Congestion- Good for Trucking Insurance Companies?

I hope everybody is doing well. While CSA continues to be the pervasive topic along what to do with it, I was struck by an article in TT Express below:

"The cost of U.S. traffic congestion has jumped to $115 billion in 2009 from $24 billion in 1982, and trucks are shouldering a disproportionate share of the cost, according to a report released this week.

Congestion in the nation’s largest urban areas cost the trucking industry $33 billion in delay time and wasted fuel last year, said the annual Urban Mobility Report by the Texas Transportation Institute of Texas A&M University, released Thursday.

While trucks account for just 7% of the total vehicle miles traveled, the $33 billion represents 29% of the total congestion costs, the report said.

Unlike the cost of congestion for cars, the cost of truck congestion “was passed on to consumers in the form of higher prices” and the fallout from the congestion extends “far beyond the region where the congestion occurs,” the report said.

Because trucks carry goods to suppliers, markets, and manufacturers, delays in arrival can cause whole production lines to close down, it said.

“The report confirms that congestion has a significant impact on the cost of moving freight, which is ultimately borne by Americans in the form of higher shelf prices, lower incomes and lost jobs,” said Darrin Roth, director of highway operations for American Trucking Associations..."

Well, is that bad for trucking insurance companies? My answer would be no. Congestion works out to less miles traveled by each truck ( if the trucker is complying with hours of service and CSA is seeing to that). Less miles = less exposure. Less exposure= less losses.

That has certainly borne out in the lower frequency and severity statistics that have occurred year-after-year. So in spite of medical inflation that is out-of-control, look for better claims results.

That does not mean better loss ratios though as premiums continue to be in a free-fall. If the insurance companies can hold their pricing ( which they show no discipline for doing ever), then congestion would translate to better results.

Trucking's misery ( congestion) creates some unlikely beneficiaries ( trucking insurance companies). Food for thought....

Changes in Hours of Service For Truck Drivers/ CSA 2010 ramifications

The FMCSA has been busy this month. The new proposed hours of service rules have now been released. There is not much that was changed. While the hours have been reduced to 13 hours, a driver can now take a one hour rest and then continue to complete 14 hours of service. The 34 hour restart rule also applies, provided that there are 2 rest periods – from midnight to 6 a.m. A restart will only be allowed once in a seven day period. The proposed regulations will not be open for public comment curiously.

It will be interesting to see how CSA 2010 grades hours of service non-compliance and what insurance carriers do about it.

It is early days with CSA where in the first days the system had 22,000(!) hits in one hour. Nobody knows what percentage of truckers are getting alerts for failing BASIC scores.

Happy New Year to all!

What Shippers and Brokers Need to Know to Manage Their Liability Exposure and The Effects of CSA 2010

I watched a fantastic webinar put on by American Shipper in November that pointed to ( although they did not specifically mention) two presently underinsured or uninsured exposures- broker liability and contingent auto liability and why coverage is needed today. ( As in right now!)

Both coverages are not understood and frankly not part of the mainstream trucking insurance marketplace. With the current economy, many truck sales professionals are setting up brokerage authority or expanding brokerage sales-as trucking capacity is still tight in many areas. Even today's truckers, who are at an all-time high with respect to operating efficiencies, have found they do not either have the equipment or drivers to keep up with their shippers' needs or demands- and that is poor business. So they are setting up and expanding their brokerage operations both within and autonomous to their existing operating authority.

CSA 2010 will make capacity even tighter as crappy trucking operations and crappy drivers will not have long to fix it. And that spells bad news to the brokerage community- who even with best practices will find their operations exposed.

Some information I learned from the webinar corroborates the need for coverage. The Transportation Intermediaries Association understands that brokers need and will be required to have broker liability ( primary coverage) or contingent auto coverage ( secondary coverage). Why?

Truckers who continue to hire or retain unfit drivers will face litigation for negligent hiring and retention. Note a now famous court decision against the nation's largest brokerage operation C. H. Robinson further necessitates the need for coverage ( the Schramm decision).

Attorney Clay Porter, a true pro in the truck broker/ insurance arena has described the truck liability "vortex" well where there is a constant duty to supervise and retain records amongst other things from a best practices context.

Broker/ Shipper Liability can today be summarized by 6 exposures

* Respondeat Superior- the employer ( the truck broker) is responsible for the employee( the carrier). Even though the broker in all cases acts as an independent contractor, the courts are becoming sensitive to this bringing vicarious liability whereby one party is responsible for the actions of others
* Negligent Entrustment- causing injury due to instrumentality( a poor driver operating a extra heavy tractor)
* Claims under the Motor Carrier Act
* Claims that a Broker acted as a Motor Carrier
* Aiding and Abetting
* Negligent Hiring

While I want to emphasize I am no lawyer, it is pretty clear to me the biggest exposure to a broker is negligent hiring- and that a best practices approach needs to be delivered to the truck brokerage community- along with appropriate insurance ( yes we provide same so this may seem a tad self-serving which is not my intention).

Federal laws also necessitate coverage. Which ones?

+49 USC 14704- Rights and Remedies of Persons injured by carriers or brokers- Both the carrier or broker is liable for damages sustained by a person as an act or omission of that carrier or broker in violation of this part


+49 CFR 387.307- Broker surety bond or trust fund- the broker is liable to payments to shippers or motor carriers if the broker fails to carry out its contracts or agreements for supplying of transportation by authorized motor carriers.

Shippers are going to make their brokers have insurance. Attorney Porter says that the indemnity agreements that brokers and truckers are being forced to sign do not hold up in 23 states, meaning shippers will require insurance, waivers of subrogation, and additional insured requirements across the board.

One of the failures of the industry is that there is a fine line between liability exposure either on a primary or contingent basis versus a professional liability exposure ( yes we insure that too). Clearly its early days from a professional liability perspective and few shippers are requiring same of their brokers and virtually none of their truckers. You will see those products as well.


While I have not commented much about CSA 2010, suffice it to say that these factors in a large loss or claim will have impact on the broker that hired them:

^Unsafe Driving
^Fatigued Driving
^Poor Driver Fitness
^Drug and Alcohol Use
^Poor Vehicle Maintenance
^Cargo Securement
^Higher than Average Crash Indicator

These are primarilly no brainers for a plaintiff's attorney to go to war against a trucker or broker but the crash indicator of a trucker is not something available to the broker or general public as I understand it at this stage in time.

You can bet the truck insurance agents will be hit with insurance requests, waiver of subrogation requests, hold harmless contracts, and additional insured requests. And today, no one knows what to do with the exposure when there is more than one broker involved in the transaction.

Keep in touch on this and Happy Holidays.

Ben

Latest Trends in Trucking Loss Control Recommendations

The one consistency in trucking insurance is that change is an integral part of the game. If you cannot change or do not want to change, you will find that the status quo is the same as a trucker putting on the brakes. You have to be moving - and stay current to what is going on in the industry. Otherwise you become irrelevant and most importantly fail to add the value that differentiates you from the masses.

I thought it made sense to address very briefly what we are seeing from insurance companies writing trucking insurance from a loss control perspective. Here is what we see:

• Acknowledgement by trucking management that CSA 2010 has been reviewed and understood
• Within CSA 2010, insurance companies want to make sure CSA 2010 has been presented to drivers and that everyone understands the implications of a drivers safety record within the driver safety measurement system
• No texting policy and the acknowledgement that it is a disqualifying expense. They will want to see this put in the drivers manual
• Defensive driver training and programs must be implemented

While there are other trends in loss control, these are what we see in most loss control reports.

If you are not familiar with what these issues are about, it makes sense to get familiar with them.

A Trucker's Need for Best Practices- Quickly

While everyone is trying to get their arms around the ramifications of CSA 2010, new information is out that points to the need for truckers to fix themselves, rather than be made to do it.

New information compiled from industry giant Lexis says that half( yes that is 50%) of driver qualification files are incomplete- or wrong. Since most insurance carriers, truckers, and truck brokers are worried about vicarious liability that goes with such terms as negligent hiring and negligent entrustment, truckers would do well to invest and fix it now. Insurance agents should work with their insurance carriers to make a trucker look better- now. Without it, the potential for liability is unfortunately at an all time high.

Here is the article in the Journal of Commerce and the Transportation Intermediaries Association.

"The LexisNexis Commercial Driver Safety Report 2010 has revealed that up to 50 percent of commercial driver qualification files, required by the U.S. Department of Transportation (DOT) are incomplete or inaccurate. The report showed numerous instances of incomplete or inaccurate information being used by organizations to screen and qualify drivers, highlighting significant and troubling gaps in compliance and safety programs. Another troubling finding is that commercial drivers are increasingly testing positive for use of PCP, Marijuana, amphetamines and opiates since 2008.

The LexisNexis Commercial Driver Safety Report 2010 is designed to help commercial transportation fleet owners and managers address initiatives, such as the Federal Motor Carrier Safety Administration’s (FMCSA) Comprehensive Safety Analysis 2010 (CSA 2010), by highlighting the areas where existing driver safety and screening programs may be inadequate. The study also found that:

• In files that are compromised by missing documentation, driver licenses are missing 85 percent of the time.

• While use of most illegal substances appears to be on the rise, positive tests for cocaine use decreased 41 percent since 2008.

• Close to 50 percent of the driver motor vehicle reports analyzed by LexisNexis include an adverse motor vehicle history, such as a driving violation or suspended license. "

CSA 2010 - Work In Progress

There are a few things about CSA 2010 that you already know about and other things you may not know. When dealing with your insureds or insurance companies, it might help to be able to discuss the following:

1) What you should already know

On August 16, 2010, the FMCSA updated the Data Preview website to allow carriers to view an assessment of where they stand in each BASIC category based on roadside and investigative findings. The seven BASICS are:
-Unsafe Driving
-Fatigued Driving (hours of service)
-Driver Fitness
-Controlled Substances/Alcohol
-Vehicle Maintenance
-Cargo-Related
-Crash Indicator.

SafeStat’s Safety Evaluation Areas (SEAs) will be replaced
by the BASICS in December, 2010. This early assessment indicator will allow motor carriers an opportunity to understand and address their safety concerns right away.

What you probably do not know:

● Carriers will not inherit the past violations of a newly hired driver.
● All crashes and inspections that occur to a commercial driver while under the authority of a carrier will remain part of that carrier’s Safety Management Data for two years, even if the carrier terminates the driver.
● Tickets or warnings received by commercial drivers while operating their personal vehicles do not count in the Safety Measurement System.
● Carriers and commercial drivers do not need to register for the CSA 2010, nor is there a training requirement.

However, it is in their best interest to be aware of this program and its implications.

Truckers are going to be asking you if the insurance company can help with compliance. We will see what insurance companies can or cannot help in the process

Good Numbers- Truck Related Fatalities & Transportation Activity

In the face of higher average medical costs per claim is the fact that fatalities are now at a record low. What would be interesting and I do not have is to see the actual truck related deaths per mile ( interesting may be the wrong word). My hunch is that not only are fatalities lower but the overall fatalities per mile are down.
It will be interesting to see how truck insurers look at this as you would hear out of every one of them that severity is up. See the attached article below ( courtesy of Transport Topics)

The number of people killed in large-truck crashes dropped 20% in 2009 to the lowest level on record, the National Highway Traffic Safety Administration said Thursday.

Total fatalities fell to 3,380, from 4,245 in 2008, NHTSA said. The total includes truck occupants, occupants of other vehicles and people who were not in vehicles, such as pedestrians.

The figure is the lowest since records began in 1975. Large truck occupants saw the largest decrease in fatalities among all groups tracked by NHTSA, falling 26%.

Fatalities have declined by 2,000 since the Federal Motor Carrier Safety Administration was created in 1999.

They have dropped by 1,855 since 2004, when the current hours-of-service regulations were put into effect by FMCSA.

Both NHTSA and FMCSA are agencies of the U.S. Department of Transportation.

The numbers reported Thursday do not take into account total mileage among trucks, a figure DOT has not yet announced for 2009.

Other good news came from the Federal Reserve. ( Again courtesy of Transport Topics)

The number of people killed in large-truck crashes dropped 20% in 2009 to the lowest level on record, the National Highway Traffic Safety Administration said Thursday.

Total fatalities fell to 3,380, from 4,245 in 2008, NHTSA said. The total includes truck occupants, occupants of other vehicles and people who were not in vehicles, such as pedestrians.

The figure is the lowest since records began in 1975. Large truck occupants saw the largest decrease in fatalities among all groups tracked by NHTSA, falling 26%.

Fatalities have declined by 2,000 since the Federal Motor Carrier Safety Administration was created in 1999.

They have dropped by 1,855 since 2004, when the current hours-of-service regulations were put into effect by FMCSA.

Both NHTSA and FMCSA are agencies of the U.S. Department of Transportation.

The numbers reported Thursday do not take into account total mileage among trucks, a figure DOT has not yet announced for 2009.