Owner Operator Insurance Obligations: Are You Breaking the Law?
March 31, 2017
Author: Ben Droessler
Federal leasing regulations require trucking companies to state very specific language on insurance obligations in their contracts with leased owner operators. 49 Part 376.12(j) states…
1. Agreement must state that the trucking company has the legal obligation to maintain insurance coverage for the protection of the public. This means you (the trucking company) are responsible for carrying auto liability that covers leased owner operators running under your authority.
2. Agreement must specify who is responsible for providing all other types of insurance coverage for the equipment, such as bobtail, work accident, cargo etc. Be specific about what you require in type of insurance, limits, deductibles, and rating of the insurance carrier.
3. If the carrier will make a chargeback to the owner-operator for any of the insurance, the lease must specify the amount which will be charged back. This applies to all types of insurance chargebacks including trucking company procured policies and pass through deducted policies.
4. If the owner-operator purchases any insurance coverages through the carrier, the lease must specify that the carrier will provide a copy of the policy upon the owner-operator’s request.
5. Where insurance is purchased through the carrier, the lease must further specify that the carrier will provide the owner-operator with a certificate of insurance which states the following:
a.The name of the insurer
b.The policy number
c.The effective dates of the policy
d.The amounts and types of coverage
e.The cost to the owner-operator for each type of coverage
f.The deductible amount
6. The lease must specify the conditions under which deductions for cargo or property damage will be made. Make it clear what you will charge the owner operator if they damage cargo, your trailer, or cause an auto liability claim. Industry average is $2,500 per line with a $5,000 aggregate.
7. The lease must further specify that the carrier provide the owner-operator with a written explanation and itemization of any deduction for cargo or property damage before the deduction is made. Key word is before. Make sure your payroll processing department and safety team are on the same page before any damage deductions are taken.
Contact Ben Droessler with Cottingham & Butler’s Contractor Services Team.
Truck Insurance Group, Vice President