Financial ResponsibilityPanel Discussion

NCSTS Annual Meeting

Louisville, KY

June 2008

Carrier Universe (385,000 USDOT Carriers)

For Hire Private

H/MFor-Hire

H/M(3,750)

PrivateH/M

(3,750)

Non- H/M

For-HireNon-H/M(138,000)

PrivateNon-H/M(240,000)

The Numbers

• Total USDOT Carriers – 385,000• Total For Hire – 138,000 (US and Canada)• Total H/M - 7,500• Total Carriers Falling Under Part 387

– 145,000 / 385,000 = 38%• 240,000 Carriers

– No Insurance or Financial Responsibility Requirement

Areas of Discussion

• What is “Financial Responsibility”?• Financial Responsibility vs. “Insurance”• The Financial Responsibility “Triangle”• Private vs. For-Hire Carriage

– Safety– Insurance Requirement

• Legitimate Carriers

What is “Financial Responsibility?”

• CFR 387.5 Definitions

– … financial reserves (e.g., insurance policies or surety bonds) sufficient to satisfy liability amounts … covering public liability.

• Interpretation

– If you transport goods (for-hire) in vehicles weighing 10,000+ pounds on public roads, you must have sufficient financial resources (as determined by the FMCSA) to make restitution if you damage something or somebody.

Public Liability

• Public Liability Includes:

– Bodily Injury

– Property Damage

– Environmental Restoration

Three Areas of Public Liability

• Bodily Injury– injury to the body, sickness, or disease including death resulting from any of these

• Property Damage– damage to or loss of use of tangible property

• Environmental Restoration– restitution for the loss, damage, or destruction of natural resources arising out of the

accidental discharge, dispersal, release or escape into or upon the land, atmosphere, watercourse, or body of water of any commodity transported by a motor carrier. This shall include the cost of removal and the cost of necessary measure taken to minimize or mitigate damage to human health, the natural environment, fish, shellfish, and wildlife.

Financial Responsibility vs. “Insurance”

Financial Responsibility

• Public Protection

• Coverages Set By Rule

• Overrides Policy Defenses

• Underwriter to Agency

• Good Until Cancelled

• No Filing – No Authority

“Insurance”

• Negotiation

• Coverages Set By Terms

• Policy Defenses

• Agent / Insured

• Cancel-able Immediately

• Policy Can Change

The Financial Responsibility “Triangle”

Private vs. For-HireSafety

• Private carriers are generally no safer than for-hire carriers.– Source: FMCSA-RI-04-025

Private vs. For-HireFinancial Responsibility

• For Hire – CFR 387

• Hazardous – CFR 387

• Private and Non-Hazardous - Nothing

“Legitimate Carriers”

• What is a “legitimate carrier”?

• All “legitimate carriers” do what they are supposed to do.

• The rest of them don’t.

• We’re more worried about the latter than the former.

Two Approaches

• Make the Financial Responsibility Requirement the Same

• Have the Insurance Company Show What Levels the Carrier Actually Has

Carrier Universe (385,000 USDOT Carriers)

For Hire Private

H/MFor-Hire

H/M(3,750)

PrivateH/M

(3,750)

Non- H/M

For-HireNon-H/M(138,000)

PrivateNon-H/M(240,000)

The Numbers

• Total Carriers Falling Under Part 387– 145,000 / 385,000 = 38%

• 240,000 Carriers– No Insurance or Financial Responsibility

Requirement

Thank You