Contingent Liability Insurance

Contingent Liability Insurance

According to the FMCSA, the minimum financial responsibilities of motor carriers need to be firmly adhered to for meeting potential public liability and boosting interstate commerce.

An important insurance coverage for motor carriers, contingent liability insurance provides protection against an independent owner-operator who may claim workers’ compensation as an employee. This insurance covers court costs for the motor carrier and also guarantees reimbursement in the event of the independent owner-operator winning the settlement.

At the outset this may appear to be an unlikely circumstance and is frequently overlooked by motor carriers. But it is quite probable, that in the aftermath of an accident, an independent owner-operator would benefit from claiming workers’ compensation and project himself as an employee. Most motor carriers are already covered by the occupational accident insurance. While the independent contractor can be compensated under this plan, it may not be adequate to cover the expenses. On the other hand, the workers’ compensation provides a much higher reimbursement and in this situation a conflict may arise. At this point, the contingent liability insurance supports you in defending your lease agreement and covers the costs in case of a successful claim.

How Can an Independent Operator Claim Workers’ Compensation?

As a motor carrier that leases out driving assignments to independent owner-operators carrying cargo for you, it may appear evident to you that they are not a direct employee of the company.

An independent owner-operator can easily be differentiated from a full-time employee on the basis of several characteristics, including:

  • Could drive for other motor carriers.
  • Uses his own vehicle, tools and equipment.
  • Selects and hires assistants independently and pays them.
  • Works by a schedule of his choice.
  • Has a registered business license.
  • Accounts for his own profits and losses.

In case, any of these do not correspond to the contractor’s profile, the settlement may result in his favor, requiring you to pay the workers’ compensation. This is where the motor contingent liability insurance can save you a huge financial loss. In case the driver is deemed an employee by the court ruling, the insurance provides benefits that are equivalent to the workers’ compensation criteria and the Employers’ Liability Act.

The FedEx Fiasco

The third largest shipping company across the globe, lost millions of dollars in the August 2014 ruling where the judges ruled that the 2,300 drivers leased by FedEx were actually employees and entitled to workers’ compensation benefits. The settlement was in favor of the drivers despite the fact that they all owned their vehicles and were running the business on their own terms. This led to a huge controversy and FedEx ran into a massive financial deadlock. This can happen to any motor carrier, and the losses can be catastrophic. It is critical to be insured against such incidents with the contingent liability insurance.

Complimentary Claims

Occupational accident insurance and contingent liability insurance work alongside each other and are important for motor carriers. The occupational accident insurance is for independent owner-operators, who are working on a lease agreement with trucking companies. In the event of accidental injuries during a motor carrier assignment, the independent owner operator is covered for:

  • Accident medical expenses.
  • Accidental death.
  • Accidental dismemberment and paralysis.
  • Accident disability income.

Trucking business checklist would already have the occupational accident coverage in place, and would require the contingent liability to protect in case the independent owner seeks employee status. The two insurance plans round off each other to cover the entire spectrum of accident possibilities and protect damages and losses for the independent contractor as well as the motor carrier.

The contingent liability insurance has a competitive cost and is an inexpensive coverage that can save you millions as a motor carrier. It forms an integral component of the risk management strategy for any motor carrier today. It effectively narrows the window of risk for motor carriers and works concurrently with the occupational accident insurance.

What We Offer

East Insurance Group brings you effective insurance solutions at affordable costs that lower your risk and expand your coverage. Customized for your business requirements, our team of insurance representatives are industry experts who would advise you on the best deals that protect your interests while your business flourishes. We provide extensive trucking coverage schemes at low premiums and maximum benefits. As a motor carrier company, getting the right insurance can help you avoid collateral damages, overcome hefty lawsuits and access immediate compensation for leased drivers in the case of accidents. We provide the effective and important protection layer that can defend you from the claims of independent owner-operators in case there is a lawsuit. Our team of specialized professionals handle claims swiftly and are dedicated to getting the drivers and your business back on the road after an accident. Give us a call today and get your free quote!