Protecting motor carriers from high workers’ comp payouts, other liabilities

Accidents abound in today’s fast-paced transportation landscape; there’s no getting around it. Because no one can predict if and when disaster will strike, taking steps to minimize the risk and potential penalties that can follow is crucial.

FreightWaves reached out to Tommy Ruke, founder of the Motor Carrier Insurance Education Foundation (MCIEF), for insights on how trucking companies can protect themselves from costly payouts through workers’ compensation and lawsuits, as well as how they can prevent accidents in the first place.

As payouts from “nuclear lawsuits” continue to reach eight figures, trucking companies cannot afford to take chances with their insurance coverage.

Workers’ comp insurance protects companies from lawsuits claiming negligence, as well as from massive medical expenses and lost wages of employees injured on the job, while providing employees with job-related injuries or illnesses rehabilitation and other assistance. Failure to provide it can result in hefty fines and even the closure of the company.

Moreover, trucking companies operating without workers’ comp when required assume full liability for any job-related accident or injury sustained by an employee, whether they caused it or not, he explained.

Some states, such as Florida, allow businesses to operate without workers’ comp as long as they employ less than four workers, according to Ruke. The only state where workers’ comp is entirely optional for employers is Texas. This can be problematic for companies that don’t extend coverage, however, as an injured employee can sue a negligent carrier under tort liability. Additionally, motor carriers’ auto liability and general liability policies exclude injuries employees sustain on the job.

“It’s very dangerous to not carry workers’ comp even when it’s not mandatory if you have employees,” Ruke said. “Even if you have the exception, is it worth the risk to lose your company if one of your drivers gets hurt?”

Another benefit to workers’ comp insurance is that the premiums are a fixed cost, in contrast to potentially huge legal costs for companies that lack coverage. Ruke noted that workers’ comp average premium rates nationwide are about $10 per $100 on the payroll. He said a typical driver making $50,000 a year costs their motor carrier $5,000 in worker’s comp-related expenses, give or take.

As Ruke explained, if a company lacks workers’ comp and an injured employee sues successfully, the amount the company owes will be determined by the court system — not according to limits set by workers’ comp — and that can often lead to costly payouts.

Ruke also warned fleet owners to be careful when working with independent drivers. Misclassifying independent drivers can cause problems down the road as they may take advantage of the abstract classification. Depending on the situation, drivers may or may not claim employee status to maximize the workers’ comp payout from the motor carrier or may decide to sue under tort liability.

Another thing fleet owners should study are the differences between worker’s comp and occupational accident insurance (OCC/ACC). This form of insurance provides coverage for owner-operators who may be leased onto a motor carrier. It pays out similarly to workers’ comp insurance, offering indemnity, medical and death benefits, but it has limitations and doesn’t offer companies immunity from lawsuits. Ruke said independent drivers who contract with motor carriers can collect OCC/ACC and still sue under tort. He advises fleet owners to understand the difference between OCC/ACC and workers’ comp insurance coverage.

Neither should carriers assume they can simply transition injured drivers into other positions within the companies after long and highly specialized careers in trucking.

“One of the problems with trucking, particularly with smaller motor carriers, is that most truck drivers have no transferable skills,” he said. “A typical trucking company doesn’t have many, if any, positions for an injured driver to fill into.”

Some drivers may be able to shift gears into mechanical work or dispatching, but Ruke pointed out that many trucking companies simply lack the jobs necessary to employ every injured driver.

The safety imperative

Of course, preventing injuries on the job is vastly preferable to having to deal with them after they occur. So the best advice a motor carrier can heed is to minimize the risk of injury to begin with. Doing so will reduce the chance of costly payouts.

Safety ultimately starts with drivers themselves. Truckers should be expected to know the behaviors and actions that can injure them or others.

However, Ruke suggests trucking companies also look for ways to prevent accidents and injuries not just on the road but around their properties as well. Simple measures like making sure parking lots are well paved and clear of ice can reduce the risk of an on-premise accident. Ruke also advises carriers to restrict drivers from unnecessarily accessing hazardous areas around their facilities, such as shipping yards, docks or garages.

When an injury does occur on company property, Ruke urges companies to always file a report and to seek medical treatment right away no matter how minor the injury may seem. A detailed account of the injury on the day it took place will make the recovery process much easier for both parties.