...what does it mean and how does it impact Your Business and your Independent Contractors?

As in any business model, Motor Carriers (MC) utilizing Independent Contractors (IC) enjoy certain benefits while also assuming additional
risks. One such risk is the potential "uninsured" exposure of the IC while not in a "business use" capacity for the Motor Carrier.

The MC's Trucking or Commercial Auto Liability (AL) insurance policy provides coverage for the motor carriers' owned units as well as any hired
tractors and trailer during their time of hire. Coverage ceases for an Independent Contractor once they are no longer in a "business use" capacity for the Motor Carrier. The concern is the IC continues to utilize their vehicle while displaying the MC placard and may not have other insurance available. Many times, the "deep" pocket of the MC is called upon to make the injured 3^rd party whole.

Three products have been developed to address the coverage gap for the Independent Contractor.

Non-trucking Liability:

• Cost: Low ($25-$35 monthly)
• Protection to Motor Carriers Auto Liability: Low
• Market Availability: High

Non-Trucking Liability provides protection for "personal use" by utilizing a Trucking or Commercial Auto Liability policy form and attaching a "business use" exclusion. The difficulty arises in that the definition of "business use" is not typically defined in the policy rather it is derived directly from various state and federal court decisions interpreting this phrase.

Unfortunately, "business use" has been interpreted very broadly and extends beyond "dispatch". Following are some typical scenarios that would not be covered by the Non-trucking policy due to the broad interpretation of the "business use" exclusion:

• IC drops load and his heading home to include a trip deviation to the grocery store (courts determine IC is owed a trip home)
• IC takes vehicle to garage on weekend for maintenance (courts determine IC is maintaining unit in accordance with MC lease requirements)
• IC is out of town, between loads. He goes to movie theatre. (courts determine IC is out of town at direction of MC)

Example of Coverage: IC utilizes their truck on personal time to run to grocery store and hits another vehicle.

Bobtail Liability:

• Cost: Medium ($40-$55 monthly)
• Protection to Motor Carriers Auto Liability: Medium
• Market Availability: Low

Many in the transportation industry use the same terminology for Bobtail Liability and Non Trucking Liability, when actually they are quite
different. Bobtail defines coverage as "any time the trailer is unattached" whether or not the IC has been dispatched by the motor carrier.

Example of Coverage:

• IC drops load and bobtails to pick up next load.
• IC drops load at end of day and bobtails homes.

Be aware the Bobtail Policy will not respond anytime a trailer is attached, even if truly in a personal situation, e.g.:

• IC brings homes an empty trailer and runs to the store on the weekend.
• IC uses his tractor to a move a mobile home on weekend.
• IC assists a friend in moving by pulling trailer with household goods

Unladen Liability:

• Cost: High ($75-$150 monthly)
• Protection to Motor Carriers Auto Liability: High
• Market Availability: Very Low (Per Class Basis)

Unladen Liability provides the least ambiguity in coverage and the broadest level of protection for the MC and IC.This policy provides coverage while bobtailing (no trailer attached) as well as while deadheading (trailer does not contain or carry any cargo – no bill of lading), regardless of dispatch.

The difficulty with this coverage line is the low availability (typically not available in a master settlement deduct program; rather the IC's need to obtain on a direct basis).

There are pros and cons to each of the coverage models which vary depending on the risk tolerance and the operations of the Motor Carrier and Independent Contractor. Deciding on the right program can be critical to managing your risk. Enlist the help of a qualified insurance broker to review your current insurance programs and operations and to provide suggestions and options that best fit your needs.