Motor Carriers and Their Owner/Operators
March 24, 2017
Author: Joel McKay, Sales Executive
The owner-operator model has become a very common means to recruit and maintain drivers in the transportation industry. Many motor carriers have implemented some sort of owner-operator program in order to attract and keep drivers.
Independent Contractor Operating Agreements are governed by Federal Leasing Regulations and should be written and signed by both the motor carrier and the owner-operator. The contract should be in place between the owner-operator and motor carrier to spell out the terms and conditions of the agreement and specifically the insurance requirements of both parties. Consulting an attorney to help create and/or review your operating agreement before implementing the lease agreement is recommended.
Responsibilities of the Motor Carrier vs Owner Operator
Pursuant to FMCSA Regulations under 49 U.S.C. 13906 the motor carrier is required to provide public auto liability coverage and typically provide cargo insurance, although cargo coverage is not required by regulation. Federal insurance filing will be provided by the insurance carrier on behalf of the motor carrier. The lease agreement between the motor carrier and owner operator should address any other insurance coverage requirements and duties.
Typically, the owner-operator will be responsible for purchasing their Non-Trucking Auto Liability, Physical Damage, and Occupational Accident coverage. Motor carriers can provide group plans for their owner-operators to ensure they are obtaining the appropriate coverage and be able to provide the coverage at competitive rates. Again, these items need to be addressed in the lease agreement.
It is in the best interest of the motor carrier to provide insurance programs for their owner-operators or to require that certificates of insurance are provided and kept in their file to ensure the owner-operators are purchasing and maintaining the proper insurance coverage per the executed lease agreement. This will help to alleviate claims that could result in the owner-operator losing the ability to provide their services.
For the owner-operators it is in their best interest to carefully read the lease agreement prior to signing to verify what their responsibilities are versus what the motor carrier is responsible for. It is also important to ensure they purchase the proper coverage in order to protect themselves and their operating ability.
It is important that a summary of all the insurance coverage required should be addressed in your operating agreement including which party is responsible for purchasing the coverage. As previously noted, typically the Auto Liability, General Liability, and Cargo Coverage are provided by the motor carrier. The Non-Trucking Auto Liability, Physical Damage, and Occupational Accident coverage is typically the responsibility of the owner-operator.
When a motor carrier decides to implement an owner-operator program, it is important that they have a lease agreement which meets the FMCSA requirements and spells out the responsibilities of each party so all parties coming into the contract know their own responsibilities as well as the responsibility of the other party. Because of the comprehensive nature of lease agreements it is important that they be reviewed by an attorney to make sure that it meets legal requirements as well.
Need help identifying the Best Practices for your company with regards to Owner Operations? Please click here to check out the risk scorecard and see how best to cover these exposures for your company and your Owner Operators or, click the link below.
|Joel McKay is a sales executive at Cottingham & Butler. He has been with company since 2004 working in both claims and the sales department. He is the father of five and spend most of his time outside of work with his children.|