On November 26 the Federal Motor Carrier Safety Administration (FMCSA) announced that it is seeking input from the trucking industry regarding newly proposed rules to raise the liability insurance minimum.
The Agency’s Perspective
The current minimum of $750,000 was set in 1985 and does not “adequately cover catastrophic crashes,” the agency says. They claim that this is mainly the result of inflation and increased medical costs.
In a report published in April the FMCSA stated that if the current insurance minimum had kept up with inflation, it would be $1.62 million today. When annual increases in medical costs are factored in, the agency says that carriers would be required to have a whopping $3.18 million in liability insurance.
The agency’s study came as a result of the MAP-21 highway funding act of 2012. Couched in the legislation was a law that required the FMCSA to study whether or not the current minimum is adequate and if not, what is.
In addition to their study, the FMCSA also points to a study by the Alliance for Driver Safety and Security that appeared to show that 42 percent of dollar settlements made by trucking companies come in above the $750,000 minimum insurance requirement. The study tracked 8,692 settlements from 2005 to 2011 and found that:
- Carriers insured to $1 million had a 37.5 percent liability exposure.
- Carriers with $4 million of insurance covered had 16.7 percent exposure.
Despite these reports, the industry maintains that an insurance hike is not currently necessary and points to its own analysis of the report.
The Industry Perspective
The American Trucking Associations (ATA) and Owner-Operator Independent Drivers Association (OOIDA) responded to the FMCSA report by stating that only one-tenth of all truck-involved crash claims exceed the current minimum.
In a statement the ATA said that it “has yet to see any evidence that increased insurance minimums will lead to improved highway safety” and expressed disappointment in the report. The ATA would consider a minimum rate hike if the data changes, but for now sees no reason to raise the current limit.
OOISA Executive Vice President Todd Spencer was even more candid in saying that “the agency seems to be bowing to the economic objectives of the personal injury attorneys and mega-trucking companies who have been campaigning for higher insurance requirements.”
Spencer then goes on to explain how this new rule could be “a death nail for small businesses” because “big trucking companies – who already use special exceptions in the law to avoid buying insurance on the open market – see an opportunity to drive up business costs and do away with their small-business competitors.”
Even though the agency has tried to quell fears about a hike in premiums by saying that rates have “declined slightly on average,” many remain unconvinced. Fortunately for those opposed to a rule change, the shifting political winds in Washington as an election approaches could prove to be its undoing.
The Political Equation
Dave Osiecki, the ATA’s chief of advocacy stated in a recent interview that he strongly suspects that “this is a rule that will get delayed and perhaps never even see the light of day.”
Since the White House generally slows down regulatory changes before an election, it is likely that the insurance increase could get caught in that logjam. Fortunately the new rule is more of a “pre-rule” because the FMCSA is publishing it as an Advanced Notice of Proposed Rulemaking (ANPRM). Through this process the agency is soliciting feedback from trucking companies and other industry stakeholders.
The agency is reporting that the ANPRM will not have a number or any language that will change regulations. It appears it may be more for data gathering and industry input.
The FMCSA will accept comments on the proposed rulemaking until February 26, 2015 through their regulations.gov portal. If you want to add your voice to the discussion, click here.
from Quick Transport Solutions Trucking Blog http://ift.tt/1rRXCHs
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