Your transportation underwriter’s favorite word probably isn’t “no.”
Finding cover for an experienced motor carrier with an above average safety history should be an easy task; however, when a motor carrier’s safety history has an SMS alert or two or if they are flagged as having the same phone number as another operation, finding coverage is increasingly difficult. One of the biggest failures in the transportation insurance marketplace is that we don’t do enough to educate our insureds and retail agents on how insurance companies are interpreting risk information, and why certain determinations are being made – especially with respect to the usage of tools like the Central Analysis Bureau (CAB) reports and the FMCSA’s Safety Measurement System (SMS). This article offers focused insight into a few common issues that are raising questions or concerns when found in an insured’s CAB report.
First, it’s important to understand what the three descriptors mean:
If an inspection is categorized as “During”, it raises concern that a motor carrier may be operating under multiple authorities and interchanging equipment.
Most owner-operators have a permanent lease when working under a motor carrier, but some owner-operators either have their own authority or only have a part-time lease agreement. In these instances, inspections may show up as “during.”
If an inspection is categorized as “Subsequent to”, it could be because an owner-operator has de-leased or the applicant has sold the equipment. In this situation, the underwriter may want to ask for appropriate documentation.
Remember, any inspections that an insured believes are not theirs can be challenged using FMCSA’s DataQs System.
Inspection data will only appear under the DOT number that the driver is operating under at the time of inspection (CAB, SMS), though driver records are maintained in separate, not publicly accessible, databases (PSP, Clearinghouse). Presently, driver information is only available to individual drivers and their potential employers.
While not part of the CAB suite of tools, the PSP tool helps screen potential new hires by providing the data needed to hire safe drivers. This program assists on a pre-employment level by reviewing violations and inspections, which an employer can review alongside the driver’s MVR. The Clearinghouse is an online database, available as of January 2020, that provides employers, the FMCSA, state law enforcement, and state driver licensing agencies information about commercial drivers’ drug and alcohol violations. This was created to assist employers in identifying drivers who have committed any drug or alcohol violations while working for one employer but fail to inform another employer. Clearinghouse is not available to underwriters, but it does impact the risk-evaluation process in a positive way by encouraging the insureds to improve their hiring process and enhancing the safety of our roads.
First, it’s important to pay attention to the date on the MCS-150, as insureds are only required to update the form every two years and, as such, the reported information may be outdated.
Having a shared phone number or address is not necessarily indicative of shared ownership or additional exposure, but it is something to investigate. The most common reason for a shared phone number or address is when a permitting office (used by a company to manage certificates, process MCS-150 filings, etc.) lists their phone number and address, rather than the motor carrier’s, with the FMCSA. In these instances it is not uncommon to see several dozen to hundreds of entities sharing the same phone number, fax number or mailing address. When this is the case, there is little additional exposure being presented and an underwriter may proceed without any further questions.
The second most common reason for a shared phone number or address is when small operations share a dispatch office. The key here is ensuring that ownership is separate and that there is no cross-use of drivers or equipment. Corporationwiki is a great tool by which an underwriter can look into ownership of a corporation, as well as look at risk information like email address, loss-control contact or even names of companies. Additional resources include the Secretary of State website and Quick Transport Solutions.
If there are entities that share a phone number or address, it is the underwriter’s responsibility to seek out additional information. It is crucial to review for any insuring history; is it truly a new venture? Does it have Freight Forwarding authority? What are the CAB alerts? The underwriter should consider reaching out to the motor carrier’s agent, as well as pull additional reports from SAFER and VITAL to cross-reference.
If a shared relationship is likely, then an underwriter should review the facts and make a determination on the exposure presented by this relationship. A son who used to work for his father but is now starting his own operation where there is no shared equipment or drivers would be considered on the merits of the driver’s history and any trends visible in the father’s CAB report. However, a risk where a son is starting his own operation at the same time that the father’s operation is going out of business is something an underwriter may decline due to the potential unintended/unknown exposure.
When trying to determine how many vehicles a motor carrier is actively using, CAB is a useful tool to better understand this exposure. The derived unit count on CAB comes from the last 24 months of inspections from weigh stations, roadside inspections and traffic stops. As this count is contingent upon an inspection taking place, and as an application may only state the current vehicle count, there may be discrepancies between these sources. Identifying any discrepancies, and understanding whether they present a material difference in exposure, is integral to underwriting a risk:
Higher units than on the policy or application could be caused by:
Lower units than on the policy or application could be caused by:
The disparity between presented policy units and derived units may be grounds for declination, but it is not always an automatic decline. Proper correspondence and documents (bill of sales, notices of sales, leasing agreements, etc.) can help qualify and underwrite risks that may appear precarious on the surface, as can checking the MCS-150 to ensure the exposure is up to date. Deeper investigation into these disparities is often key to fully underwriting a risk.
Presenting full submissions with all necessary documents (loss runs, driver MVRs, IFTAs where applicable, carrier applications) will often lead to less delay in the underwriting process. Understanding and addressing common underwriting questions or clarifying known concerns prior to underwriter review will often generate quicker response times and greater coverage placement. Knowing the risk in and out, while often difficult or time-consuming, is paramount to placing coverage or qualifying a risk for coverage.
This article was authored by Kayley Dana, Quentin Fox, Lizbeth Cuatecontzi and Christian Senecal of AmWINS Transportation Underwriters. Learn more about ATU's capabilities at amwins.com/atu.
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.