ANALYSIS: Logic and facts aside, FMCSA pushes ahead to up insurance requirements

By Jami Jones, Land Line managing editor | Wednesday, November 05, 2014

In what appears to be a fast-tracked move by the Federal Motor Carrier Safety Administration, a pre-rule seeking to increase the required insurance motor carriers cleared the White House Office of Management and Budget late Monday, Nov. 3.

FMCSA submitted the pre-rule to OMB on Oct. 1. Originally, the agency estimated the pre-rule would be under review for only 10 days at OMB – a virtually unprecedented short time frame. Typically reviews last 30 to 90 days. Some regulations have been at OMB for upwards of a year.

The OMB released the rule back to FMCSA on Nov. 3. Tracking back to the agency’s original schedule, the agency predicted the pre-rule would be published in the Federal Register within 10 days of release and a 60-day comment period was planned.

How did it all get started?
In what amounts to a one-two punch to the gut of small to mid-sized motor carriers, back in 2012 a group of mega fleets began lobbying Congress and the agency to increase the required amount of insurance for all motor carriers.

Motor carriers Maverick Transportation, Knight Transportation, J.B. Hunt, Dupre Logistics, Boyle Transportation, Schneider and Fikes Truck Line, under the umbrella of The Trucking Alliance launched the assault on the rest of the industry. (Currently, Schneider is no longer listed as part of the alliance.)

They claim that the current required insurance isn’t enough to cover claims in the industry.

Enter Rep. Matthew Cartwright, D-Pa. The then freshman lawmaker introduced a bill in July 2013, less than seven months after taking office, that sought to increase the required insurance on motor carriers from the current $750,000 to $4.2 million per truck.

Cartwright’s motives can quickly be called into question when considering his career before entering politics.

Cartwright was a licensed attorney in the state of Pennsylvania. Before being elected to Congress and taking office in January, he was part owner in a law firm with his in-laws.

His bio on justice.org, the homepage of the trial lawyers lobbying group, explains Cartwright’s career like this:

“Matthew A. Cartwright concentrates his practice in interstate trucking, professional negligence, and business litigation. … As a lawyer representing plaintiffs, Mr. Cartwright has more reported cases than any other practicing lawyer in northeastern Pennsylvania.”

While Cartwright’s attorney status is now listed as “inactive” he does remain affiliated to the legal profession. Cartwright is a partner at Munley, Munley & Cartwright, P.C. in Plains, Pa., and is married to Marion Munley, another partner in the firm. While he no longer receives compensation from the firm, he does participate in the profit-sharing plan of the firm, according to 2013 financial disclosures filed with the House of Representatives.

The bill was referred to the Subcommittee on Highways and Transit by the House Transportation and Infrastructure Committee. The subcommittee has not taken any action on the bill since it was referred to the committee on July 19, 2013.

Not deterred
Despite the fact that Cartwright’s bill appears to be a non-starter, the mega carrier group turned their sights on FMCSA.

A study of the current required insurance was mandated by Congress, and FMCSA moved forward on that study. The agency released that report in April. The report, which was heavily criticized by the leadership of the Owner-Operator Independent Drivers Association, was based on a study by the Volpe Foundation.

The report confirms that the number of crashes costing more than the current $750,000 minimum liability insurance for interstate operations is very small, a stance that OOIDA has taken since the first mention of increasing insurance minimums was raised.

OOIDA Director of Government Affairs Ryan Bowley pointed out when the study was released that a footnote to the study used as the basis for the report says that approximately 74 crashes per year occur that are above the minimum level. However, the study conducted by Volpe did not consider fault in the crashes studied.

Bowley said that between 75 and 85 percent of crashes – depending on what research you use – are the fault of the passenger car driver. That would drive the number of truck driver responsible crashes to fewer than 20.

In spite of a study that shows that less than 0.2 percent of all crashes exceed the required insurance amounts, FMCSA continued to plod forward.

The agency had also established a subcommittee through the Motor Carrier Safety Advisory Committee. The first presentation to the committee was made by attorneys and those invested in increasing the amount, according to Todd Spencer, OOIDA executive vice president and member of MCSAC.

The stacking of the deck continued.

Pushback engaged
In June, the Owner-Operator Independent Drivers Association supported an amendment introduced by Rep. Steve Daines R-Mont., and co-sponsored by Rep. Sam Graves, R-Mo., seeking to prohibit the Federal Motor Carrier Safety Administration from initiating a rulemaking that would increase the minimum required insurance on trucks in the industry.

The full House voted 214-212 on the amendment, which added the amendment to the House’s version of the Transportation, Housing and Urban Development appropriations bill – dubbed the THUD bill. The bill passed the House later the same day with the amendment intact.

The Senate has not passed its version of the THUD bill.

The appropriations bill is a must pass for Congress. It is one of 12 bills that fund the federal government each year. When the appropriations bills fail to pass, the government faces a shutdown. Generally, when Congress is running behind on passing the approps bills by Oct. 1 of each year, all or some of the bills are rolled into a giant bill called an omnibus bill and passed.

OOIDA continues to encourage members to support the Daines-Graves amendment shutting down FMCSA’s actions toward increasing insurance requirements. The Association is also calling on its membership to tell lawmakers to include similar language in the longer-term highway bill, which Congress will also have to pass in the future.

Pushback on pre-rule
The 60-day comment period on FMCSA’s pre-rule presents truckers an opportunity to inject real-world realities into the misguided proposal.

First, the cost. Increasing required insurance levels to anything above the industry standard $1 million (required by most shippers, not FMCSA) will undoubtedly raise premiums. Start considering Cartwright’s proposed $4.2 million, and you’re looking at a 500 percent increase. What would that mean for your premiums? No one knows. How many insurance companies will take on that kind of risk? The ones that do will certainly charge handsomely.

The mega fleets who are all for this? The majority are self-insured. They don’t/won’t be subject to a mandated increase the way things stand. It certainly presents itself as an assault on small-business motor carriers’ bottom lines.

Second, safety. FMCSA’s stated primary objective is improving highway safety and reducing large truck crashes. The research shows no correlation in reducing truck crashes by increasing required insurance. In fact the opposite could happen as small operators are squeezed out with big fleets expanding with new, inexperienced drivers.

Third, no guarantees. Even though lawyers will tout $8 million judgments, no amount of insurance will prevent those types of jury awards or settlements. Insurance is meant to protect a company’s assets and worth. As long as a company is worth more than the insurance carried, lawsuits are almost a certainty after any incident.

OOIDA encourages these realities to be submitted to FMCSA through the comment period. Comments will be accepted at regulations.gov once the pre-rule is published in the Federal Register.

Copyright © OOIDA

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