Dollars & Sense

Are you covered? Workers' Comp. and the Expediting owner-operator

If you're an expediting owner-operator, one of the wisest purchases you can make for yourself and your family is workers' compensation or especially, Occupational Accident Insurance. 

As a matter of fact, this specialized insurance is now required by most of the expedited carriers when leased to that company.  It pays to understand what programs are available and how they can help you.

Simply put, "Workers' compensation" (WC) is a system of statues enacted by each state that provides medical, lost time and permanent disability benefits for employees hurt in the scope of their employment.

Benefits are determined by the individual states, but coverage typically includes medical expenses, rehabilitation costs, a portion of lost wages, and weekly or lump sum payments for families of workers killed on the job.

The WC issue is complicated by the fact that Independent Contractors aren’t employees and aren’t covered by WC statues. It’s a very fact-specific issue, and the injured person who’s claiming that he is an employee may need legal counsel to make his case.

Some background is in order
Rick Gallegos is the founder and president of Transport Insurance Agency, a firm that has specialized in providing insurance services to the expedited carriers and owner-operators since 2000.

He relates, "What initiated this desire by the carriers to ensure that their owner-operators carried Workers' Compensation was a lawsuit by an independent contractor who was leased to a major expedited carrier.  This contractor was under load when he was involved in a trucking accident and severely injured.  He had no disability insurance and no benefits."

"This contractor retained a lawyer who did a "test sequence".  The lawyer determined that the carrier had (1) dispatched the contractor, (2) the contractor displayed the carrier's signs on his truck and (3) the contractor was wearing a hat with his carrier's logo."

He continues, "Because of these carrier-contractor connections, the courts ruled that the contractor was an employee and thus was subject to the carrier's workers compensation.  The carrier's WC insurance company paid the claim, but then turned around and sued the expedited carrier to recover the money paid to the contractor."

"This is why the motor carriers want that type of coverage.  The idea of the Occupational Accident Insurance is to protect both the owner-operator and the carrier."

Gallegos adds, "All of the major and many of the smaller expedited carriers require their owner-operators to carry Occupational Accident Insurance.  Carriers accept the Occupational Accident Insurance because it pays claims like a Workers' Compensation policy. It is the standard "alternative" for owner-operators who do not fall under the requirements of worker's compensation statutes. This includes death claims, disability claims and accident medical claims up to statutory state limits."

Another insurance perspective
John Mueller is the Safety and Recruiting Director for Premium Transportation Logistics in Rossford, Ohio.  With an extensive background as a safety director for both expedited and general trucking, Mueller is well acquainted with the insurance needs of the owner-operator and particularly, WC-type insurance.

He begins, "Many carriers will require a WC certificate.  In Ohio, for example,  the U-3 form can be completed and sent in with a ten dollar fee and boom, you've got a WC certificate.  Does that mean you now have Workers Compensation?" 

"No, it just means that you're registered.  You don't have WC until you start paying into it!"

"What I try to do during our company's orientation, is to educate people to the fact that the non-trucking liability insurance that they have on their truck has no medical coverage like their car insurance does."

Mueller says that the owner-operator needs to look beyond that because a driver can be injured just walking into a truck stop, a shipper or consignee.  A viable alternative to WC is Occupational Accident Insurance.

"I tell people that it's an insurance policy that covers them at the same level or higher than that of WC for a fixed rate.

"I present this example to them:  if you pay yourself a thousand dollars a week, in Ohio the WC rate for long-distance trucking is 8.2 percent, so you would owe Ohio workers comp 82 dollars a week.

"You can get pretty good Occupational Accident Insurance for about half of the state's WC.  With our company's insurance, for instance, it's paid directly to the insured rather than to the hospital or doctor and it protects the owner-operator on and off the job."

"In our PTL manual, I specifically state that our company is not responsible for any injuries that a contractor suffers on the job.  All of our contractors are independent business people and they have a right to secure whatever type of insurance coverage they desire."

Insurance shopping
Even if it's not required by your expedited carrier, it's smart to have something to help pay the medical bills and pick up some lost income if you're injured on the job.  Occupational Accident Insurance generally offers the same basic coverage as workers' compensation: medical benefits, disability income and life/dismemberment insurance.

Occupational accident insurance is usually easier for owner-operators to get and can be less expensive than WC, but premiums depend on the benefits you choose.

When looking for Occupational Accident Insurance, ask a lot of questions:

What is the annual and/or lifetime maximum for medical benefits? Are rehabilitation expenses covered?  Are Dental expenses covered? Can you choose your own health care providers? What is the weekly disability benefit? How long must you be out of work before payments begin? What is the maximum total disability benefit?

It's also important that the plan fits your profession. For example, some occupational accident policies exclude common driver problems such as back strains, hernia and hemorrhoids.

Also look closely at when you're covered. Some plans only cover injuries that occur when you're under dispatch, but not when you're deadheading or working on your truck.

If you're leased to a carrier that offers a group WC or Occupational Accident Insurance, by all means take a look at the program. Ask about benefits and find out exactly how much you'll pay for coverage, including premiums and any administrative fees charged by the carrier or its agent.

Any charges to be deducted from your settlement checks should be clearly specified in your lease agreement.  Ask for the name of the insurance company, and the name and number of the agent or plan administrator. Ask for a copy of the policy. If a carrier pressures you to buy their program, look for a new carrier.

Before you buy a carrier's plan, compare benefits and prices you can get elsewhere. Many trucking groups offer occupational accident insurance for owner-operators. You can find names and phone numbers of trucking associations  Also talk with an insurance agent or broker who specializes in workers' comp and occupational accident insurance — preferably one who also has knowledge of trucking.

TIA's Rick Gallegos says that in many cases, the insurance provided by the carriers is a better deal because of the lower insurance costs that can be obtained by group-buying power.  Also, the owner-operators enjoy the convenience of the premiums being deducted from their settlement checks.

"However," he notes, "For the individual with a good driving record, sufficient experience behind the wheel and who owns a newer, higher-value truck, we can get him a better deal on his own.  It can be to his advantage to do some shopping on his own."

"This insurance from TIA would run an owner-operator from $130 - $150 per month," says Gallegos. "This would cover disability insurance if the person were injured and could not generate a weekly income - up to $500.00/wk for 52 weeks.  It could also include a death benefit of let's say, $250,000.00 over a period of possibly 3 years."

Disability
Individual disability insurance is truly a basic concept. It is an insurance product designed to replace anywhere from 45-60% of your gross income on a tax-free basis should a sickness or illness prevent you from earning an income in your occupation.

Every disability insurance policy from every insurance company is very different, this is not a product to simply shop for the most competitive rate.

Make sure you understand a plan’s definition of disability. Some policies may not pay benefits if you can work at an occupation other than trucking, or they may pay partial benefits if you can do some but not all the duties of your own occupation.

The key terms are “own occupation” and “any occupation.” And make sure your policy covers both injuries and illnesses that interrupt your job.

Like health insurance, disability usually won’t cover you for claims related to pre-existing conditions. You’ll probably have to answer medical questions and maybe get a physical examination. If you’re turned down for full coverage, you may be able to purchase a restricted policy or to pay higher premiums for some level of coverage.

About Transport Insurance Agency (TIA)
Rich Gallegos, President and founder of TIA, is a Registered Health Underwriter and has a Certified Insurance Counselor degree.  He has been in the insurance business for 22 years, and for the last 7 years, has concentrated exclusively on trucking insurance.   

"In 2000, we opened our agency in the Detroit area by insuring individual owner-operators in expediting.  Our goal from the first has been to serve the expediting carriers and since then, we have specialized in expedited freight - owner-operators, expedited fleet insurance programs as well as corporate liability programs. 

Because of our successful business relationship with Alumi-Bunk Corporation, we've be able to serve a large cross-section of the expediting industry."

"We feel that we understand the needs of the expediting owner-operator better than any other insurance company in the country.  We have relationships with many of the expedited carriers and we know how important it is that the owner-operator needs his truck to be up and running immediately."

"If the owner-operator is not making money, his carrier is not making money and that effects us all because we're in this together.  My staff members have  been with me since the beginning of the company and all of them understand the difference between general trucking and expedited freight. 

As a matter of fact, all of my sales people have to go through an orientation in which they learn the trucking business first before they actually sell truck insurance."   

"We've been very fortunate that we've been able to keep many of our original customers.  They might change carriers but they stay with us.  It's because of our loyal customers that we have been able to grow our agency's business to $30 million in premiums annually and over 5,000 individual owner-operators insured."

For more information, visit:

Transport Insurance Agency
5133 S. Main St.
Sylvania, OH  43560
PH.  888 935-4842
FAX 419 882-6760
http://tia.expeditersonline.com/

Insurance Information Institute
www.iii.org

For a complete listing of state laws concerning workers’ compensation, go to www.comp.state.nc.us.