When assessing the safety of a commercial auto operation, there is more freely available information today than ever before. As with all data that is easily accessible in the information age, there are people trying to capitalize on how this information is used. In a prior article, CAB Usage in Underwriting Truckers, we discussed how insurance companies and underwriters utilize this data to try and better determine the safety culture of an operation. However, the use and interpretation of this data is not limited to the insurance industry, which is leading to disputes over the measurements gathered and the availability of data.
First, let’s quickly establish what data we’re talking about. The Federal Motor Carrier Safety Administration (FMCSA) created the Safety Measurement System (SMS), the source of this data, and its associated scoring methodology as part of the CSA 2010 initiative. The intent of the initiative was to make the roadways safer by identifying those trends in motor carriers that might show a direct connection to loss frequency. Determinations for trends and scores are based on the aggregated history of all DOT violations that are discovered during the roadside inspection of a motor carrier, and it is this violation data – ranging from a cracked windshield to speeding in a school zone – that is the focus of the current dispute.
Knowing that the dataset is flawed allows those who are familiar with it to look beyond its issues, but because the data is freely available, violations are left open for public debate and interpretation. The FMCSA curtails any liability for the accuracy of this data by stating that the information captured is for the use of the FMCSA in determining who to single out for inspection, but this doesn’t stop its public use.
Very few motor carriers that have had a roadside inspection have no violations. Long-haul vehicles are on the road upwards of 110,000 miles annually, and in that period there is likely to be a situation where one of the bulbs on the back of the tractor goes out or when the straps holding down equipment on a flatbed shows signs of fraying. Motor carriers have a significantly higher opportunity for a small violation to occur simply due the number of miles that they’re traveling annually. On top of that, they are held to a higher standard than the general motoring public. Due to the nature of their operations, there are few who would question that this higher standard is necessary, but it is something to consider when looking at the SMS information on an individual inspection level.
Focusing too heavily on the individual inspections instead of the risk’s history as a whole may present an inaccurate representation of a motor carrier. That’s not to say that high severity infractions don’t warrant special attention; however, for minor violations the focus should be given to any trends that would indicate a continuous or conscious disregard for DOT rules in order to get a complete perspective of a risk.
On May 27, USA Today published an article regarding an accident in Detroit involving a gasoline tanker that overturned on the roadway. The article specifically references the motor carrier having faulty brakes on a prior roadside inspection. What the article does not mention is that, of the nine recorded inspections, only one had brake violations and that occurred in August of 2013, nearly two years prior to the accident. Since that time, the motor carrier has been without a single brake violation, and has an SMS score well below the intervention threshold. Regardless of the circumstances surrounding the accident, and regardless of the merits of the SMS model, using a single instance to paint a motor carrier in a particular light has the potential to create an incomplete picture and may severely impact the trucking industry as a whole.
Public opinion is powerful, especially in the courtroom where the potential for an inaccurate representation of a motor carrier is likely to affect the judgment. Tort lawsuits continue to plague the industry, and while there are very likely offenders whose judgments are justified, increased use of FMCSA information in the courtroom – despite their own statement that it is not to be used to draw conclusions about a motor carrier – will only exacerbate this issue. As a result of the misuse of a flawed dataset, fewer insurers will enter the transportation marketplace, and motor carriers that would have otherwise been deemed fit or satisfactory by the FMCSA will have a greater difficulty finding coverage and will pay higher premiums. In addition, insurers and shippers, who are also weary of public opinion with respects to SMS data, may find themselves obligated to consider it or face potential inclusion in a future suit.
The biggest push to counter the availability of this data can be found in H.R. 1371. Under the title of the Safer Trucks and Buses Act of 2015, Representative Lou Barletta (R-PA-11) introduced language that would both ensure that the carrier safety data found within SMS would not be made available to the public (except law enforcement personnel) and that the data will not be used in a civil action for damages resulting from an incident. The bill would also formalize an agreement between the Department of Transportation and the National Academy of Public Administration to create a study on how the CSA initiative (of which SMS is one part) can be further improved.
Similar language was introduced in 2014 without success, but it appears that Rep. Barletta is looking to move forward with this until it is heard in Washington. It is uncertain whether Congress will take any action on the bill as presented, but industry associations such as the Motor Carrier Insurance Education Foundation have written letters in support of facets of the bill, most notably supporting the position that flawed SMS data should not be used as a means of accelerating claims costs. As of the publication of this article, the bill has been referred to the Subcommittee on Highways and Transit.
In addition to the steps being taken on the Hill, other parties with an investment in the transportation industry are consistently putting out recommendations and commenting on legislative action in that sector. In particular, the American Transportation Research Institute has been engaged in studies of the industry since 1954, and the American Trucking Associations have published reports and made recommendations to Congress since its founding in the early 1930s. While there is no lack of players in this space, it will ultimately fall to Congress to take action and remove any bias that might exist in the studies that are put forth.
Lastly, the FMCSA is regularly updating the rules to better realize the intent of the CSA initiative. The latest proposal for changes (labeled “enhancements”) was published on June 29, 2015 and attempts to combat one of the current issues on the floor, which is the implicit suggestion that all seven categories and their respective scores are equal. The proposed measurement takes loss correlation, largely determined by the latest SMS Effectiveness Test, and both re-organizes the layout of the categories and assigns an updated intervention threshold. The change should present better clarity to those reviewing the data – and should better prepare the FMCSA for a time when the SFD becomes accessible by the public.
The greatest attribute of the present model is that a motor carrier is held publicly accountable for their safety record. Brokers, shippers and insurers have a tool by which they can track the negative trends of a motor carrier and, when used properly, focus and loads can be given to those operations that are doing their due diligence in operating in accordance with the DOT guidelines. Many in the industry are building out their own analytics based on the SMS in order to counter the known issues – while these are still early in their development and the logic is still being tweaked as more accident data comes in, these parties are taking the SMS data and finding a way to use it for its intended purpose: to make the roadways safer.
Despite its flaws, there is also merit to simply having the information publically available. Most motor carriers take pride in their work and the vast majority of drivers have made this their career. However, there will always be drivers and carriers who take shortcuts or don’t take the time to learn how best to operate. Having a public record of their violation history serves as a countermeasure to those motor carriers who might not dedicate as much time to their safety culture were it not for the SMS data’s existence.
While there is no solution that responds to every issue at hand, a few targeted actions should counter the majority of the issues. Revisiting the methodology in the SMS data itself, and working with industry associations to better target motor carriers, will begin to address the underlying inaccuracies, and the ultimate establishment of the revised SFD will provide a concrete reference point by which the public can see whether the risk has been deemed fit to operate. The exposure presented by the availability of the SMS information still exists, and there still are some concerns not addressed above – such as the difficulty motor carriers have eliminating erroneous data from their company profiles – but with better education on the issues, positive steps would be taken toward seeing the SMS meeting its intent.
This article was authored by Liam Hutelmyer, member of AmWINS' national Transportation Practice.
Legal Disclaimer. Views expressed here do not constitute legal advice. The information contained herein is for general guidance of matter only and not for the purpose of providing legal advice. Discussion of insurance policy language is descriptive only. Every policy has different policy language. Coverage afforded under any insurance policy issued is subject to individual policy terms and conditions. Please refer to your policy for the actual language.
(c) 2017 AmWINS Group, Inc.
Construction contract negotiations, which determine the kind and amount of insurance required for a construction project, can be time-consuming, complicated and frustrating. Project owners require contractors on a project to name the project owner as an additional insured on the contractor’s casualty insurance program. It's important that both project owners and contractors understand the coverage provided by these additional insured endorsements. This article discusses four common ISO additional insured endorsements related to commercial general liability policies purchased by contractors, including their limitations, conditions and exclusions.
A common complication during the claim process is the late reporting of claims. In some cases, a late claim can put the agent or broker's own E&O policy in jeopardy. There are many reasons for missing a reporting deadline; however, in most cases, they will not matter to the insurer or the courts. This article discusses typical claim reporting requirements, common causes of late reporting, and recommendations to mitigate the risk of late notice claim denials.
The theories of recovery, as well as the ensuing loss provisions, contained in property insurance policies are often complex and, at times, seemingly in conflict. Although a policy may not directly address these theories, their application by courts plays a significant role in the coverage determination process after the claim. It is essential that brokers understand the primary theories of recovery – Efficient Proximate Cause, the Concurrent Causation Doctrine, and the Anti-Concurrent Causation Doctrine – in order to navigate the challenging post-claim process and effectively serve their clients.
The Thomas Fire, the largest fire in California's history, subsequently led to a mudslide on January 9, 2018, which caused a massive amount of damage in Santa Barbara and Ventura counties. The California Insurance Commissioner has issued a formal notice reminding carriers to pay for damage, citing the "efficient proximate cause doctrine." This article takes a closer look at the doctrine and how it has been challenged in court over the years.
Ordinance or Law insurance coverage provides limited protection for costs associated with repairing, rebuilding, or constructing a structure when physical damage to the structure by a covered cause of loss triggers an ordinance or law. Compliance with ordinances and laws after a loss can add 50% or more to the cost of a claim. This article will help you educate your insureds on exclusions and limitations and help them take a proactive approach to their insurance program.
In 2017, the issue of sexual harassment – especially in the workplace – gained greater awareness as accusations of harassment by high-profile individuals were constantly in the news. In many cases, sexual harassment lawsuits seriously impacted businesses and their respective insurers. Employment Practices Liability Insurance not only provides protection against employee lawsuits, but can also help your clients mitigate their sexual harassment risks.