The Federal Motor Carrier Safety Administration (FMCSA) is making a long-awaited move to seek increased liability coverage for trucking operators via a notice of proposed rulemaking (NPRM) issued by the agency last week before the Thanksgiving holiday.
A similar FMCSA effort launched earlier this year came to naught after the House of Representatives voted back in June to prevent the agency from boosting the minimum level of financial responsibility for motor carriers above the current $750,000 requirement – a requirement that’s been unchanged since 1982.
Yet the agency is returning to the subject in part due to the findings of a report it sent to Congress in April that determined while catastrophic crashes involving motor carriers are rare, the costs for resulting severe and critical injuries can exceed $1 million and that current insurance limits do not adequately cover these costs.
To agency said it is now soliciting information based around 26 questions regarding “financial responsibility” as part of a renewed effort to propose changes to current trucking insurance rules, but Robert Moseley, Jr., chairman of the transportation practice at the law firm of Smith Moore Leatherwood LLP, told Fleet Owner that in many ways the FMCSA is actually playing “catch up” in terms of carrier insurance levels demanded by shippers and brokers.
“The main driver of higher insurance amounts required of trucking companies is not FMCSA [rules]; it’s the freight contracts,” he explained. “Most shipper and broker [freight] contracts require $1 million in coverage and they’ve required that for a long time.”
Yet Moseley emphasized that a regulation mandating higher insurance coverage levels for motor carriers will most likely raise insurance costs across the board within the industry – even for carriers that maintain insurance coverage levels well beyond the $1 million level.
“Let’s say you have $2 million in overall coverage,” he said. “You’ll have to pay a higher premium for that [coverage amount] under the proposed FMCSA rules because now the cost of your ‘primary’ insurance is going up as it is being raised from $750,000 to $1 million or whatever level the FMCSA settles on.”
Moseley added that trucking companies will most likely seek to recoup such increased insurance cost through higher freight rates.
While he noted that in 25 years of practice he’s only dealt with “a handful” of cases where carriers had to pay plaintiffs the full amount of their insurance coverage, Moseley stressed that coverage exceeding industry minimums is usually the wisest option.
“If you operate around 10 trucks, you can get away with maybe $1 million in coverage,” he explained. “But once you reach 40 or 50 trucks, you’ve got large enough accounts receivables to make you a big target.”