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Independent Contractor Operating Agreements (ICOA) aka Owner-Operator Lease Agreements are governed by specific laws within the Federal Leasing Regulations. Violate these provisions and you may find yourself in hot water in the form of a class action lawsuit. According to transportation legal specialist Greg Feary of Scopelitis, Garvin, Light, Hanson, and Feary, the average cost to defend a class action lawsuit for violating truth in leasing laws is $25,000 per month. Cases normally drag on for several years and end with 6 to 7-figure settlements. Over 100 contractor v. motor carrier class action cases are active today. What steps can you take? Find out if your agreement meets the Federal Leasing Regulations. The Contractor Services Team at Cottingham & Butler can perform a checklist review of your agreement and advise if further action should be taken. If your agreement needs work, we can put you in touch with attorneys to revise your agreement at a discounted rate. A quality lease agreement might cost anywhere from $3,000 to $20,000 depending upon your situation. Compared to the cost of defending a class action, this is money well spent. Once you have a quality agreement in place, have an attorney review your lease at least every 18 months. Case outcomes and changes in state laws require regular tweaks to your agreement. We suggest budgeting $1,500 per year for these reviews. To learn about how your owner-operator risk management strategies stack up against the best in the business, complete our virtual Risk Scorecard assessment.

Competition for quality drivers has reached an all-time high Currently, the industry is short over 60,000 drivers, but most truckers say it feels like more. So what can a trucker do to solve this problem? Many have doubled down on lease purchases and owner-operator programs to attract drivers. But how are they doing it? Pay on percentage – Freight rates are at all-time highs and owner-operators know it. Carriers paying on mileage are at a disadvantage when freight rates are climbing. Adjusting mileage pay to compensate can be administratively crippling for a carrier. If mileage pay is necessary, consider a per-load override or “mileage booster” to keep pace with freight increases. Keep onboarding costs low – Efficient and effective orientation is critical to starting a good relationship with an owner-operator. Try and utilize electronic document processing to complete easy paperwork ahead of the orientation, such as Docusign or SignNow. Secure damage chargebacks via Deductible Buyback instead of collecting high escrows. Additionally, offer settlement deduct insurance programs to minimize owner-operator startup cash. Access to quality equipment – On average, owner-operators spend $2,400 per month on truck payments. Finding quality used equipment to fit a budget and keep maintenance costs in check is critical to owner operator’s success. Lease purchase programs and equipment financing can reduce the barrier to entry for a company driver looking for the next career step. Avoid leasing programs designed to take advantage of an owner-operator’s financial position. Are projected owner-operator revenues and expenses giving the owner-operator better net income than a company driver? If not, you may need to reexamine your approach. Resources American Truck Business Survey, September 2019

Have you completed “annual queries” on your current drivers? These are due by January 5th, 2021. By now, most of the industry is familiar with the required full query. However, as you may have seen in recent industry news, the “limited queries” (sometimes deemed “annual queries”) must be completed, as well. FMCSA’s Clearinghouse FAQs (Frequently Asked Questions) clarify the difference between the two types of mandatory queries. “A limited query allows an employer to determine if an individual driver’s Clearinghouse record has any information about resolved or unresolved drug and alcohol program violations, but does not release any specific violation information contained in the driver’s Clearinghouse record. Limited queries require only a general driver consent, which is obtained outside the Clearinghouse; this general consent is not required on an annual basis, it may be effective for more than one year. However, the limited consent request must specify the timeframe the driver is providing consent for.A full query allows the employer to see detailed information about any drug and alcohol program violations in a driver’s Clearinghouse record. An employer must obtain the driver’s electronic consent in the Clearinghouse prior to the release of detailed violation information during the full query.” Last Updated July 22nd, 2019 To summarize, the limited check tells you if your drivers are clean or if further digging is needed. This is applicable to all drivers running under your authority. Some Clearinghouse Need-To-Knows Limited checks DO NOT require the driver to register in the Clearinghouse. The driver DOES need to give the motor carrier consent for this query (outside the clearinghouse). This limited consent can be can done routinely through an annual consent – i.e. completed yearly. Another more efficient option is for your drivers to complete a single ongoing limited consent form (if it is worded properly). FMCSA has a sample consent form available in the Clearinghouse FAQs, found here. Consents are to be retained for 3 years after the date of the last query. The fleet MUST suspend operations for any existing driver NOT completing the consent and, therefore, not participating in the annual query. Should the limited query return that information exists on a driver, it will only say further investigation is needed. The motor carrier MUST, within 24 hours of the limited query, complete the full query or NOT use the driver in a safety-sensitive function. The driver must then approve (through the Clearinghouse) the release of the related data before FMSCA shares the detailed information with the Fleet contact. The motor carrier will be only charged once for both queries. Limited and full queries are $1.25 unless the fleet subscribes to a larger bundle package. A driver can access his/her own data by registering with the Clearinghouse and requesting their own data at no charge. Drivers must be queried once per year within 365 days from hire. Since the program went into effect on January 6, 2020, your annual queries are due by 1/5/21. For more information, visit FMCSA’s Clearinghouse Learning Center.

As we move into the final months of 2020, the pressures put on organizations across the country have increased, particularly for trucking companies.  Never mind COVID-19, civil unrest, and the interesting dynamics a presidential election year provides, the challenges trucking companies are facing with organizational and cost pressures – on top of an already difficult liability insurance market – are unparalleled. The Role of Captive Insurance in the Trucking Industry The overlap of the ongoing hard market that has seen rates increase for 39 straight quarters, and the fact that we are seeing a massive increase in the size and frequency of nuclear verdicts, is causing insurance premiums to rise and coverages to become more restrictive, requiring trucking companies to get resourceful and explore alternative risk transfer strategies, such as captives. The right captive can provide advantages in any type of insurance market, but they’ve become increasingly more attractive now as they help provide best-in-class trucking companies obtain fair pricing that is warranted based on their individual performance, superior coverage terms, higher limits, and improve their cash flow and long-term stability. Key Considerations for Successful Captive Participation A captive insurance program is different from traditional insurance in that it is owned and controlled by individual members with the primary purpose being to insure the operating risks of each company and gain control over the claims process. The companies that choose to join a captive make a conscious decision to partner with best-in-class companies who share their same vision, and together achieve superior results and capitalize on the return of underwriting profit. Cottingham & Butler: A Trusted Leader in Captive Insurance Cottingham & Butler, the U.S.’s largest transportation insurance broker, has been involved in captives for more than 25 years and has proven that group captives are a smart alternative risk strategy for savvy business owners. Chris Vogel, Senior Vice President of Cottingham & Butler’s Transportation Group, advocates that captives are a good fit for companies looking for more control over their insurance program and who want to be rewarded for their positive results. “The goal of the captive is to help our members lower their total cost of risk,” Vogel adds. “A captive is not for every fleet, but it is absolutely ideal for those that want control and are looking to capitalize for operating better than their peers and making investments to achieve superior results. We work with many fleets who have seen their cost decrease over the last 10 years contrary to most in the industry that are seeing them skyrocket.” Critical, though, to a company’s success in a captive program is the selection of its captive and risk-sharing partners. There are thousands of captive programs, but not all are built equally. When evaluating a captive partner, companies will want to ensure they are joining a group with similarly situated trucking companies and those that share common loss prevention and financial interests. It is also important to partner with a captive manager, claims administrator, and reinsurance partner who has extensive experience and positive standing in the transportation industry. The team at Cottingham & Butler has unmatched credentials and unparalleled success in the captive arena.  They have built a suite of businesses that includes a trucking claims administrator, safety consulting team, brokerage, and captive management, all with one goal in mind – to drive exceptional results for the trucking companies they work with.

The marketplace for commercial auto and excess insurance for trucking companies and businesses with heavy fleet exposures has been hardening rapidly over the past two to three years.  Unfortunately, for companies with those exposures, the expectation is that there will be little relief in the coming months. Challenges in the Commercial Auto Insurance Market Average commercial auto increases averaged just shy of 11% across all sizes of risks for the second quarter of 2020, which marked the thirty-five consecutive quarters of rate increases on that insurance coverage line. In spite of those steady increases, the industry results in commercial auto has seen little improvement over that time span. Impact of External Factors on Commercial Auto & Excess Insurance The combined ratio, which is a measure of insurance company profitability, moved into an unprofitable status in 201. In spite of continued rate increases, it has remained at unprofitable levels for the past decade. The COVID-19 pandemic brought new issues into the fold of the marketplace. With large portions of the country under stay-at-home orders, the frequency of auto liability claims dropped significantly. However, the benefit of that decline was somewhat muted by premium returns to companies that were shut down during that timeframe. Surge in Rates and Concerns in the Excess Insurance Market There is additional concern that a spike in the frequency and severity of claims dollars might be coming. The expected increase in auto usage and road congestion due to concerns with flying, buses, subways, and other forms of public transportation as states reopen drives the frequency concerns. Impacts that are occurring at higher rates of speed in areas of the country that have not reopened are leading to concerns around severity. It will take time to determine the true impact of these items on the industry, but given the results in the commercial auto segment over the past decade, expectations are that the rate increases will continue. We see a similar theme in the excess or umbrella marketplace where rates have sharply increased over the past few years. In the second quarter of 2020, commercial umbrella rates increased 20%.  This increase marked the highest of any line of coverage in the industry during that time, and marked the first time since 9/11 that a single line of business increased by 20% or more in a single quarter. Evolving Dynamics Leading to Shifts in Excess Insurance Landscape Factors such as litigation financing, distracted driving, and social inflation have driven the size of commercial auto claims exponentially higher over the past years. These factors have led to a dramatic increase in the average size of claim, not only for the verdicts in litigated claims, but also for the smaller claims settled out of court. Another by-product of these issues is that many insurance companies are no longer writing excess policies or are changing the amount of insurance they will offer to an individual insured. The increased costs of insurance and lack of capacity in the marketplace are leading companies to purchase less insurance in an environment where the need for larger limits is extremely high. For an in-depth market report of the commercial property/casualty space, reference the CIAB Q2 Market Index.

The average trucker’s auto liability premiums are increasing by 9.6%. Why?  Several insurers are exiting the marketplace due to bad losses.  The insurers that remain are raising rates to outpace rising claim costs.  As a result, even good trucking companies’ costs are going up.  So what can owner-operator fleets do to keep their auto costs down? Take higher deductibles AND recover those deductibles from your owner-operators. Seems pretty simple, but the bigger deductible the cheaper your insurance.  Most fleets pass on all or a portion of those deductible costs to the owner-operator.  The challenge becomes getting the money from the owner-operator when the claim happens.  Fleets solve this problem by installing Deductible Buyback insurance.  Owner-operators pay a small premium in exchange for a deductible reimbursement.  For example, a $9 per week premium reimburses up to a $5,000 per occurrence auto deductible. Install a “Better Bobtail” policy. It is no secret that “off-the-shelf” Bobtail, which is really Non-Trucking Liability, pays very few claims.  Denied Non-Trucking Liability claims turn into your Auto Liability claims, increasing your premiums.  “Better” Non-Trucking Liability policies have broader coverage for commonly denied scenarios like trips for maintenance, commuting between terminal and garage, and while awaiting dispatch.  Consider the “Best” and broadest Non-Trucking Liability with an Unladen Liability policy.  This policy provides liability coverage while the truck is being operated with an attached empty trailer, or without any trailer at all, whether dispatched or not.   These policies have pricing that starts as low as only $5 more per month. To learn more about how your owner-operator risk management strategies stack up against the best in the business, please complete our online risk assessment. Resources The Council of Insurance Agents & Brokers (CIAB) in its second-quarter 2020 broker survey said premiums increased for the 11th consecutive quarter by an average of 9.6 percent.

“If you only ever did the things you don’t want to do, you’d have everything you’ve ever wanted,” speaker, CNN contributor, and author of the 5-Second Rule, Mel Robbins, told attendees during her keynote address at the 10th annual Cottingham & Butler Transportation Summit. Robbins, along with political analyst Bruce Mehlman and bestselling author, Jon Gordon, shared stories, predictions, and leadership tips with attendees during keynote week as they looked to address the growing uncertainty and concerns in the world today. Every year, hundreds of trucking company owners and executives flock to the Cottingham & Butler Transportation Summit in Schaumburg, IL for one day of insight, networking, and new ideas – but with the growing threat of COVID-19, the group this year gathered virtually for a six-week series of sessions that covered the hottest topics in trucking today. You can view this year’s complete speaker lineup at www.cbummit.com. Though the current environment prevented us from gathering in person this year, the virtual series was no less impactful. For 10 years the Cottingham & Butler Transportation Summit has given trucking companies the unique opportunity to learn from some of the trucking industry’s best and connect with fellow colleagues on challenges and opportunities to grow their businesses. With this year’s shift to a virtual platform, we saw over 1,600 participate in the live and on-demand sessions. Registrants were flexible and enthusiastic about the switch to the virtual platform, actively engaging with the live Q&A sessions at the end of each presentation. Said Jim Kosak of Midwest Freight Systems, “Cottingham & Butler always brings together the best and brightest, and the virtual series has made it easier to attend.” The success of the Transportation Summit has led Cottingham & Butler to announce the all-new Transportation Summit – Unloaded series, where they will host bi-weekly sessions covering the most relevant topics facing trucking companies today. To learn more and get complete access to all of the 2020 Summit sessions, visit www.cbsummit.com to register.

Ten members of the Cottingham & Butler Food & Agribusiness team successfully completed a robust food safety training program and achieved their designations as Preventive Controls Qualified Individuals (PCQI), the leading designation for food safety professionals. “As trusted risk consultants in the Food industry, our goal is to prepare businesses for the changing landscape and provide valuable resources that go well beyond an insurance policy,” said Ryan Venti, Food & Agribusiness Risk Management Consultant. “The more we know, the better we can serve our clients.” The preventive controls qualified individual (PCQI) certificate is crucial to the management and preparation of the food safety plan and validation of preventive controls. In order to become a preventive controls qualified individual, you must successfully complete specialized training under a standardized curriculum recognized by the FDA, which was led by instructors at the world’s leading food safety consultancy and Cottingham & Butler’s food safety partner, TAG. The expertise and knowledge will help the Cottingham & Butler Food & Ag practice continually provide value to their clients and help them better manage unique loss exposures. “With heightened regulation and complexity from the Food and Drug Administration (FDA), along with the rules brought by the Food Safety Modernization Act (FSMA), it is important, now more than ever, to understand what our clients have to go through on a daily, weekly, and yearly basis.  The Cottingham & Butler Food and Agribusiness team continues to amaze me as we further the education that allows us to bring cutting-edge ideas and expertise to our clients,” Alex Portwood, Food & Agribusiness Marketer, Risk Management Practice. Certified Preventive Controls Qualified Individuals (PCQI): Ryan Butler Brian Grant Derek Mizaur Ross Milne Madison Worzalla Alex Portwood Ryan Venti Jordan Cowhey Thomas Merfeld Chase Medinger

On Monday, October 21, 2019, Cottingham & Butler announced the appointment of Andrew Butler as the company’s new Executive Chairperson, effective immediately. Butler, who has served as Vice Chairperson, President of SISCO & HealthCorp and member of the company’s Board of Directors since 2013, will now be responsible for providing oversight and direction to the Cottingham & Butler Board of Directors and the organization as a whole. Andrew succeeds his father, John Butler, who transitioned from his role as Executive Chairperson to Chairperson and will retain an active advisory role and continue to provide guidance to the business. David Becker, President & CEO, will continue to lead the company’s overall business operations. “John’s leadership and vision since 1957, has guided Cottingham & Butler to be recognized as a strong leader in our industry,” said Andrew Butler. “Everything we do at Cottingham & Butler is about serving our clients with distinction, and David and I are excited to continue to lead a team of passionate insurance professionals that deliver on that promise every day. The opportunity that lies ahead for our colleagues and most importantly, our clients, is exceptional and we are committed to providing long‐term value well into the future.” John Butler added, “I am extremely proud of the team’s accomplishments during my tenure. It is the right time to evolve our leadership as we continue to drive innovation in the industry. Andy is a talented leader and I look forward to continuing to work with him, David, and our experienced team as Chairperson. I am confident our leadership team will take Cottingham & Butler to the next level of growth, and I am tremendously optimistic about the future we are all creating together. Our people, culture, and business plan have proven to be of great value to those we serve and have produced results that are the envy of the industry.” About Cottingham & Butler Cottingham & Butler is the 5th largest privately held insurance broker in the United States and a recognized leader in offering innovative property & casualty and employee benefit insurance solutions. The privately held organization was founded in 1887 and is headquartered in Dubuque, Iowa, employing over 1,000 employees across the U.S.

Press release published by The Council of Insurance Agents & Brokers. David Becker, chief executive officer of Cottingham & Butler, Inc., in Dubuque, Iowa, was elected 2020 Chairman of The Council of Insurance Agents & Brokers, as announced today by The Council. He succeeds Martin P. Hughes, executive chairman of the Board of Directors of HUB International in Chicago. Becker was elected during The Council’s 106th annual Insurance Leadership Forum (ILF) in Colorado Springs, Colo. The Insurance Leadership Forum has been instrumental to the commercial property/casualty insurance industry since its beginnings in 1913, and continues to be the premier industry meeting for market leaders worldwide. “Dave has made a name for himself by approaching each day with an entrepreneurial spirit focused on how to help both his employees and clients be successful,” said Ken A. Crerar, President/CEO of The Council. “He’s engaged and pragmatic, always looking for opportunities by simply talking to people and listening. He’s also one of our champions for finding better ways to recruit and develop young talent to the brokerage industry, which is very much a priority of ours. We’re looking forward to having him lead our organization in the coming year.” Since Becker started with Cottingham & Butler in January 2004, the company’s annual revenues have increased more than six-fold, propelling C&B to become one of the top 10 employers in Dubuque. C&B has also expanded its geography with Becker at the helm, with more than a quarter of C&B’s 1,000+ employees working in regional offices spread across 24 states. Prior to joining Cottingham & Butler, Becker spent eight years with McKinsey & Company in Chicago, where he was a Partner specializing in issues related to strategy and marketing. Before McKinsey, Becker worked for IBM in a sales and marketing capacity. Becker has a bachelor’s degree in Computer Science and an MBA from Washington University in St. Louis, graduating magna cum laude. He also holds a J.D. from Harvard Law School, graduating magna cum laude. Becker serves on the Board of the Greater Dubuque Development Corporation and is a member of the Washington University Olin School of Business National Council. He is active in several civic and charitable organizations including Holy Family Catholic Schools and the Foundation for Academic & Social Excellence. As Chairman of The Council, Becker leads a team of officers including Vice Chairwoman Nancy Mellard, executive vice president and General Counsel at CBIZ in Kansas City, Mo.; Treasurer Robert J. Klonk, chief executive officer of Oswald Companies in Cleveland, Ohio, and Secretary Keith Schuler, president, and chief executive officer at InterWest Insurance Services, LLC, in Sacramento, Calif. In addition to Becker’s appointment, six were newly named to The Council’s board: Jochen Koerner, Managing Director, Ecclesia Group, Germany Kate Armfield, COO & Principal, AHT Insurance, Leesburg, Va. Chris Boone, President – P&C, BXS Insurance, Jackson, Miss. Michael Christian, CEO, Risk Strategies, Boston, Ma. Lori Goltermann, CEO, US Commercial Risk & Health Solutions, Aon, Chicago, Ill. Kyle Lingscheit, CEO, PayneWest Insurance, Missoula, Mont. The Council of Insurance Agents & Brokers is the premier association for the top regional, national, and international commercial insurance and employee benefits intermediaries worldwide. Council members are market leaders who annually place 85 percent of U.S. commercial property/casualty insurance premiums and administer billions of dollars in employee benefits accounts. With expansive international reach, The Council fosters industry-wide relationships around the globe by engaging lawmakers, regulators, and stakeholders to promote the interests of its members and the valuable role they play in the mitigation of risk for their clients. Founded in 1913, The Council is based in Washington, D.C.

Complying with the reporting requirements in a claims-made policy can sometimes feel like navigating through a minefield. Claims-made policies contain a number of traps for the unwary that could leave you with no insurance coverage, so the importance of having someone in your organization trained on these policies cannot be overstated. What is a 'claims-made' policy? There are two basic types of insurance policies: occurrence-based policies and claims-made policies. Common occurrence-based policies include commercial auto, general liability, and property policies. These policies cover claims that arise out of damage or injury that took place during the policy period, regardless of when the claim is actually asserted. For example, if a customer slips and falls on your premises in 2016 but does not file a lawsuit until 2018, your 2016 general liability policy would respond. Claims-made policies operate very differently. Claims made policies cover only those claims made during the policy period, regardless of when the injury occurred (although most policies require the injury to occur after a “retroactive date” stated in the policy). For example, if an employee files a complaint with the EEOC in 2018 alleging that he was discriminated against by your company back in 2017, your 2018 employment practices liability policy would respond because that was when the claim was made. Common claims made policies include employment practices liability, directors and officers, errors and omissions, product recall, cyber, professional liability, and fiduciary policies. What are the biggest pitfalls associated with claims-made policies? Failing to recognize that a claim has been made Recognizing a claim on an occurrence-based policy is fairly easy. If your building is damaged in a storm or your employee is in an auto accident while on duty, you have a claim. Recognizing a claim on a claims-made policy is not as straightforward. Depending on the wording of your policy, all of the following can constitute a claim that must be reported to the insurer as soon as practicable: Any written demand Service of a complaint or similar pleading, Any arbitration, mediation, or other similar dispute resolution proceeding, Any criminal proceeding commenced by the return of an indictment, Any administrative or regulatory proceeding commenced by the filing of a notice of the charge, written request to interview, formal investigative order, or similar document (e.g. an EEOC, civil rights commission, or a similar notice), A written request to toll or waive a statute of limitations, A subpoena Failing to report a claim on time If a claim is made against your company in any of the above forms, you must notify your insurer as soon as practicable. If you fail to do so, the insurer can deny coverage. The following scenario illustrates a common coverage issue with claims-made policies. An officer of your company is served with a notice of charge from the EEOC on December 23rd. The officer fails to act on the notice prior to the holidays, and your insurance coverage moves to a different carrier on January 1st. After the New Year holiday, the officer reports the claim to the previous carrier. The previous carrier will deny the claim because it was not reported during the policy period. The new carrier will also deny the claim because the claim was not first made during the policy period. Your company now has no insurance coverage for this claim. What can you do to protect your company? Read your policy, and pay close attention to the definition of a “claim.” Train your employees to recognize and report claims immediately. Training on claims-made policies is available in the Cottingham & Butler Risk Management Center. Communicate with your Cottingham & Butler team if you are unsure of whether or not an event constitutes a claim. Report a notice of circumstances that may give rise to a claim. This type of notice provides a safe harbor for reporting an event that may turn into a claim in the future. This may protect you in the event that a claim arises after the expiration of the policy because you have already put the insurer on notice.

What are you charging owner-operators for damages to your trailers, cargo, or auto liability claims? The industry average is around $2,500 per line and $5,000 combined. A hefty charge for an owner-operator to handle who likely doesn’t have that kind of cash on hand. A few options trucking companies have to protect themselves and their owner-operators; escrow, post-claim, and deductible buyback. Escrow: Collect enough funds to cover these damages from the owner-operator before they take their first load. Most trucking companies take escrow in small increments from the first few settlements. While this creates better cash flow for the owner-operator, it puts the trucking company at risk of not collecting those funds if an accident occurs before the escrow is fully funded. By law, trucking companies are required to pay interest to the owner-operator on their escrow funds, which can be an administrative nightmare. Post Claim: Allow the owner-operator to make small payments on the claim after it happens. The post-claim option provides good cash flow for the owner-operator and eliminates the headache associated with escrow. However, owner-operators often part ways with the trucking company after a claim, making the post-claim process rather challenging for the trucking company. So how do you ensure you get paid? Deductible Buy Back: Allow the owner-operator to purchase an insurance policy that pays for these damage chargebacks. Around $9 of premium per week buys down $5,000 of damage deductibles. This insurance guarantees payment to the trucking company and positive cash flow for the owner-operator. Trucking companies should offer Deductible Buy Back through settlement deduction so owner-operators have easy access to purchasing this insurance.