THE OWNER OPERATOR'S INSURANCE DILEMMA

Q: . May a driver or other motor carrier employee be qualified as a brake inspector under 396.25, by way of experience or training, to perform brake adjustments, without being qualified to perform other brake-related tasks such as the repair or replacement of brake components?

A: Yes. A driver may be qualified by the motor carrier to perform a limited number of tasks in connection with the brake system such as inspect and/or adjust the vehicle’s brakes, but not repair them (396.25).

THE POLITICS OF "PROTECTION"

In most states, workers’ compensation is elective for sole proprietors or self-employed persons such as owner operators. Thus, most owner operators can legally forgo workers’ comp insurance for themselves. Many states make it compulsory for small companies (those with two, three or sometimes even five workers). What that means is that owner operators who opt out of coverage for themselves can hire a couple drivers and not worry about getting workers’ comp for them. That could be a considerable savings, but is it the smart thing to do? Equally important, is it the smart thing for a motor carrier to allow?

Insurance experts (and many attorneys in fact) say to allow owner operators to opt out of coverage is simply asking for trouble. Owner operators who run without some type of medical coverage risk financial devastation if they are injured on the job. Their wife's medical insurance may not cover work-related illnesses or injuries. Even if they do, a trucker who can’t drive has to cope with lost income. When that happens, many forget their "independence" and go after their lease carrier for compensation.

The risk isn’t from the guy out to "get" the carrier, but from the event of a catastrophic accident where an owner operator is temporarily or totally disabled or even killed. Then you have a man unable to pay his bills, or a family with no support. Ultimately, the motor carrier has a possible lawsuit charging that the owner operator was really an employee after all.

In workers’ comp cases, the courts tend to broadly define "employee" in order to give legal protection to those who need it. Some attorneys are adept at finding chinks in the independent contractor's status. Owner operator workers’ comp claims against carriers are often hard fought - and still lost. If a carrier is found to be an owner operator’s "employer", the consequences may not be confined to one workers’ comp claim. Likely, the carrier’s insurance company will want to add all of the carriers’ owner operators to the policy, often demanding retroactive payments.

The workers’ comp decision may also attract the attention of the state and federal tax agencies interested in unemployment and other tax withholdings. The owner operators themselves, buoyed by this new "employee" status, may also demand other employee benefits like profit sharing and retirement plans.

So what’s the protection? Motor carriers that use owner operators have a few choices. Some carriers try to have their cake and ice cream at the same time by including owner operators in the company’s workers' comp insurance carried for the company drivers and either pay the premiums out of pocket or charge the owner operators. Many carriers often do this but overcharge the owner operators, and even add administrative fees. Only licensed third party administrators may charge these fees. This choice could jeopardize the independent contractor's status. It will be only a matter of time until this is challenged in the courts. After all, would you pay the workers' comp (or charge) for a plumber that comes to your house? Of course not, but it's the same thing.

Another option is to require, as part of the lease contract, that the owner operator have some kind of protection, either workers’ comp for his drivers or occupational accident insurance for himself. In some states, such as California where workers’ comp isn’t mandated, the decision hinges on cost versus benefit and/or competition versus exposure. Since workers’ comp premiums differ by state and by loss experience, there is no national or industry standard. On average, in California, it runs from 5% of the weekly gross to as high as 22% for a new company.

Occupational accident premiums depend on the coverage. Fairly extensive coverage can be purchased for anywhere from $175 (from the National Association of Independent Truckers) to $120 or $140 per month (from the NTA) and can be as low as $54 per month (from the NTA) when coupled with a health plan. Motor carriers who mandate the occupational accident insurance (occ/acc) are actually giving their owner operators a cost break. The carriers that demand workers’ comp could even drive owner operators away. Occ/acc insurance usually has lump-sum death benefits higher than workers’ comp. Occ/acc insurance oftentimes pays more than workers’ comp on disability claims.

Trucking companies that require either worker’s comp or occ/acc are by far the smarter companies to work. Also, companies that have a policy of "no pay settlement deductions" are better to work for. These companies are doing their owner operators a favor by making them protect themselves and their family.

Most trucking companies will be very careful to maintain an arm’s distance relationship with their owner operators, making certain they don’t breach that independent contractor relationship. Owner operators must remember that because of this arm’s length distance they must keep, that motor carriers cannot give their owner operators any benefits - even if they want to. Companies who don’t require any coverage, in my opinion, simply don’t care. The average guy that gets hurt and has no money is in a much more desperate situation than the guy who gets hurt and has at least $500 a week coming in to count on.

Whatever kind of coverage a motor carrier chooses, it may have to over come skepticism on the part of the owner operators who, too often, get burned. Some have purchased coverage through carriers only to find, when they had a claim, that they weren’t covered. All owner operators should know that according to federal lease regulations, a carrier CANNOT require its owner operators to buy from it or from its designated agent. Also, if any administrative fees are added onto the price of the premium, the owner operator must be told.