if this is an ongoing trend."
Tuesday, August 25, 2009
Monday, August 24, 2009
The Rules for Principal Place of Business
A trucker has an office in Nashville and terminals in Jackson and Seattle. What is the principal place of business? Here is what the FMCSA says:
The regulatory guidance in this notice responds to recurring questions FMCSA has received
concerning the definition of “principal place of business” in 49 CFR 390.5.
AGENCY: Federal Motor Carrier Safety Administration (FMCSA), DOT.
ACTION: Notice of regulatory guidance.
SUMMARY: The FMCSA announces regulatory guidance concerning its definition of “principal place of business.”
The regulatory guidance is presented in a question-and-answer format and is generally applicable to motor
carrier operations subject to the Federal Motor Carrier Safety Regulations. No prior interpretations or regulatory
guidance concerning the term “principal place of business,” whether published or unpublished, may
be relied upon as authoritative if they are inconsistent with the guidance published today. This
guidance will provide the motor carrier industry and Federal, State and local law enforcement
officials with uniform information for use in determining which locations may be designated by a
motor carrier as its principal place of business.
DATES: Effective Date: This regulatory guidance is effective on August 12, 2009.
G U I D A N C E :
Question: What location may a motor carrier
designate as its “principal place of business”?
Guidance: In instances where a motor carrier has
more than one terminal or office, the regulations do
not explicitly place a restriction on which location a
motor carrier may designate as its principal place of
business. The definition states that such a location is
“normally” the carrier's headquarters; the rule does not
require motor carriers to use the company's corporate
headquarters as its principal place of
business. However, motor carriers are limited
to using an actual place of business of the
motor carrier. Moreover, a motor carrier may
designate as its principal place of business
only locations that contain offices of the
motor carrier's senior-most management executives,
management officials or employees responsible for the
administration, management and oversight of safety
operations and compliance with the FMCSRs and
Hazardous Materials Regulations. In determining its
principal place of business, a motor carrier must
consider the following factors: (a) The relative
importance of the activities performed at each
location, and, if this factor is not determinative, then
(b) time spent at each location by motor carrier
management or corporate officers.
Question: May a motor carrier with a single business
location, including a private residence, designate a
different location as its “principal place of business”?
Guidance: No. The definition of “principal place of
business” in 49 CFR 390.5 allows a carrier with multiple terminals or offices to designate a single terminal or office as
its primary business location for identification purposes. Consistent with this definition, a motor carrier with a single
place of business may designate only its actual place of business as the “principal place of business.”
For the complete Notice, go to http://edocket.access.gpo.gov/2009/E9-18142.htm
The regulatory guidance in this notice responds to recurring questions FMCSA has received
concerning the definition of “principal place of business” in 49 CFR 390.5.
AGENCY: Federal Motor Carrier Safety Administration (FMCSA), DOT.
ACTION: Notice of regulatory guidance.
SUMMARY: The FMCSA announces regulatory guidance concerning its definition of “principal place of business.”
The regulatory guidance is presented in a question-and-answer format and is generally applicable to motor
carrier operations subject to the Federal Motor Carrier Safety Regulations. No prior interpretations or regulatory
guidance concerning the term “principal place of business,” whether published or unpublished, may
be relied upon as authoritative if they are inconsistent with the guidance published today. This
guidance will provide the motor carrier industry and Federal, State and local law enforcement
officials with uniform information for use in determining which locations may be designated by a
motor carrier as its principal place of business.
DATES: Effective Date: This regulatory guidance is effective on August 12, 2009.
G U I D A N C E :
Question: What location may a motor carrier
designate as its “principal place of business”?
Guidance: In instances where a motor carrier has
more than one terminal or office, the regulations do
not explicitly place a restriction on which location a
motor carrier may designate as its principal place of
business. The definition states that such a location is
“normally” the carrier's headquarters; the rule does not
require motor carriers to use the company's corporate
headquarters as its principal place of
business. However, motor carriers are limited
to using an actual place of business of the
motor carrier. Moreover, a motor carrier may
designate as its principal place of business
only locations that contain offices of the
motor carrier's senior-most management executives,
management officials or employees responsible for the
administration, management and oversight of safety
operations and compliance with the FMCSRs and
Hazardous Materials Regulations. In determining its
principal place of business, a motor carrier must
consider the following factors: (a) The relative
importance of the activities performed at each
location, and, if this factor is not determinative, then
(b) time spent at each location by motor carrier
management or corporate officers.
Question: May a motor carrier with a single business
location, including a private residence, designate a
different location as its “principal place of business”?
Guidance: No. The definition of “principal place of
business” in 49 CFR 390.5 allows a carrier with multiple terminals or offices to designate a single terminal or office as
its primary business location for identification purposes. Consistent with this definition, a motor carrier with a single
place of business may designate only its actual place of business as the “principal place of business.”
For the complete Notice, go to http://edocket.access.gpo.gov/2009/E9-18142.htm
How Truckers should keep their garage or shop
from Professional Safety
Most truckers of any size have a garage or shop to repair and maintain their equipment. Part of their requirements with the Department of Transportation is that they must maintain within published guidelines their equipment- so many try to do so at their terminal or office.
There is a general liability exposure and in certain cases a garage liability exposure when the insured has a garage or shop.
Most agents are unaware of what to advise an insured as to how to create a Best Practices approach to safety at the garage or shop. Most housekeeping safety hazards fall into one of two categories: unsafe acts and unsafe conditions.Statistics show that for every mishap caused by unsafe conditions, roughly four are caused by unsafe acts. So, it makes sense to be constantly aware of hazardous housekeeping conditions -- and actions -- both on and off the job.
So what should a trucker do? Try the following:
ô€€» Keep your surrounding work area safe.
ô€€» Keep your tools and working materials off the floor.
ô€€» Use designated storage locations for materials and tools.
ô€€» Keep briefcases, handbags & other obstacles out of the aisles.
ô€€» Shut the file and desk drawers when they’re not in use.
ô€€» Clean and properly maintain all safety gear.
ô€€» Wipe up all spills immediately.
ô€€» Stack materials properly.
ô€€» Remove or repair all unsafe conditions if you are authorized to
do so.
ô€€» Keep your work area secure.
ô€€» Lock up before you leave.
ô€€» Return all keys to authorized personnel.
ô€€» Make a daily inspection of your work area and department.
ô€€» Be alert to housekeeping hazards and accumulation of
combustibles that could cause a fire.
ô€€» Make sure hazardous materials are properly labeled and stored
so that labels can be seen. Guard against exposure of
flammable and combustible materials to any heat source.
ô€€» Put oil-, paint-, and grease-soaked rags, shavings & other highly
combustible waste in the proper waste receptacles.
ô€€» Clean up safely. Never use alcohol, gasoline, or other
flammable liquid as a cleaning agent, and make sure that all
flammable liquids are stored away from direct heat and are in
proper containers.
ô€€» Never block fire doors, fire extinguishers, warning signs, or
emergency exits.
ô€€» Always report these housekeeping hazards:
ô€€± Wet walkways
ô€€± Loose or torn carpeting
ô€€± Chipped tiles
ô€€± Holes, trenches, open manholes
ô€€± Loose tread on stairs
ô€€± Objects left in aisles
ô€€± Cables, hoses, or cords stretched across walkways
ô€€± Poorly lit walkways or stairwells
ô€€± Unsafe tools and equipment
ô€€± Blocked emergency exit(s)
Most truckers of any size have a garage or shop to repair and maintain their equipment. Part of their requirements with the Department of Transportation is that they must maintain within published guidelines their equipment- so many try to do so at their terminal or office.
There is a general liability exposure and in certain cases a garage liability exposure when the insured has a garage or shop.
Most agents are unaware of what to advise an insured as to how to create a Best Practices approach to safety at the garage or shop. Most housekeeping safety hazards fall into one of two categories: unsafe acts and unsafe conditions.Statistics show that for every mishap caused by unsafe conditions, roughly four are caused by unsafe acts. So, it makes sense to be constantly aware of hazardous housekeeping conditions -- and actions -- both on and off the job.
So what should a trucker do? Try the following:
ô€€» Keep your surrounding work area safe.
ô€€» Keep your tools and working materials off the floor.
ô€€» Use designated storage locations for materials and tools.
ô€€» Keep briefcases, handbags & other obstacles out of the aisles.
ô€€» Shut the file and desk drawers when they’re not in use.
ô€€» Clean and properly maintain all safety gear.
ô€€» Wipe up all spills immediately.
ô€€» Stack materials properly.
ô€€» Remove or repair all unsafe conditions if you are authorized to
do so.
ô€€» Keep your work area secure.
ô€€» Lock up before you leave.
ô€€» Return all keys to authorized personnel.
ô€€» Make a daily inspection of your work area and department.
ô€€» Be alert to housekeeping hazards and accumulation of
combustibles that could cause a fire.
ô€€» Make sure hazardous materials are properly labeled and stored
so that labels can be seen. Guard against exposure of
flammable and combustible materials to any heat source.
ô€€» Put oil-, paint-, and grease-soaked rags, shavings & other highly
combustible waste in the proper waste receptacles.
ô€€» Clean up safely. Never use alcohol, gasoline, or other
flammable liquid as a cleaning agent, and make sure that all
flammable liquids are stored away from direct heat and are in
proper containers.
ô€€» Never block fire doors, fire extinguishers, warning signs, or
emergency exits.
ô€€» Always report these housekeeping hazards:
ô€€± Wet walkways
ô€€± Loose or torn carpeting
ô€€± Chipped tiles
ô€€± Holes, trenches, open manholes
ô€€± Loose tread on stairs
ô€€± Objects left in aisles
ô€€± Cables, hoses, or cords stretched across walkways
ô€€± Poorly lit walkways or stairwells
ô€€± Unsafe tools and equipment
ô€€± Blocked emergency exit(s)
Sunday, August 2, 2009
The ISO 80% Radius Rating Rule
When agents put down the radius in the application process, they need to remember how ISO does it and also understand how your insurance company rates according to radius. Many insurance companies follow ISO rating but many other insurance companies go at it their own way.
Some companies have you rate on radius by having the requirement of classifying a vehicle based on the furthest destination. ISO looks at this way as well, but with one very important caveat.
If 80% of the trips are in a lower radius classification, you should use the lower rated classification. How should you disclose that to your underwriter?
You should use the lower radius as ISO suggests and have a note that says 20% or less or the trips are more than the radius indicated. In trucking insurance this is verified in the mileage or IFTA reports. One of the problems with mileage reports are that they are state mileage specific, and not formulated by radius. If there are miles in a certain state, the vehicle could be traveling trough more than one or two higher radius thresholds. So further underwriting relative to determining shippers and destinations is in order.
Radius underwriting in Trucking is an imperfect science. It is important to understand the ISO rule and whether the company you are submitting to concurs with the ISO 80% radius rule. How a company prices based on radius is probably as important a factor in underwriting and rating in the trucking insurance marketplace we are in.
Some companies have you rate on radius by having the requirement of classifying a vehicle based on the furthest destination. ISO looks at this way as well, but with one very important caveat.
If 80% of the trips are in a lower radius classification, you should use the lower rated classification. How should you disclose that to your underwriter?
You should use the lower radius as ISO suggests and have a note that says 20% or less or the trips are more than the radius indicated. In trucking insurance this is verified in the mileage or IFTA reports. One of the problems with mileage reports are that they are state mileage specific, and not formulated by radius. If there are miles in a certain state, the vehicle could be traveling trough more than one or two higher radius thresholds. So further underwriting relative to determining shippers and destinations is in order.
Radius underwriting in Trucking is an imperfect science. It is important to understand the ISO rule and whether the company you are submitting to concurs with the ISO 80% radius rule. How a company prices based on radius is probably as important a factor in underwriting and rating in the trucking insurance marketplace we are in.
Friday, July 24, 2009
Truck Data Worth Knowing- Q & A
from Travelers and truckinfo.net
Q- How many truckers are in America?
A- 675,000 registered trucking accounts in the US according to Travelers. truckinfo.net reports almost half of that or 360,000 companies
Q- So how many trucks operate in the US?
A- Estimates are over 15 million trucks and just under 2 million of those are tractor trailers.
Q- How much is spent on Trucking Freight annually in the US?
A- $400 billion
Q- What is the average operating ratio ( profit) for trucking companies?
A- 95.2% or a profit of 4.8 cents on every dollar
That shipping companies paying truckers to haul freight just to be specific
Q- Total Amount of cargo theft in the US?
A- $30 billion
So that means that 7.5% of trucking freight payments are eaten by the shipper, the trucker, the insurance company, or the consignee. That $30 billion is passed on to shippers and truckers in higher premiums- and to the general public. A very big deal.
What would be ideal information from an underwriting context as to the values shipped so it could be understood what percentage of values is lost.
Q- How many truckers are in America?
A- 675,000 registered trucking accounts in the US according to Travelers. truckinfo.net reports almost half of that or 360,000 companies
Q- So how many trucks operate in the US?
A- Estimates are over 15 million trucks and just under 2 million of those are tractor trailers.
Q- How much is spent on Trucking Freight annually in the US?
A- $400 billion
Q- What is the average operating ratio ( profit) for trucking companies?
A- 95.2% or a profit of 4.8 cents on every dollar
That shipping companies paying truckers to haul freight just to be specific
Q- Total Amount of cargo theft in the US?
A- $30 billion
So that means that 7.5% of trucking freight payments are eaten by the shipper, the trucker, the insurance company, or the consignee. That $30 billion is passed on to shippers and truckers in higher premiums- and to the general public. A very big deal.
What would be ideal information from an underwriting context as to the values shipped so it could be understood what percentage of values is lost.
Thursday, July 23, 2009
Progressive?
Progressive Insurance Company is a very good marketing company and would like the public to think that the transportation insurance marketplace is their oyster.
Recently they did two things that created a new level of hubris.
First of all they have advertised that they are the largest writer of commercial truck policies than any other carrier. They mention policies, not operating units or radius ( they do no long haul) or classes.
Secondly, they have introduced an any auto endorsement. Here is the advertisement
" Imagine this scenario -- a customer has commercial auto insurance for his small business. Before it's time to renew his policy, he buys a new truck, forgets to notify his insurance agent about it so that the agent can update his policy. Then the customer causes an accident.
"A scenario like that could raise errors and omissions issues for independent insurance agents," said Mike Miller with Progressive's commercial auto insurance group. But, according to Miller, a new endorsement -- Any Auto Liability -- could limit the agent's exposure.
"An Any Auto Liability endorsement from Progressive can limit E&O exposure in those situations by filling the gap created when commercial auto insurance customers get new vehicles but don't update their policy until it's time to renew," Miller said"
All sounds good until you have a start up insured buy 1 unit, fail to add 10 units and show up at renewal with 11. Can you imagine the missed premium and the audit issues. It will be interesting to see
Recently they did two things that created a new level of hubris.
First of all they have advertised that they are the largest writer of commercial truck policies than any other carrier. They mention policies, not operating units or radius ( they do no long haul) or classes.
Secondly, they have introduced an any auto endorsement. Here is the advertisement
" Imagine this scenario -- a customer has commercial auto insurance for his small business. Before it's time to renew his policy, he buys a new truck, forgets to notify his insurance agent about it so that the agent can update his policy. Then the customer causes an accident.
"A scenario like that could raise errors and omissions issues for independent insurance agents," said Mike Miller with Progressive's commercial auto insurance group. But, according to Miller, a new endorsement -- Any Auto Liability -- could limit the agent's exposure.
"An Any Auto Liability endorsement from Progressive can limit E&O exposure in those situations by filling the gap created when commercial auto insurance customers get new vehicles but don't update their policy until it's time to renew," Miller said"
All sounds good until you have a start up insured buy 1 unit, fail to add 10 units and show up at renewal with 11. Can you imagine the missed premium and the audit issues. It will be interesting to see
Friday, July 17, 2009
Trucking Trends- Better Drivers and Better Equipment on the Road/ Less Severity
From Professional Safety
According to the Commercial Vehicle Saftey Alliance Roadcheck 2009, there were declines in the vehicle and driver Out of Service rates(OOS) versus last year. The numbers:
Drivers- 4.4% of drivers were OOS versus 5.3% in 2008
Equipment- 19.6% of vehicles were OOS versus 20.8% in 2008
While the differences are not huge they do show trucking is getting better and more compliant
At the same time the US DOT announced that traffic fatalities reached a record low. The fatality rate is 1.27 fatalities per 100 million vehicle miles traveled. This represents a 9% decline from the previous year
What does this mean respects trucking insurance today?
Most insurance capacity is geared for the better truckers. So as you can see trucking operations are getting better and better. So for the truckers who are able to endure in this economy, the trend is that their operation will be better
Also less severity means there is a better chance for underwriting profit so look for a continued softness and reduced pricing
According to the Commercial Vehicle Saftey Alliance Roadcheck 2009, there were declines in the vehicle and driver Out of Service rates(OOS) versus last year. The numbers:
Drivers- 4.4% of drivers were OOS versus 5.3% in 2008
Equipment- 19.6% of vehicles were OOS versus 20.8% in 2008
While the differences are not huge they do show trucking is getting better and more compliant
At the same time the US DOT announced that traffic fatalities reached a record low. The fatality rate is 1.27 fatalities per 100 million vehicle miles traveled. This represents a 9% decline from the previous year
What does this mean respects trucking insurance today?
Most insurance capacity is geared for the better truckers. So as you can see trucking operations are getting better and better. So for the truckers who are able to endure in this economy, the trend is that their operation will be better
Also less severity means there is a better chance for underwriting profit so look for a continued softness and reduced pricing
Thursday, June 25, 2009
How Trucking is doing/ Trends in the Industry - June 2009
from Transport Topics
Logistics Expenses Drop 3.5%
WASHINGTON — The cost of moving and storing goods nationwide fell 3.5% last year, the first decline in logistics-related ex-penses in six years, despite 2% higher transportation expenses. Manufacturers and retailers slashed inventories and excess capacity limited the ability of freight carriers to raise prices, according to a new report
What does this mean for truckers? With shipping capacity tight, they will continue to look at ways of cutting expenses and insurance is one of the larger expenses
from CAB
Trucking is getting more safe which means less non-standard risks- 80.4% of truckers have their vehicles compliant with FMCSA requirements. There are less bad operations on the road. Drivers are 95.7% compliant which is the highest ever
Shipments are up 3.2% and this is a bell weather for the economy improving
While that is going on there has been a lack of capital extended to the industry and less entrepreneurs wanting to venture into trucking and less trucks on the road with registrations down 40% for 2009- so there are less trucks to insure
Logistics Expenses Drop 3.5%
WASHINGTON — The cost of moving and storing goods nationwide fell 3.5% last year, the first decline in logistics-related ex-penses in six years, despite 2% higher transportation expenses. Manufacturers and retailers slashed inventories and excess capacity limited the ability of freight carriers to raise prices, according to a new report
What does this mean for truckers? With shipping capacity tight, they will continue to look at ways of cutting expenses and insurance is one of the larger expenses
from CAB
Trucking is getting more safe which means less non-standard risks- 80.4% of truckers have their vehicles compliant with FMCSA requirements. There are less bad operations on the road. Drivers are 95.7% compliant which is the highest ever
Shipments are up 3.2% and this is a bell weather for the economy improving
While that is going on there has been a lack of capital extended to the industry and less entrepreneurs wanting to venture into trucking and less trucks on the road with registrations down 40% for 2009- so there are less trucks to insure
Wednesday, June 24, 2009
Trucking Named Insureds Grow in June
source: Don Harvey and Bruce Butler
According to the DOT 9,350 new companies have been set up and 5,600 have departed for a net increase of 3,750. While this says nothing with respect to the number of vehicles on the road, the assumption would be that those that departed had a greater number of power units than those new companies that set up. It also shows that there is a consistant need for new venture insurance capacity.
According to the DOT 9,350 new companies have been set up and 5,600 have departed for a net increase of 3,750. While this says nothing with respect to the number of vehicles on the road, the assumption would be that those that departed had a greater number of power units than those new companies that set up. It also shows that there is a consistant need for new venture insurance capacity.
Virginia UM
In a case decided in June 2009 that is sure to send reverberations down to the trucking insurance company sector, the Virginia Supreme Court decided to stack UM limits for 3 vehicles on a policy and award a plaintiff $850,000. They cited ambiguity in the UM policy form language. Look for most insurance carriers to refile their UM forms in VA
Monday, June 22, 2009
The Importance of Trucking Financials For Insurance Underwriting Purposes in the 2009 Economy
Why is it so important for our companies to require us to get financials on well-established, experienced truckers? I think the industry does a very poor job explaining why. Everyone knows truckers have been struggling from a financial viability standpoint and that they are struggling this year as well. Last summer’s diesel price increase put a number of owner-operators out of business. These truckers simply could not afford to fill up their gas tank to run. Either they leased onto other truckers or they went out of business. Some of our insurance companies told us that it was the first time they were losing renewals when it did not involve the competition; the truckers simply choose not to renew.
So if we all know truckers are struggling financially, why do we force our agents to get financial information? Also everyone understands it puts you as a retail agent/ broker in a terrible position to ask for confidential financial information when all you really want to do is get a quote and see if you can win the business. If you have not built a level of trust with your trucking insured, chances are you are not going to get financial information. To add insult to injury, financials are usually required on 10 power unit accounts and higher in this marketplace, and for most agents, not having the financials is a barrier to getting any quote- and most of our companies and most of the companies in the marketplace will not quote without updated financials.
So what can the insurance company hope to glean once they receive the financials? With trucking insurance capacity pervasive in the marketplace, all insurance carriers are trying to out select each other. They look to use financials as a benchmark for risk acceptability and in certain cases use them as a schedule rating tool and apply debits and credits based on quality of the financial situation with the trucker.
It’s not a perfect situation however. Most trucking companies are small businesses and closely held. As such, most trucking owners and principals are not leaving much money in the operation annually and likewise trying to avert taxes. This means less capital available to run operations and less profit. Most trucking financials are unaudited so an underwriter is not able to establish verifiable financial information necessary in underwriting.
So what do they look for in financials? Generally it is 3 things:
1) The Quick Ratio- Current Assets to Current liabilities need to be 1:1. Less than 1:1 indicates cash flow problems, payment of driver issues, maintenance issues, etc..
2) Profit- A company that is figuring out a way to make money and not have to utilize capital to run the com
3) Positive Net Worth- this notes a good capital structure to be able to endure economic bumps in the read
Other companies use a smart GTU partner CAB. CAB stands for the Central Analysis bureau and they have come up with a financial rating program that most truck liability writers and nearly all motor cargo writers utilize. The insurance company’s rationale is that due to the DOT financial responsibility filings that must be made by the insurance company with the DOT, the insurance companies are contractually liable for any vehicle operating on the insureds behalf, whether they get paid premium or not and due to notification issues upon cancellation, there is a 35 day window for cancellation. The motor truck cargo insurance writers know that they might have to reimburse unpaid deductibles ( O S & D’s) which happens on financially strapped truckers. I attach CAB’s information for your interest. An agent will submit an account with financials only to have it turned down for a CAB rating that is unacceptable to company standards. So when you are working on a fleet, if you can get financials early in the game it can save you a lot of time .
You can learn about CAB by going to www.cabfinancial.com. Jean Gardner is a principal in the firm and you will find her to be as knowledgeable about trucking financial matters and industry issues as anyone there is in truck insurance.
At the end of the day, trucking financials are an integral part of the underwriting process. Although unaudited in a great deal of cases, they are a barometer of a trucking companies health. While some companies are going into the politically delicate issue of credit rating based on getting actual receivables/ payment history on truckers, you will find that your better truck insurers are looking at trucking financials- especially on the larger risks. In this economy, a good trucking company can end up having financial problems quickly- and those problems spill over into problems for insurance companies, their general agents, our retail agents, and the trucking company itself
So if we all know truckers are struggling financially, why do we force our agents to get financial information? Also everyone understands it puts you as a retail agent/ broker in a terrible position to ask for confidential financial information when all you really want to do is get a quote and see if you can win the business. If you have not built a level of trust with your trucking insured, chances are you are not going to get financial information. To add insult to injury, financials are usually required on 10 power unit accounts and higher in this marketplace, and for most agents, not having the financials is a barrier to getting any quote- and most of our companies and most of the companies in the marketplace will not quote without updated financials.
So what can the insurance company hope to glean once they receive the financials? With trucking insurance capacity pervasive in the marketplace, all insurance carriers are trying to out select each other. They look to use financials as a benchmark for risk acceptability and in certain cases use them as a schedule rating tool and apply debits and credits based on quality of the financial situation with the trucker.
It’s not a perfect situation however. Most trucking companies are small businesses and closely held. As such, most trucking owners and principals are not leaving much money in the operation annually and likewise trying to avert taxes. This means less capital available to run operations and less profit. Most trucking financials are unaudited so an underwriter is not able to establish verifiable financial information necessary in underwriting.
So what do they look for in financials? Generally it is 3 things:
1) The Quick Ratio- Current Assets to Current liabilities need to be 1:1. Less than 1:1 indicates cash flow problems, payment of driver issues, maintenance issues, etc..
2) Profit- A company that is figuring out a way to make money and not have to utilize capital to run the com
3) Positive Net Worth- this notes a good capital structure to be able to endure economic bumps in the read
Other companies use a smart GTU partner CAB. CAB stands for the Central Analysis bureau and they have come up with a financial rating program that most truck liability writers and nearly all motor cargo writers utilize. The insurance company’s rationale is that due to the DOT financial responsibility filings that must be made by the insurance company with the DOT, the insurance companies are contractually liable for any vehicle operating on the insureds behalf, whether they get paid premium or not and due to notification issues upon cancellation, there is a 35 day window for cancellation. The motor truck cargo insurance writers know that they might have to reimburse unpaid deductibles ( O S & D’s) which happens on financially strapped truckers. I attach CAB’s information for your interest. An agent will submit an account with financials only to have it turned down for a CAB rating that is unacceptable to company standards. So when you are working on a fleet, if you can get financials early in the game it can save you a lot of time .
You can learn about CAB by going to www.cabfinancial.com. Jean Gardner is a principal in the firm and you will find her to be as knowledgeable about trucking financial matters and industry issues as anyone there is in truck insurance.
At the end of the day, trucking financials are an integral part of the underwriting process. Although unaudited in a great deal of cases, they are a barometer of a trucking companies health. While some companies are going into the politically delicate issue of credit rating based on getting actual receivables/ payment history on truckers, you will find that your better truck insurers are looking at trucking financials- especially on the larger risks. In this economy, a good trucking company can end up having financial problems quickly- and those problems spill over into problems for insurance companies, their general agents, our retail agents, and the trucking company itself
Tuesday, June 16, 2009
Transportation of Hazardous Materials
Excerpts from Holmes and Wisel, PC
There are certain driving and parking rules that those that haul hazardous materials and their insurance agents are not aware of.
If a driver is transporting explosives, the load must be attended at all times by the driver or a qualified representative of the motor carrier. The only exception is while the load is on the property of the motor carrier.
If a driver wants to park a load of hazardous materials, it cannot be parked within 5 feet of a highway or street or within 300 feet of a bridge, tunnel, dwelling or place of work or where people gather.
No smoking is allowed within 25 feet of the vehicle
The motor carrier must supply the driver with all the rules and what to do if an accident occurs
There are certain driving and parking rules that those that haul hazardous materials and their insurance agents are not aware of.
If a driver is transporting explosives, the load must be attended at all times by the driver or a qualified representative of the motor carrier. The only exception is while the load is on the property of the motor carrier.
If a driver wants to park a load of hazardous materials, it cannot be parked within 5 feet of a highway or street or within 300 feet of a bridge, tunnel, dwelling or place of work or where people gather.
No smoking is allowed within 25 feet of the vehicle
The motor carrier must supply the driver with all the rules and what to do if an accident occurs
Friday, June 5, 2009
Trucking Insurance Report- June 2009
Where are we today in trucking insurance and what is the current outlook?
Trucking insurance is a specialty line of insurance written with specialty insurance companies. The current outlook for specialty commercial insurance companies is mixed as general economic uncertainty, financial market turmoil and competitive market conditions are pressuring financial results and making the market turn more difficult to predict.
• Prices continue to decline, but have shown signs of stabilization; capital constraints are causing carriers to implement more disciplined underwriting to avoid business that does not meet profitability targets.
• The weak economic environment is reducing exposure bases and impacting demand for insurance, particularly in sectors that have been hit hardest by the downturn such as construction and transportation.
• Standard market carriers in search of premium growth continue to be a primary source of competition for business historically written in the E&S marketplace.
• Investment portfolio deterioration has reduced excess capital positions as credit spreads have yet to experience significant contraction.
Increasing reinsurance rates are expected to precede a turn in primary rates, creating margin erosion at primary carriers in the interim; capital-constrained insurers are turning to the reinsurance markets as one of the few available and viable sources of capital. We’ll see if that happens in trucking insurance soon.
Information on trucking insurance companies is both scant and hearsay. However, there has been specific company response made public. WR Berkley, one of GTU’s carriers through their Carolina Casualty subsidiary, sees declines in commercial transportation along with significant undercutting on prices for trucking insurance. National Interstate has mentioned that there are lower premiums due to fewer insured vehicles; moreover they also report low-single digit rate decreases for trucking insurance. There is a tendency for larger accounts to look for placement options outside of large struggling insurers. Baldwin & Lyons reports fleet transportation business as essentially flat from a pricing context.
What strategies have some of the carriers employed?
All companies are trying to grow in this tough marketplace while they say they want to maintain their underwriting discipline. Meadowbrook has chosen to expand it transportation footprint geographically. WR Berkley has formed new underwriting units- one of them being an Excess Transportation Facility through a new General Agent. Baldwin & Lyons acquired at the end of last year an insurance broker called Transportation Specialty Insurance Agency which provides service to owner-operators.
At GTU we see our companies and our agents the same way- everyone is trying to out select the competition without sacrificing underwriting integrity. In its present form, the marketplace constraints against growth and underwriting profit are not sustainable but when the marketplace will harden is anyone’s guess
Trucking insurance is a specialty line of insurance written with specialty insurance companies. The current outlook for specialty commercial insurance companies is mixed as general economic uncertainty, financial market turmoil and competitive market conditions are pressuring financial results and making the market turn more difficult to predict.
• Prices continue to decline, but have shown signs of stabilization; capital constraints are causing carriers to implement more disciplined underwriting to avoid business that does not meet profitability targets.
• The weak economic environment is reducing exposure bases and impacting demand for insurance, particularly in sectors that have been hit hardest by the downturn such as construction and transportation.
• Standard market carriers in search of premium growth continue to be a primary source of competition for business historically written in the E&S marketplace.
• Investment portfolio deterioration has reduced excess capital positions as credit spreads have yet to experience significant contraction.
Increasing reinsurance rates are expected to precede a turn in primary rates, creating margin erosion at primary carriers in the interim; capital-constrained insurers are turning to the reinsurance markets as one of the few available and viable sources of capital. We’ll see if that happens in trucking insurance soon.
Information on trucking insurance companies is both scant and hearsay. However, there has been specific company response made public. WR Berkley, one of GTU’s carriers through their Carolina Casualty subsidiary, sees declines in commercial transportation along with significant undercutting on prices for trucking insurance. National Interstate has mentioned that there are lower premiums due to fewer insured vehicles; moreover they also report low-single digit rate decreases for trucking insurance. There is a tendency for larger accounts to look for placement options outside of large struggling insurers. Baldwin & Lyons reports fleet transportation business as essentially flat from a pricing context.
What strategies have some of the carriers employed?
All companies are trying to grow in this tough marketplace while they say they want to maintain their underwriting discipline. Meadowbrook has chosen to expand it transportation footprint geographically. WR Berkley has formed new underwriting units- one of them being an Excess Transportation Facility through a new General Agent. Baldwin & Lyons acquired at the end of last year an insurance broker called Transportation Specialty Insurance Agency which provides service to owner-operators.
At GTU we see our companies and our agents the same way- everyone is trying to out select the competition without sacrificing underwriting integrity. In its present form, the marketplace constraints against growth and underwriting profit are not sustainable but when the marketplace will harden is anyone’s guess
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