Debilitating injuries from tractor-trailer wrecks are sadly commonplace for motor carriers nationwide. Despite the best efforts to improve driver safety through rigorous training, the adoption of improved regulations and the implementation of new technologies, accidents still abound.
To make matters worse, payouts for “nuclear verdicts” and other high-dollar lawsuits stemming from commercial truck-related accidents have sharply risen in recent years. New research by the American Transportation Research Institute (ATRI) found that the number of cases with verdicts over $1 million increased 335% between 2012 and 2019. That does not come as news to truckers.
Motor carriers know not to operate without first obtaining general liability, physical damage and of course, workers’ compensation coverage to protect their employed drivers. However, things can get tricky on the issue of how to protect against the liabilities that accompany independent drivers.
While owner-operators aren’t technically classified as W2 employees, that doesn’t mean you’re exempt from the liabilities and legal obligations that arise when an accident occurs. Without the proper insurance in place, trucking companies may find themselves paying a hefty sum in medical expenses for a 1099-classified driver injured or killed on the job.
Similar to workers’ compensation coverage, occupational accident insurance (Occ/Acc) provides coverage for owner-operators and drivers leased on to a motor carrier and may provide coverage for accidental death and dismemberment, medical expenses, and disability in addition to other coverages. The policy isn’t exclusive to just owner-operators; it’s available to motor carriers as well. In fact, Occ/Acc protects fleets and independent contractors should the owner-operator seek coverage under the trucking company’s workers’ comp policy.
Utilizing the services of independent drivers has become an attractive alternative to adding another driver to the payroll as workers’ comp coverage can be quite expensive. Motor carriers may prefer to contract independent drivers for this reason as Occ/Acc offers similar benefits but at a lower price.
“For trucking companies that lease 1099-classified owner-operators, motor carriers can rely on Occ/Acc instead of putting them on their workers’ comp policy,” said Jordan Chastain, Reliance Partners’ senior vice president of sales. “Since owner-operators aren’t true employees of the company, they are not required to be listed on a workers’ comp policy. It can save the motor carrier a lot of money.”
Chastain explained that smaller fleets often require owner-operators to individually have Occ/Acc coverage before leasing them on. However, he added that well-established trucking companies may have a companywide Occ/Acc policy available as well.
Occ/Acc policies typically run $50-200 a month per driver — the average being $150, according to Chastain. In comparison, workers’ comp premiums are expressed as dollars per $100 of payroll. He noted that the average is usually around $7-8 per $100. Policies have a per-accident deductible and an annual maximum payable amount.
To conclude that employed drivers receive workers’ comp while owner-operators obtain Occ/Acc sounds simple enough, but the truth is that the lines are often blurred.
Motor carriers must be careful how they utilize independent drivers. Chastain urges them not to treat owner-operators like fleet drivers as it could result in their being listed as true employees on audit reports, rendering them eligible for workers’ comp benefits.
“If the government sees that you’re telling contracted drivers where to go and when to be there, they’ll be classified as a true employee in your company,” Chastain said. “It’s a hard line to define.”
In addition, owner-operators may attempt to take advantage of their abstract classification after an accident and claim employee status to make a workers’ comp claim against a company. However, the likelihood that an owner-operator files a lawsuit against your motor carrier will be minimal if your company offers adequate Occ/Acc compensation for illnesses and injuries.
Chastain acknowledged that contracting independent drivers carries an inherent risk. That is why he urges motor carriers not to lease just any driver willing for the long haul but instead to have stringent hiring standards.
He suggests motor carriers require owner-operators to receive the same orientation and training as their employed drivers to ensure all drivers regardless of classification understand the company’s safety expectations. Owner-operators should also be encouraged to take proper care of their vehicles and participate in weekly or monthly maintenance inspections to detect any issues.
“Make sure that you’re doing your due diligence in hiring the best driver for your company,” Chastain said. “Motor carriers should hold owner-operators to the same standards as their own drivers.”
Developing a culture of safety in addition to ensuring your company and its drivers receive proper insurance coverage is the best way to mitigate the risk factors associated with roadway accidents and injuries. Reach out to Reliance Partners for more information on how Occupational Accident coverage can improve your company’s relations with owner-operators in addition to protecting your fleet from costly expenses and other liabilities.
