Owner Operator Administrative Fees | What Should Companies Charge?
Event Date: November 29, 2018
Author: Ben Droessler
Trucking companies who offer insurance to their owner operators through settlement deduction often charge administrative fees to recover costs associated with administering these programs. Costs incurred include but are not limited to: time spent negotiating and securing insurance through a broker, processing settlement deductions, and remitting premiums to the insurer.
How much should (can) a trucking company charge an owner operator for administrative fees?
The answer isn’t as clear cut as one might think. No law currently exists specific to “mark ups” or administrative fees, so we are forced to look at history for guidance. Rewind back to 1981, the Interstate Commerce Commission proposed a rule1 limiting chargebacks to 110% of the amount which properly should have been deducted. However, upon publishing the final rule that wording was omitted.
Fast forward to 2010, Landstar lost a lawsuit to OOIDA for excessive and undisclosed chargebacks. The ICC proposed rule was again referenced in the Landstar case. Subject matter expert Greg Feary with Scopelitis, Garvin, Light, Hanson, & Feary, “We take a conservative approach and feel the above is sufficient to warn carriers (especially in regards to insurance chargebacks given the sale of insurance is regulated by the state and making profit from the sale of insurance is one definition of brokerage) that an administrative charge for insurance should be the lesser of the carrier’s actual cost to administer the insurance programs or 10%”
1Lease and Interchange of Vehicles, 46 Fed. Reg. 44013, 44015 (Sep. 2, 1981)
Contact Ben Droessler with Cottingham & Butler’s Contractor Services Team.
Truck Insurance Group, Vice President