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Business Insurance

Owner Operators in the Trucking Industry

By February 24, 2020 March 2nd, 2020 No Comments

Owner operators are an important component of the trucking industry. Many carriers utilize owner operators to supplement their staff, while other trucking firms use owner operators as their primary source of drivers. While there are advantages to being owner operators, there are a few items that need to be considered.

Authority
This should go without saying, but if the owner operator is hauling under their own authority the carrier must have brokerage authority in addition to their own hauling authority.

Owner Operator Contract
The contract between the carrier and owner operator is the most important aspect of the relationship. The contract needs to clearly define the owner operator as a subcontractor and not an employee. If no contract exists, the owner operator is legally considered an employee. The contract also needs to specify which party’s insurance coverage applies and when. Without specification about insurance coverage, the carrier’s insurer can deny the claim and there will be no coverage! It is a good practice to require “bobtail” insurance be purchased by the owner operator. However, Bobtail coverage is not a substitute for a correctly designed contract. It is also a good practice to have both your legal counsel and insurance broker review the contract.

Workers’ Compensation
If the owner operator contract is constructed correctly, the owner operator will be legally considered a subcontractor. However, if they are injured while hauling for a carrier, they can still petition for workers’ compensation benefits from the carrier’s policy. There have been instances where owner operators have received unintended worker compensation payments from the carrier. Requiring the owner operator to purchase “Occupational Accident” coverage is a good practice. Occupational Accident coverage will not guarantee that the owner operator will not receive workers’ compensation coverage, but the optional coverage provides an alternative to seeking workers’ compensation coverage after an accident. Also, some workers’ compensation insurers will include a portion or all of the payments made to owner operators at audit. This could obviously add up to a large sum of money. Therefore, it is a good practice to determine how your workers’ compensation insurer handles payments to owner operators.

If a carrier hires owner operators, it is imperative that a well-constructed owner operator contract is in place. The contract should be reviewed by the carrier’s lawyer and insurance broker.  Despite having a good owner operator contract, the owner operator can still petition and attain workers’ compensation coverage. Having the owner operator purchase Occupational Accident and Bobtail coverage is a good practice. However, neither coverage will completely insulate the carrier without a well drafted contract and workers’ compensation insurance.

Tod Bergen, CPCU, CIC, CRM

Author Tod Bergen, CPCU, CIC, CRM

Business Insurance Executive
tbergen@ekmcconkey.com
717-505-3165

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