As mentioned on page 16 in this issue of Land Line, OOIDA has recently filed two additional lawsuits against motor carriers. This brings to 12 the total number of legal actions we currently have underway against motor carriers involving federal leasing regulations. In addition to the 12 actions currently working their way through the court system, we also have approximately half a dozen more carriers under active review as potential candidates for legal actions over violations of the rules.
Several of these cases have been pending for a number of years now and have not yet come before a jury to be tried on their merits. In some cases, this is a result of a very slow judicial system but mostly it is a result of legal maneuvering by some very good opposing attorneys to test every aspect of the law. While this has caused some very frustrating delays in actually getting to the merits of the cases, on the positive side, our significant victories on each of these issues have succeeded in establishing legal precedents that will carry over and add strength and speed to owner-operator positions on other pending and future legal actions.
For example, in our case against New Prime Inc. and their subsidiary Success Leasing Inc., Prime’s attorneys challenged our contention that the “private right of action” provision allowed legal actions by private individuals to enforce the federal leasing regulations. Their contention was that only DOT could enforce the regulations. Prime won in the district court, but in the Court of Appeals we succeeded in overturning that court’s decision. Prime appealed all the way to the U.S. Supreme Court, who refused to hear their case thereby affirming the appellate court’s decision in our favor. This precedent has a direct effect on all current and future lawsuits involving the federal leasing regulations.
Another important precedent was established last November when the federal judge in the Ledar case ordered Ledar to cease operations under nonconforming lease contracts with owner-operators. The impact of this decision, I’m sure, put many motor carrier attorneys to work reviewing lease contracts. Those carriers, who haven’t yet reviewed their lease contracts to assure they are in compliance with the regulations, may wish to do so because this precedent gives us another powerful tool to enforce compliance.
The best news is most of the legal maneuvering unrelated to the merits of these cases is now over. Most of them are now scheduled or near the process of being scheduled for trial before juries on the important issues we raised in the first place. This is where the issues that most directly affect you will be decided.
This brings me to the real point I want to make in this editorial. None of the carrier executives who run these companies consider themselves to be the bad guys. For the most part, they probably just think they are doing what they have to do to get by and survive in a very tough competitive business. In some cases they may be right, but in most cases I strongly disagree because in my view, those people who use and abuse others for personal gain simply because they have the power to do so are really the lowest form of humanity. They deserve no more consideration or pity than they afford to their victims. Their low standard of business ethics and morality impacts the entire industry by lowering the bar of conduct for everyone including those who would otherwise not even consider the type of conduct that professional truckers (drivers and owner-operators) are now subjected to as the industry norm.
Consider, for example, just one area of abuse we now find in many leasing arrangements – the issue of insurance purchased through the motor carrier. Some carriers require that insurance coverage, such as bobtail deadhead, workers’ compensation or occupational accident, be purchased through the company. Others say, “You can purchase coverage elsewhere if it meets our standards,” then they set unreasonable standards that are difficult or impossible to meet leaving no alternative but to purchase through the company store.
We have found examples where owner-operators were being charged for insurance coverage that didn’t even exist. Other motor carriers added substantial overcharges to the actual insurance premiums generating hundreds of thousands of dollars in clear profits for themselves. One company that was operating half owner-operators and half company trucks marked up insurance charges so high on physical damage insurance sold to owner-operators that the owner-operators ended up paying the company’s entire insurance bill. Our calculations show the owner-operators even covered the company’s $500,000 deductible.
Many owner-operators will buy insurance coverage through the motor carrier for convenience sake (just one more deduction from that settlement check) with no knowledge that the carrier is profiting to the tune of hundreds of thousands (and in some cases millions) of dollars from these schemes. While making a profit is not illegal, failure to disclose those overcharges in the lease contract is. Even more important, consider the implications of those carriers generating their profits from the sale of insurance, lease-purchase programs, fuel card rebates and other schemes and the effect this has on the rates the company sets for hauling freight. Is there any incentive for a carrier to set adequate rates if they are generating their profits elsewhere?
Think also of the impact this has on the competitive structure of the entire industry. How do legitimate companies compete with fair rates against someone who doesn’t need to make a profit from the rates they quote to the shipper? It’s not a coincidence that truckload freight rates haven’t increased in 20 years.
What you individually can do to address this issue is first know the regulatory requirements for motor carrier lease agreements. Second, read your lease carefully and insist on a contract that complies with the regulations. Third, if it’s not in compliance and the carrier refuses to make the necessary changes say “adios.” OOIDA’s Business Services department will be pleased to assist in reviewing your lease contract to determine if it complies with the regulations. They also will be happy to provide you with a copy of the leasing rules to assist you in becoming better informed. Knowledge is power.
One of the most important parts of the leasing rules prohibits the carrier from requiring you to rent, lease or purchase any products or services from the company as a condition of leasing on. If you decide to rent, lease or purchase products or services from the carrier, they are required to furnish you with a complete accounting of any deductions from your compensation for those items. If you purchase insurance products through the company, they are required to furnish you a certificate of coverage and, if you request it, a copy of the insurance policy. You should always demand a copy of the policy because this is the only way you can determine if you actually have coverage and what that coverage consists of. If you are insured through the carrier’s fleet policy and they have a large deductible you should understand that, in effect, you are actually insured by the carrier. Since they are not an insurance company, you are not protected by any of the state insurance laws and that carrier may be illegally operating as an insurer. But most importantly, if the carrier is generating their profits from these types of schemes it most definitely will reduce their incentive to set adequate hauling rates.
The bottom line is that if we are successful in these lawsuits, the benefits will accrue not only to those who were directly affected through refund of money improperly or illegally taken from them, but to the entire industry including company drivers, owner-operators and legitimate motor carriers by helping to again raise the bar of ethical business conduct.