“Backfield in motion, yeah,
I'm gonna have to penalize you
Backfield in motion, baby,
You know that's against the rules.
Off side and holdin, yeah,
You ought a be ashamed of yourself baby” ~ Mel & Tim 1969

You have to do a lot of things right everyday to make money in the tight margin business of trucking. You only have to do one thing wrong to get sacked in the backfield and carried out on a stretcher. As the leader of a company that provides for your family as well as many others and their families, you need look above the day to day blocking and tackling and take the view of the defensive coordinator. Peer out at things that could break the game wide open for the other side.

Protect your blindside and manage risks that are not planned, budgeted, nor covered by insurance.

Insurance.

Liability Insurance. We are uninsured for our deductible and anything over the limit of our insurance. If you carry $1 million in liability insurance, then you are uninsured for any verdict that comes in over $1 million. I just read where a large carrier paid over $40 million on a settlement in a case where one of its trucks rear ended a passenger vehicle, killing the mother, brain damaging one son and causing injury to the other. The average pay out on a fatality accident is $4 million. A case with permanent brain damage and life-time care will likely be in the $10 to 12 million ranges. Odds are that some wrecks will involve more than one person. If you think about how many miles your fleet runs every year, this is a question of “when” not “if.” Due to the size and weight of tractor trailers, a collision with a passenger vehicle often causes severe injuries.

Even though collisions are the passenger vehicle’s fault in the majority of cases, jury sympathy often lies with the injured person. If you carry the minimum of insurance, someday you will be in mediation where the demand from the plaintiff exceeds your limits. If the plaintiff claims punitive damages, he will be able to obtain your financial statements. Do you want to take a chance with the jury?

If you are carrying the standard $1 million in liability insurance, you are putting your company at risk with each mile you run. $5 million is expensive, you say? Yes, that is because insurance companies know that this layer has a high possibility of being penetrated. After $5 million, umbrella coverage becomes more affordable. You have your assets broken into separate companies? Good, but consult with your attorney to make sure all transactions between the companies are “arms length” and all documentation is properly done. There are legal methods to get around the corporate shield.

Rates you charge should be sufficient for your company to make a reasonable rate of return on invested capital and risk. This is a business that has a high degree of risk. You shouldn’t have to “roll the dice” everyday. Adequate insurance limits are a necessary part of your cost structure. A rate is insufficient if you can’t afford enough insurance to protect yourself and still make a reasonable profit.

Cargo Insurance. If you have the standard $100,000 in cargo insurance, and don’t know the value of the cargo you are transporting, then your company is at risk to pay amounts not covered by insurance. When accepting loads on the “spot market,” the risk increases. Carmack Amendment liability is not limited and the burdens of proof greatly favor the shipper. With each contract you enter, determine the value of the highest value cargo that will be transported. Limit your cargo claim liability to that amount in the contract. Some contracts provide for consequential damages and attorneys’ fees. These are beyond Carmack liability should be stricken. If you find the value of the cargo exceeds your limits, then purchase a rider with higher limits for that customer, and include this in your costs when setting a rate. Other costs for high value cargo include the additional security measures, monitoring and risk involved in the business.

Employer’s Practices Liability Insurance. There are umpteen ways you can be sued by current or former employees who can make a case for large damages. These cases often involve punitive damages and always attorneys’ fees. The doctrine of “employment at will” has so many exceptions that it has lost its original meaning. Recently the EEOC sued a large trucking company under ADA for refusing to put an admitted alcoholic behind the wheel. Another was sued by the EEOC for refusing to have trainers placed with a trainee of a different gender. The many exceptions to the “at will” doctrine include race, gender, nationality, religious discrimination, sexual harassment, sexual preference discrimination, Family Medical Leave Act claims, wrongful discharge for work comp applicants, union activity and whistle blowers, disability, old age (over 40). Many companies neglect to purchase insurance to protect them. This is a big gamble in today’s “victim entitlement” society.

Indemnification Agreements. All too often, shipper contracts contain a provision which provides that you will “defend and indemnify” the shipper for any loss or claim “in connection with or arising out of the transportation services.” In essence, when you agree to this, you have agreed to become an insurance company without policy limits.

Imagine that your driver is required to be on a dock and is hurt badly by the customer’s forklift driver. Of course, the driver can file a work comp claim against you. Work comp does not depend on fault. The trade off for you is that the amounts are limited and the driver can’t sue you for negligently failing to provide a safe place to work, in which case damages would not be limited. However, the driver can sue anyone else in the world that negligently hurt him. Imagine your distress to find that you paid work comp, the driver sued the shipper and now you are the shipper’s insurance company. They demand you pay their attorney and the unlimited damages. About half the states have declared it against public policy to require someone to defend and indemnify for their own negligence, but many haven’t.

A related issue is a “waiver of subrogation” which many contracts require. This is a separate rider which must be purchased from your work comp carrier. Your carrier will often subrogate work comp claims they have paid against the negligent party. This lowers your loss experience used to set premiums. It also deters 3rd party claims because the driver who sues the third party will have the comp claim amount deducted from his recovery making it less profitable.

Business Continuity Planning. Trucking depends on sophisticated computer and communications systems. This year it is not hard to imagine your business being shutdown due to natural disasters such as tornados, fire, flood, earthquakes, power outage, hurricanes or other disasters. Statistics show that most business cannot survive being shutdown even for a few days. You can purchase business continuity insurance and can develop business continuity plans. Where will your people work if your terminal is destroyed? What phones will they use? How do I get computers and power back up and running?

Embezzlement. It is unfortunately all too common that the viability of a business is threatened by those who control money within the business. Work with your accountant to develop cross checks to deter such activity or catch it at the earliest possible date.

Misclassification. In my previous blog I discussed this at length. If you have owner operators, there is a risk that someone could claim that they are employees, not independent contractors. Unexpected claims could involve back taxes, interest and penalties, unionization, claims for benefits, work comp premiums, unemployment taxes and other unplanned, uninsured, unbudgeted liabilities. If you use owner operators, consultation with counsel is a necessary expenditure.

Lease Claims. Many companies have found themselves sued in class action lawsuits by owner operators or owner operator associations for violation of the leasing regulations, 49 CFR 376. If you use owner operators, make sure a motor carrier attorney reviews your lease documents at least annually and audit your company to make sure your practices conform to the lease.

Unfortunately, I don’t think this list is exhaustive.

Pro football is like nuclear warfare. There are no winners, only survivors.
Frank Gifford