Excess, Umbrella, and multi-Insurer Coverages. Deductibles and Self-insured Retention policies; Control over Safety; Insurance Pricing in 2017.

You’ll buy insurance this year for your transportation business, and perhaps  a large percentage of it will be from multiple insurers. Pricing may be an issue (see below), or your clients may require certain policy features.

Insurance policies themselves are always bilateral, not multi-lateral agreements. So, when you buy into a multi-insurer program, you should be aware of the gaps and inconsistencies that may occur. Your insurance broker is assembling a program that is complex, multi-layered, and multi-insurer. So ask a lot of questions.

Never will two insurers jointly issue one policy that will provide whole coverage to you. But although policies are not multi-lateral that does not mean they operate only individually. Excess and umbrella policies, which you may need to fulfill customer demands, refer to other policies by their nature, generally calling them the underlying coverage – and are contingent in some ways on the provisions of that underlying coverage.

A primary policy pays the first dollar of a covered claim, perhaps subject to your deductible or self-insured retention. You buy the primary and then add other policies that are excess of the primary as you deem necessary. An excess policy means the insurer only begins coverage after the pre-determined primary limits. Excess is available for just about all primary lines and there is no requirement you buy only from one underwriting company.

An umbrella policy is more of a stand-alone excess policy that offers a bit broader scope than the primary. Umbrella policies stand out over plain excess covers: like an excess policy, umbrellas provide additional amounts of cover once the primary is tapped out; but umbrellas sit more broadly, and provide cover over other types of coverage, for example, your auto or employer’s liability policies; and umbrellas can serve as primary cover outside the scope of some primaries.

Consider that excess policies “follow form” of the underlying coverage – the exact provisions of that policy – but no more. Sometimes “follow form” language takes a detour and conflicts with terms of the underlying policy, narrowing the scope with additional terms. That may be excess, but it sure ain’t what you expected.

A “DIC” policy is a stand-alone excess policy that typically drops down and serves as primary where there is a difference in policy conditions or scope, or when the underlying is exhausted. These DIC policies are often seen in D&O coverage programs.

Generally, however, excess policies attach and pick up the claim and defense when the pre-determined limits of the primary coverage are exhausted, when the primary throws in the towel.

In umbrella situations, some of the coverage may be excess to the primary, and other coverage could be first dollar.

Umbrella policies should provide additional limits over the underlying liability and, as said, they usually provide broader coverage than an Excess Liability policy.

Excess Liability policies provide additional limits over the underlying liability, but this can be more restrictive and they do not provide coverage that was unavailable to you in the underlying policy.

 What About Retentions and Deductibles? Under an SIR, the insurer generally has nothing to do with losses that do not penetrate its attachment point. The insurer may, however, require notification when a claim comes in to you or when it is perceived by you and/or the insurer the claim may pierce the attachment point. Under a deductible, however, the insurer pays every loss up to its limits, and then – in theory –  is reimbursed by you up to the amount of your deductible. In practice, however, if you can manage to do so, pay losses that are within the deductible from your pocket. Remember, numerous and frequent losses are considered more unfavorably than cat losses, and next year’s insurance looks for frequency.

Who pays Defense Costs? A policy with a deductible provision requires an insurer to investigate each claim and pay to defend it. The insurer controls the defense.

With an SIR policy, you can be in control of the defense. In theory since it’s your money up front, you can control your  own investigation, defense, and settlement of claims within the SIR. You may be better suited to investigate than the insurance adjuster. Presumably, you’ll know of the claim first. Until the SIR has been satisfied by you, or the claim is clearly going  to exceed the SIR, the insurer, in true SIR policies, has no obligation to provide or pay for the insured’s defense.

Unless the policy otherwise provides (e.g. eroding limits), the deductible relates to the damages for which the insured is indemnified, not to defense costs, so the insurer pays defense costs from the beginning. The insurer is fully responsible for defense costs regardless of the amount of the deductible, assuming there is a potential for coverage under the policy.

In an SIR policy, until the insurer becomes obligated for a loss over the SIR, the insured will pay its own defense costs. In this situation, you’re not bound to use the services  of the insurer’s stable of lawyers. You can choose.

Settlement. A policy with a deductible allows the insurer to defend and settle claims against the insured without the insured’s consent. An insurer cannot settle a claim within the SIR without the insured’s consent.

Which One Should I pick? In the current insurance climate, first-dollar coverage is a luxury we can’t afford. You should go for either a deductible or SIR policy. You’ll be more in charge  with an SIR.

This is not new. Policies with large self-insured retentions and deductibles have always been available, but if you have a better hand at managing your day-to-day risks, that is, you’re better at conducting a safe operation than an insurer, an SIR policy may be more attractive than a deductible. This is especially true if your CSA scores are well within limits and you preach and practice safety.

Your Insurance Market for 2017. With sagging growth and under-performing investments, the insurance industry is likely to continue consolidation, leaving you with fewer choices. There is an expected outflow of some 70,000 insurance workers – of all stripes – so insurers will need to attract and train workers and count more on algorithms (yes, CSA is only an algorithm, and a poorly functioning one at that).

Then there’s the uncertainty of the new Administration and its effects on domestic growth and trade. Expect increasing insurance costs this year.

Regards,

Jim Mahoney

602 900 1800

Transportation Chair

Louis & Resnick PC

 

 

 

 

Baseball has always had statistics. They’ve been studied to excess and its auditors have immense data directly related to every player. Not so with CSA BASICs.

The FMCSA built CSA and it routinely lacks the complete data tov reveal the behaviors the Agency – and insurers, and shippers – are interested in. What the Agency does instead is substitute stand-in data, or what we might call proxy data. They draw statistical correlations between a  motor carrier’s type of operations and its potential for safety. These correlations discriminate. Whereas baseball stats pour in daily for more than 6 months a year; and they can feed back inconsistencies into the model, redefining it as they progress, CSA scores are static; there is no mechanism to correct errors (let’s not even bring up dataQ appeals). Conditions and outcomes change or evolve in court somewhat closer to the truth, so must the model the penalties are based on.

CSA, cloaked as it is in a great deal of mystery, with only chance encounters delivering outsized results, relies heavily on a handful of “test” results, which is so very far from algorithmic modeling.  But yet, CSA purports to predict outcomes – i.e., crashes. These “predictions,” unfortunately, guide the discussions of shippers, DOT inspectors, and insurers.

There will always be miscalculations in CSA evaluations because the models used are just simplifications. No model can include all the world’s complexities or nuances of human behavior. Inevitably, a lot of important stuff gets left out – like communications in operations, variable ground conditions, and interactions with other parties, namely shippers and receivers.

To be frank, CSA BASICs is a toy algorithmic model that abuses truckers who all operate on the slimmest of margins. The Agency makes choices about what’s important enough to include, simplifying the world of trucking into its own version of reality, not a true life version where real life decisions and actions are and can be made every day. CSA reflects the goals and ideology that the Agency imposes onto its “safe trucking” mandate. CSA scores are opinions embedded in arbitrary mathematics. What the Agency is trying to accomplish  – saving lives – the very definition for its existence, is, of course, more than simply admirable. But by blending in arbitrary measures of “success,” the CSA model hunts down arbitrarily determined data. The CSA model itself becomes a belief, relied upon by those who serve and use the trucking industry. It has not eliminated DOT-based human bias; it’s only camouflaging its bias with its mysterious predictive math calculations.

To sum up, CSA presents three elements of false beliefs: it’s opaque; it uses false scales to measure safety, and reliance upon it definitely causes damage. When the volume of data multiplies, CSA scores-can’t decipher a meaning. They just generate more inaccuracies. Carriers are being coerced, threatened with livelihood – and no recourse exists in the system that shuts down a carrier or imposes an onorous penalty.

People  – not algorithms – still decipher meaning from events. CSA, for all its supposed magical abilities, is still not equal to a group of people who can sift through false indicators and bypass CSA’s wishful thinking.

CSA, with great fanfare, was simply a human-derived formula deliberately wielded to impress, rather than clarify the data it receives. In the insurance world, its created a flock of underwriters who are in the rubber stamp business, formulating opinions by proxy, and which opinions become self-reinforcing. When you create models from proxies, it’s easy for users to game it to their desires.

CSA suggests it relies on its efficiencies. It feeds off data that can be counted and measured. But not necessarily fairly or accurately because that data are incomplete qualities and subjective concepts that were built into the original algorithm, and now are essentially unassailable DOT “truths.” Fairness is not calculated; instead CSA calculates great unfairness and causes collateral damage. Many truckers are not singled out  as others are, either because of the overly zealous commercial enforcements efforts in known jurisdictions, or perhaps the size (small or large) of the operation doesn’t warrant the time needed to truly gauge a safe operation.

These primitive algorithms have a real, deleterious effect on motor carriers, shutting some down; causing others to pay exorbitant insurance premiums and fines. All based on incomplete, human-biased algorithms.   Knowledgeable persons can and do a much better job at determining safe operations and crash predictability. The scores should come with an explanation that they are entirely based on opinion, innuendo, influence groups, and are not to be taken literally, as there is no scientific basis to the conclusions.

Call for help. 602 900 1800

Who’s Exempt From Overtime – the Motor Carrier Exemption

The Fair Labor Standards Act (FLSA) provides that employers must pay non-exempt employees at “one and one-half times the regular rate” for time worked in excess of forty hours per week. 29 U.S.C. § 207(a)(1). The FLSA exempts “any employee with respect to whom the Secretary of Transportation has power to establish qualifications and maximum hours of service” under the Motor Carrier Act (MCA). 29 U.S.C. § 213(b)(1) (“the MCA Exemption”). Mr. Williams brought this action alleging that Central Transport LLC violated the FLSA’s overtime requirements when it employed him as a “switcher” at its St. Louis terminal. He tried to make the claim into a class action suit.

The question of how Williams spent his time working for Central Transport is a question of fact; the ultimate issue of whether his work activities exempted Central Transport from paying FLSA overtime is one of law.

In United States v. American Trucking Ass’ns, 310 U.S. 534, 553 (1940), the Supreme Court rejected the contention of that all employees of interstate motor carriers were exempt, concluding that the jurisdiction to regulate maximum hours “is limited to those employees whose activities affect the safety of [motor carrier] operation.” Later, the rule was expanded that motor carrier drivers, mechanics, loaders, and drivers helpers who “perform duties which affect the safety of operation… are therefore subject to the authority conferred [by the MCA] to prescribe qualifications and maximum hours of service.” MC-2, 28 M.C.C. 125, 126 (1941).

Mr. Williams was a “city loader” by title with Central Transport. However, he also did some minimal loading of trailers that affected the motor carrier’s safe interstate operation, including balancing loads and stacking cargo “high and tight.” The 8th Circuit Court of Appeals in a decision published July 28 2016 seems to have expanded a ruling from 1947 that even randomly assigned drivers, loaders, mechanics whose operations are quite minimally in interstate commerce (“3 or 4%”) are under the MCA exemption for overtime.

FMCSA Delays Unified Registration System

The Federal Motor Carrier Safety Administration has delayed the final implementation of its Unified Registration System until Jan. 14, 2017.

Dr. Kelly Regal, FMCSA associate administrator of research and information technology, said the agency is updating its IT systems and migrating existing data to new servers, which is causing the delay from the previous implementation date of Sept. 30.

Since December, new applicants for registration have been required to use the new streamlined online form. Existing carriers were supposed to begin using the system to do their biannual updates, name changes and transfers of authority on Sept. 30, but now won’t be able to use the system until the January 2017 implementation.

California Workers’ Comp – What Ails You?

In California, where reforms were implemented in 2013, medical trends are seen as stabilizing with fewer spine surgeries and a reduction in the use of opioids. According to the State this shows that many elements of the reform effort are working. Hmmm…not so sure. When compared with other states California has the highest rate and frequency of permanent and partial disability claims and has the highest Workers’ Comp premium rates in the country. Nothing to brag about there.

I used to think that injured workers got high quality care in the Comp system. I don’t know why I thought that. Maybe because some care was better than crawling home to a bandaid. However, the focus on quality of care  – with as much oversight as we see in the health care industry – could be a way to improve patient outcomes and limit rising premiums. But insurers often see Work Comp and its mandatory coverage as a loss leader in selling other, more profitable lines. It doesn’t appear that any insurer – despite their sales puffery to their customers – really look at clinical quality at all to determine provider quality and performance.

Literally, on the Work Comp side of healthcare, there are no standards. Just overburdened claims adjusters.

Tough to Make a Buck in Trucking 

Truckload linehaul rates in June were nearly the same as the month before, but they are still below levels from a year ago, while there seems to be no end to the recent drop in rates for intermodal shipments. I expect to see a big dropoff in capacity in fresh produce reefer business as the Food Safety regs come along. Current spot reefer rates of $2.00 a mile will go up no doubt, but it’s still not going to be an easy line to make a buck.

 

MEDICAL MARIJUANA AND THE TRANSPORTATION WORKPLACE

 

Colorado – crystal clear

Employers are allowed to regulate or prohibit the use, consumption, possession, transfer, display, transportation, sale or growing of marijuana in the workplace. Employers may also enact policies restricting the use of marijuana by employees. Simple. No need to drag in DOT issues. Clear-headed.

 

Nevada – oddly sensible, but it’s complicated by reasonable accommodation.

Nevada Revised Statutes 453A.800. Costs of medical use of marijuana is not required to be paid or reimbursed; medical use of marijuana not required to be allowed in workplace; medical needs of employee who engages in medical use of marijuana to be accommodated by employer in certain circumstances.  The provisions of this law do not: 1. Require an insurer, organization for managed care or any person or entity who provides coverage for a medical or health care service to pay for or reimburse a person for costs associated with the medical use of marijuana. 2. Require any employer to allow the medical use of marijuana in the workplace. 3. Except as otherwise provided in subsection 4, require an employer to modify the job or working conditions of a person who engages in the medical use of marijuana that are based upon the reasonable business purposes of the employer but the employer must attempt to make reasonable accommodations for the medical needs of an employee who engages in the medical use of marijuana if the employee holds a valid registry identification card, provided that such reasonable accommodation would not: (a) Pose a threat of harm or danger to persons or property or impose an undue hardship on the employer; or (b) Prohibit the employee from fulfilling any and all of his or her job responsibilities.

 

California – typical psychosis.

A tortured, psychotic path in California now suggests a concern when the employee explains positive test results by mentioning a medical condition that led to the marijuana use.

The employer can still choose not to hire the applicant, or to fire the employee.

But the decision would be the least risky when the employer applies a zero tolerance policy for marijuana use across the board, and when the position is safety-sensitive (like operating machinery or DOT safety related).  The decision is to be made only on the drug test results, and not on the underlying medical condition.

But, if an applicant for an office job fails a drug test due to off-duty medical marijuana treatment for cancer, the employer may decide to hire anyway.

Arizona – hazy – with a chance of general legalization.

The Arizona Medical Marijuana Act (“AMMA”) already prohibits employers from discriminating against individuals who are authorized to use medical marijuana. The principal exception to this prohibition applies if the hiring or retention of a medical marijuana user would cause the employer to lose a monetary or license-related federal benefit, e.g., hampering your FMCSA authority via workers in safety-related functions.

Employers may certainly test employees and applicants for marijuana and other controlled substances, but the AMMA protects authorized medical marijuana users testing positive for marijuana from adverse employment action based solely on the test results.

Arizona employers can discipline an employee with a positive test even if the employee is authorized to use medical marijuana, but only if there is additional objective evidence of possession or impairment during working hours. Where it gets even hazier is the evidence of workplace impairment: a workplace incident reflecting negligence, obvious signs of intoxication: decreased coordination, slurred speech, blood shot eyes, and/or empty bags of Cheetos (jk).

As some of us may know from Cheech and Chong movies, off-duty usage effects can linger into the workday. The fact that an employee’s off-duty use of medical marijuana may be protected by Arizona state law does not alter the fact that such use may have adverse results and occasionally may cause an injury. This clouds the challenge for employers: Hmmm…does evidence of workplace intoxication, despite the employee having a medical marijuana card mean the employee goes home until the fog clears? No clear answer. Legislature was too busy lining up to sue Feds for clarification of who gets to use which bathroom.

http://jfm-lawfirm.com

 

 

 

Uninsurable Contract Clauses

          We all receive draft contracts from our customers with clauses that are absolutely or mostly uninsurable and often unenforceable – and many are so often throwaways. Some terms to avoid and suggested alternatives:

  • You shall defend, indemnify, and hold harmless [Customer], its officers, directors and employees from and against any and all claims, damages, causes of action, or allegations in any way arising out of or relating to Your work on the project. Your liability policies may only provide coverage, including a legal defense, for your negligence. I can count on one hand the number of times insurers have willingly picked up a defense that’s this broad.

 

  • You shall perform the services in accordance with the highest standard of care. This proposed language changes the coverage standard—it essentially requires perfect performance. Insurers are not in the business of insuring against a sure thing. Use alternative language.

 

  • You shall name [Customer] as an additional insured on all policies. Not all policies allow this – Work Comp, professional e&o, etcetera have exclusions for several reasons, including insured vs. insured battles.

 

  • You warrant that the [service, project, etc.]will comply with all laws, codes and regulations. Much more palatable: You shall make reasonable efforts to comply with applicable laws, codes, and regulations.

 

  • Then there’s the ominous clause: prevailing party shall be awarded its attorneys’ fees and costs. Delete the clause. There are no great alternatives here. Are “we” really going to go to the mattresses all the way to verdict? Negative. We want to fix anything certainly before suit and very little gets to verdict. What does “prevailing” mean in that regard?

 

  • You shall inspect the Work to ensure that it is in strict accordance with the contract documents. To the extent that this contractual language amounts to a guarantee of the Work, it is very possibly uninsurable. There is alternative language.
  • You shall report all safety hazards at the job site to Us. Sounds innocent enough, but by agreeing to this language, you are possibly taking responsibility for a duty that belongs to the Owner to protect visitors or its own employees.

 

When negotiating contracts, the argument that a clause is “not fair” may be of limited value, kinda like the playground arguments that usually fell on deaf ears. “It’s my ball. If you want to play, you gonna play by my rules.” 

It’s much more effective to point out that the Customer has as much interest as you do in having liability insurance coverage for the scope of work under the contract. That’s a valid argument and that’s easy for me to say, but sometimes difficult to get across. Many large and small legal departments review contracts by demanding these uninsurable / unenforceable terms. Rational, measured reasoning generally works out some of these problems.

Temperature controlled Food Transportation

The rule pertaining to transportation under the Food Safety Modernization Act – FSMA – is called the Sanitary Food Transportation Act – SFTA. Effective date is April 6 2017.

  • The final rule applies to shippers, receivers, loaders, and carriers who transport food in the United States by motor or rail vehicle, whether or not the food is offered for or enters interstate commerce. An entity is subject to the regulations in several ways – a shipper can also be a loader; a freight broker can be a shipper. Contractual shifting of responsibilities is allowed – be aware of what you’re signing.
    • Transportation regulations apply to:
      • Foods transported in bulk, e.g., juice, animal feed
      • Packaged foods not fully enclosed by a container, fresh produce
      • Foods that require temperature control for safety

      Key requirements:

      • Transportation operations must be conducted to prevent food from becoming unsafe during transport, including: assuring proper temperature controls; preventing contamination by contact with non-food items or raw food, or allergens. If a shipper, loader, broker, receiver, or carrier becomes aware of a possible material failure of temperature control or other condition that may render the food unsafe during transportation, the food shall not be sold or otherwise distributed. A shipper must develop and implement written procedures – which will then, of course, be contractually transferred to brokers and motor carriers – to assure vehicles and equipment are in appropriate sanitary condition; that previous cargo does not make food unsafe; that food requiring temperature control is transported under adequate temperature control (designation of required temps on the Load Sheet and proof of temperature control at delivery).While the enforcement and effective dates are still a year out, most if not all requirements will start to be enforced by shippers. I see a number of companies gearing up and using compliance as a selling point. You can expect to see language in contracts almost immediately.
      • Small reefer carriers are most likely the first affected. One or two losses in this new environment (of very conscious receivers) will hurt too much. Cargo insurance for reefer loads has too many unscrupulous exceptions to coverage. Freight brokers will see more claims for which they will be responsible – either by contract or contingent to the absence of underlying carrier coverage.
      • The burden will fall onto the motor carrier (and by extension, the broker) to prove – via USDA inspection – that the temperature deviation or other condition did not render the food unsafe.
      • Brokers will look more often to contingent cargo insurance
      • Carriers should buy better cargo coverage; brokers must monitor those policies.

If you own or manage a transportation company, the URS, or Unified Registration System, is about to become reality for you.

It’s the FMCSA’s new, “streamlined” registration system that will improve our collective looks, smooth wrinkles, and do away with paperwork.

It requires regulated transport businesses to register online. It eliminates the MC number, FF or MX number.

As of September 30th new registrants will use this system to obtain a DOT number and register operating authority. Established companies will thereafter edit or update registrations online.

The URS is a single, online federal information system that transport businesses use to register and update their information with the Federal Motor Carrier Safety Administration.

Don’t confuse it with that other registration system, UCR. The Unified Carrier Registration system is not part of the FMCSA; instead, it’s a federally mandated, annual state-administered registration program that exists to collect funds from trucking companies and give funds back to the states to support DOT officers’ ability to write violations and give drivers costly citations that often have nothing to do with safety.

The URS applies to all interstate motor carriers, including private and for-hire passenger and property motor carriers, freight forwarders, brokers, intermodal equipment providers (IEPs), hazardous materials safety permit (HMSP) applicants/holders, and cargo tank manufacturing and repair facilities under FMCSA’s jurisdiction. Mexican-domiciled carriers conducting long-haul, non-cabotage operations into the U.S. are exempt.

Again, the URS will require online registration for all filers, will use only your DOT number as identifier, will have a new fee schedule, and will maintain your records of financial responsibility and statutory process agency…umm, just like it does now, only…umm…better.

Applicants will begin using URS for registrations and changes starting Sept. 30. If you’re already registered with the FMCSA “the old way,” you will have until December 31st to start using the new system – but only as you update biennially or edit your registration.

There will undoubtedly be some changes, so read the FAQs and website updates. I wouldn’t work up a sweat over all of this just yet, though.


Oh, by the way, the Governor of Arizona did sign the independent contractor bill, so, as said previously, it’s effective August 6th.  Arizona-based carriers should review, negotiate, and rewrite their ICOAs with their OOs. And those interstate entities domiciled elsewhere, but who now wish to be Arizona-based carriers – should consider re-domiciling and changing operations a bit to take advantage of  the new law.

 

Anticipating the Governor’s signature on HB2114 this week, Arizona should have a very strong law defining independent contractors. To paraphrase:

ANY EMPLOYING UNIT CONTRACTING WITH AN INDEPENDENT CONTRACTOR MAY PROVE THE EXISTENCE OF AN INDEPENDENT CONTRACTOR RELATIONSHIP FOR THE PURPOSES OF THIS TITLE BY THE INDEPENDENT CONTRACTOR EXECUTING A DECLARATION OF INDEPENDENT BUSINESS STATUS, and by the contractor declaring the following:

… THE CONTRACTOR is operating an independent business and providing services as an independent contractor; the contractor acknowledges the absence of an employment relationship without any claim to UI benefits or other rights arising from an employment relationships; that the contracting party is not responsible to withhold any tax; the contractor is responsible for his or her tax obligations, for obtaining licensing, registrations, or other authorizations that would be necessary for rendering the contracted services.

There will be six of ten categories that the contractor acknowledges as existing in the relationship, most of which can  – or already are – in practice with our transport partners.

Perhaps the best benefit for those of us in the trenches who spend time educating courts and state agencies to the distinction between independent contractors and company employees is the explanation in the new law that “any supervision or control exercised by the employing unit to comply with any statute, rule, or code adopted by the federal government, this state …may not be considered for the purposes of determining the independent contractor or employment status of any relationship…”

This will eliminate the hang-up that judges and agencies see as indicia of employment control. Since all motor carriers and freight brokers – to some degree – are obligated to enforce drivers to adhere to FMCSR regulations for hours of service, safe operations on the road, off-duty, and in pre-trip operations, as well as in communications with dispatch personnel, customers and general safe and efficient routing, this phrase eliminates that argument.

I would recommend that each of us review and amend – slightly, but quite importantly – our ICOAs with our owner-operators so as to comply with this law. Thereafter I expect a slight learning curve in educating state agencies, Work Comp insurance underwriters, courts and, not the least, negotiating with our contractors.

But this new law – expected to be signed by Governor Ducey this week, and effective August 6th – will unburden Arizona businesses from the vestige of impossible compliance with conflicting federal and state laws, and some costly litigation efforts.

Perhaps another benefit, which was envisioned bringing this Bill to fruition, is making Arizona more attractive to businesses across the West, particularly California companies escaping burdensome – and conflicting – regulations and insurance rates.

Re-domestication efforts can be considered. There are a few boxes to check off as companies consider this, and the benefits and detriments should be considered individually.

 

Maybe at the top of annoyances coming out of the FMCSA is “Beyond Compliance,” the Agency’s false logic attempt to make trucking “safer” by rewarding motor carriers that buy equipment purportedly leading to better CSA scores. It would be nice to see the empirical data of enhanced safety stemming from the latest doodads, rather than just regulatory guessing.

Using the input received and the Congressional direction in the FAST Act, the notice published in the Federal Register provides details on FMCSA’s proposal and processes to allow “recognition” ( I’m thinking this doesn’t mean a gold star; instead probably some kind of bonus chit to help the carrier bypass inspections or audits) for a motor carrier that:

  1. installs advanced safety equipment; (gee, at a implementation price when shippers are balking at 2% rate increases?)
  2. uses enhanced driver fitness measures; (are we talking sleep apnea testing? If so, another waste of carrier resources and time. Measure neck size, much more reliable; or hire skinny drivers).
  3. adopts fleet safety management tools, technologies, and programs; (robots and algorithms replacing fleet Safety Management?) or
  4. satisfies other standards determined appropriate by the FMCSA. (maybe a realistic new driver training program with a real backing test?)

See more at: https://www.fmcsa.dot.gov/newsroom/fmcsa-seeks-input-%E2%80%9Cbeyond-compliance%E2%80%9D-program#sthash.626nkom0.dpuf

For another prime example of regulatory annoyance, look at the mandate for ELDs. Not one of us would dispute the fact that drivers can shave miles on ELDs just as they could with paper logs.  Even I could do it (not that I would ever).

Then there’s URS. As of September 30th, the Agency will use the singular URS registration number to make our world simpler. But it will cost hours in learning and complying with the new system. The old system and paper filings will no longer be allowed because the Agency believes the Unified Registration System will cut down on phantom registrations by unsafe carriers – all six of them. Gee, no one could ever figure a way to register around the URS if one were so inclined.

Lest we forget the new Food Safety Modernization Act, a safeguard work-in-progress for a non-existent problem, in a year from now shippers, consignees, warehouses, and freight brokers will be looking to one another for assurances and pointing fingers that their part in the logistics system was not the cause of unsanitary or spoiled food conditions.

In the words of the FDA, “In keeping with the overarching food safety goal of FSMA, this rule now solely focuses on practices that create safety risks, rather than on those that affect its quality but don’t necessarily make it dangerous to consume.” Hmm, a fix for a problem that doesn’t necessarily exist.

“Loaders” have been added as covered parties under the FSMA. According to the Act, a loader is a person who physically loads food onto a motor or rail vehicle (rail carriers are exempted from the rule entirely; motor carriers are not. Certainly, that has nothing to do with the strength of the rail lobby).

  • Before loading a food not completely enclosed by a container (oh, you mean those sea-tossed containers of produce that were sitting next to containers leaking toxic battery acid?) , the loader must determine that the transportation equipment is in appropriate sanitary condition.
  • Before loading a food requiring temperature control, the loader must determine that each mechanically refrigerated cold storage compartment is adequately prepared for refrigerated transportation, including precooling, if necessary.

Seriously, who is a loader? A Beneficial Cargo Owner, a Shipper, an Expeditor, a Broker, Warehouse, a Lumper? Who checks the trailer – and who’s qualified to check the trailer – to determine adequate preparation?

Oddly, carriers and brokers are supposed to look to the shippers for guidance in compliance. But the onus will undoubtedly still fall on carriers and brokers.

And the learned outsiders pondering the new law provide a worthless solution: Carriers are going to have to be given notice of what the transport protocols are in order to make “decisions” about whether they want to move the loads or not.

Sure.

A broker and/or carrier is going to turn down loads because shippers don’t have protocols. It’s presently tough enough for reefer carriers to make a buck,  to be turned away at delivery, and without USDA inspection, or because the carrier didn’t show up at the convenience of the consignee, and the truck is left wandering around while shippers, brokers and carriers fight about responsibility. And it’s most often the carrier that is blamed – wrongly – and then the carrier’s insurer declines the claim for little or no reason. The FSMA is going to fix that?

Equipment must be clean and suitable for safe temperatures. No one has said what “clean” is or how often a trailer needs a washout, but records of prior loads must be kept. For criminal prosecution. As with the ELD mandate and Beyond Compliance, maybe only the better-capitalized brokers and carriers will have an easier time convincing shippers to follow protocols and force them to load those carriers with real cargo coverage that actually covers reefer loads. Ok, on second thought, no they won’t.

Then there’s the proposed Safety Fitness Determination program, a kind of pass / fail system that is to review tens of thousands of carriers based on the methodology of CSA scoring. I can attest that roadside stops are generating non-existent CSA violations because of: 1) DOT officers don’t really understand the regs (“Gee, what’s the 100 air mile exemption again? Don’t drivers have to keep logs with them?” – Ah, no. Or, this one: 2)  “You’ve crossed state lines. The 100 air mile exemption no longer applies.” Ah, yes it does). Or, this one’s popular 3) “Hmmm, your truck looks dirty, so these air lines must be chafing.”

And maybe the grandest incursions are by states into interstate commerce. It’s a tie:

  1. “Owner-operators are cheated by motor carriers. They are paid so little it’s like indentured servitude.” Actually, a recent study showed OOs had almost 30% greater net income than company drivers. Presumably these small business owners pay their share of taxes. But even with proof of their State and Federal returns evidencing that, judges decide they’re really just employees.
  2. FLSA wage and hour claims under the incorrect assumption that intra-state movements of cargo is not interstate commerce and thus not subject to the exemption in the Motor Carrier Act. Distilled down, the applicability of this MCA exemption depends centrally on whether the employee was engaged in interstate commerce. A driver-employee engages in interstate commerce if his delivery “forms a part of a “practical continuity of movement” across state lines from the point of origin to the point of destination, an understanding of the law that harkens back to a 1943 Supreme Court case, Walling v. Jacksonville Paper Co., 317 U.S. 564, 568 (1943).

I suppose ranting isn’t productive.

But instead of fixing non-existent problems, or developing a program of brownie points to skip real safety problems, or weeding out the very few phantom carriers, or owning up to the realization that neck size is a better indicator of fatigue, or that 24 hour sleep apnea tests are driven by the “sleep apnea industry,” why not spend money on fixing the traffic choke points and infrastructure problems that cause drivers to run over hours or become fatigued or use discretion to avoid the California break time rules, which truly affect safety and also delay loads? Wouldn’t that improve our transport system, decrease costs, and increase productivity?

The saving grace of all this is that it’s put my kids through college and I’m still off the streets.

 

 

The European Union has long had a type of worker with both the characteristics of employees blended with characteristics of what we in the U.S. call independent contractors. In the latest Uber settlement, the company seems to have played that Euro-card and compromised with lead plaintiffs in two class action suits, one in Northern California and the other in Massachusetts.

This outcome may suggest to us in the transport industry a renewed interest in happy mediums, that is, blended workers. The European model I studied and wrote about last summer is a bit more – okay, a lot more – closely defined and evolved than what Uber and the class members’ lead counsel proposes. If you’ll recall, the EU model of ICs in trucking grants some additional rights of employment despite having contracts and the real freedom to drive for other entities. We needn’t get into all that detail right now because we sure don’t want to sound socialistic again, but the time is probably ripe for us to re-write our ICOAs with a view towards mirroring both the EU model and the EU-lite model that Uber has smartly proposed in its settlement.

We should remember the main reason – or one of them anyway – that there’s opposition to independent contractor work: the fear of losing tax revenue. Real or not, the perception is that Owner-Operators in the transport industry are not self-reporting income or paying mandatory taxes. The EU model takes care of that, but we’re not ready for that just yet. Think of all the ALJs, State, and Federal Court judges whose heads would spin trying to grasp our industry’s regulatory quirks combined with the EU model.

That said, however, the time seems right to continue our efforts to adjust laws of contracting (see Arizona’s business’ efforts now circulating the State House) and also to gingerly approach our OO contracts with revisions that reflect these nascent terms from the EU and Uber’s proposed settlement.