$4,923,154 Minimum Financial Responsibility Limit Proposed

7/16/2019 – A bill (H.R.3781 ) has been introduced in the House which seeks to increase the minimum levels of financial responsibility by 556% for transporting property, and would index future increases to changes in inflation relating to medical care.

At a press conference in Washington D.C., Representative Jesus Garcia (D-Ill) proclaimed “we’ve seen how victims, their families, hospitals, and our strained social safety net are forced to foot the bill for irresponsible driving.” Garcia was joined by members of the Truck Safety Coalition and accident victims to announce the bill and to introduce the Safe Roads Act. The legislation would require Automatic Emergency Braking technology as standard features on commercial vehicles.

This is not the first go-around for increasing minimum insurance limits. In April of 2014, the FMCSA examined the appropriateness of the current financial responsibility requirements. The agency concluded that catastrophic crashes involving CMVs are relatively rare occurrences. When catastrophic and severe/critical injury crashes do occur, the costs of resulting property damage, injuries, and fatalities, can far exceed the minimum levels of financial responsibility. Based on that research, the FMCSA announced a Advance Notice of Proposed Rulemaking (ANPRM). After a public comment period and hearing from its own Advisory panel (Motor Carrier Safety Advisory Committee), in November 2014 it withdrew its ANPRM due to insufficient data or information to support an increase.

The newly proposed legislation does not point to any new data to further support its cause. According to Section 2 of the legislation’s text, it finds that increasing financial responsibility is to encourage the carriers to engage in practices and procedures that will enhance the safety of their equipment so as to afford the best protection to the public. Accordingly, it also states that the $750,000 minimum amount set in 1980 equates to $4,923,154 in today’s dollars.

On this subject, the American Trucking Association previously revealed data (through 2012) obtained from the Insurance Services Office (ISO), under nondisclosure agreements, from two of the 10 largest trucking insurers covering all their large truck (over 26,000 lbs) policies. That data showed that only 6.5% of insurance policies for those trucks are written at limits under $1 million, while 83% are written at $1 million, and the remaining 10.5% are written over $1 million. Analyzing the data further, it was found that there is a 1.40% chance of a claim exceeding $500,000, a 0.73% chance of a claim exceeding $1 million, and a 0.31% chance of a claim exceeding $2 million.

EAST – WEST – TRUCK – RAIL

Rough waters ahead!

Currently, modern commercial ships run on fossil fuels which have a high content of sulphur (3.5%) – known to be harmful to humans and the environment. Beginning January 1, 2020 low-sulfur fuel (0.5%) is required for those ships that are not equipped with air scrubbers. The added cost of the new fuel could have serious implications for all modes of delivery around the world. Here in the U.S., the East Coast vs West Coast battle for business is about to heat up.
In 2016, the International Maritime Organization (IMO), the regulatory authority for international shipping, set January 1, 2020 as the compliance date for the reduction in the sulphur content of shipping fuel oil.
Roughly 90% of international trade is carried by the shipping industry where it is delivered by commercial ships to a port of choice (the “long mile”). Once off the ship, that delivery continues over land to long distance destinations often through rail (“middle mile” 15.5% of goods). Shorter distances finish the delivery through the use of trucking (“final mile” 65.5% of goods).
A whole slew of factors go into choosing a port for delivery i.e., the route(s), the direct port cost(s), the size of the ship vs the port, the costs of fuel, rail and truck, and labor issues, etc. Currently, the cost of shipping fuel is estimated around 3% of the value of the cargo. The new low-sulfur fuel is projected to nearly double that cost.
For certain areas of the world e.g. China (the largest importer to the U.S.), delivering to the U.S. West Coast is closer by half than the East Coast. The burn on fuel to the East, as some analysts claim, makes West an easier choice and will divert shipments West. However, considering recent tariff increases on Chinese goods as well as a doubling of the fuel cost, no stone will be left unturned in finding the best routes, modes and efficiencies to complete those shipments. Alternate ports of origin that deliver to the East coast are likely options.
Enter into the equation the Panama Canal.
The Panama Canal benefits when ships choose their locks to travel to the Eastern U.S. and beyond and they are not sitting idly by losing that business. Beginning January 1, 2020, a new set of transit tolls will take place for shippers traversing the Canal’s locks which will incentivize carriers based on the amount of containers they bring.
For container shippers that transit between 1.5-2 million TEU of total capacity in a 12-month period, they will receive a $3 per TEU reduction in tariffs for one month; those with 2-3,000,000 TEU receive a $3.25 reduction; and those exceeding 3 million TEU, a $5 reduction.
While some analysts are adamant that West ports will continue their dominance over East, in spite of the tariff war, Deutsche Bank’s transportation analyst Amit Mehrotra believes otherwise. In April, Deutsche Bank downgraded JB Hunt (JBHT – NasdaqGS) from Buy to Sell based on their research that U.S. import volumes will shift east, shrinking the middle mile and forcing the company to compete with trucking. Mehrotra highlights year-over-year declines in the length of haul for the “middle mile”, substantial infrastructure investments by eastern ports, statistics from companies like JB Hunt and the simple fact that the majority of the U.S. population resides in the East to support his opinion. Mehrotra believes the reduction in middle-mile distance is a trend that will not only send ships east, but favor trucking over rail as it remains a better fit for shorter distances.

Dirty Diesel

Dirty Diesel
Dirty Diesel

Rising levels of carbon dioxide and other greenhouse gases such as methane and nitrous oxides, are fueling the pace of climate change legislation around the world. Those efforts in the U.S. continue to heat up and right now, the trucking industry is directly in the cross hairs.
California is aggressively targeting greenhouse gas emissions from all sources throughout the state, and at the moment the trucking industry’s primary fuel source, diesel, is being labeled “Dirty”.

Senate Bill 44, also known as the Ditching Dirty Diesel bill, is designed to phase out the use of diesel-fueled medium- and heavy-duty trucks and buses in the state over the next three decades. The bill would mandate that the California Air Resources Board (CARB) come up with a plan to reduce greenhouse gas emissions in commercial trucks by 40% in 2030 and 80% by 2050. The bill also requires CARB to develop their strategy for targeted trucks by Jan. 1, 2021. The proposed legislation has far reaching consequences that would include trucks entering California from other states.

The state of Oregon has initiated similar legislation (HB2007) which declares an emergency related to diesel emissions. The bill would require the Environmental Quality Commission to adopt federal diesel engine emission standards for medium-duty and heavy-duty trucks. It would also require truck owners entering into the state to maintain evidence that their engines meet those standards. Taking it a step further, HB2007 would also require certain public improvement contracts to require the use of 2010 model year or newer diesel engines in performance of the contract. The bill would be effective January 1, 2020. But wait, Oregon is not done yet. The state is doubling down on their emergency declaration by simultaneously introducing a greenhouse gas cap and trade program as a compliance mechanism. That legislation would take effect January 1, 2021.

On the other side of the country, a coalition of nine states (Connecticut, Delaware, Maryland, Massachusetts, New Jersey, Pennsylvania, Rhode Island, Vermont, Virginia, and Washington, D.C.) announced their intent to design a low-carbon transportation policy proposal. The proposal would cap and reduce carbon emissions from the combustion of transportation fuels, and invest proceeds from the program into the transportation infrastructure. It also sets a goal of completing the policy design process within one year, after which each jurisdiction will decide whether to adopt and implement the policy.

EQUIPMENT VALUES

Another welcomed alert from your claims professionals

According to our claims experts, a growing number of claims are turning up with an equipment’s stated value either over/under estimated compared to the current local market price.

What this means is that when you insure your truck/trailer for physical damage coverage, you are asked to provide a value for that piece of equipment (stated value). The insurance company does not determine that value, you do. However, if/when you have a need to use this coverage, this value is the maximum amount that the equipment is covered for in a total loss, but not necessarily the amount that will be paid out.

An experienced claims adjuster will take in consideration a number of factors to determine the value of a vehicle and the first on that list is what other equipment like it is selling for on the local open market. If you think your truck is worth $75,000 and list that amount as the stated value, but similar trucks are selling on the market for $62,000… you’re value is a bit high. Conversely, if your truck’s stated value is $55,000, but similar trucks are selling on the market for $62,000… you’re value is a bit low. Consider that a physical damage policy rate can be around 4% of the stated value (this rate varies). The difference between $75,000 and $62,000 is $13,000. $13,000 multiplied by a 4% rate is $520 extra (per truck) that you paid for that policy. The difference between $62,000 and $55,000 is $7,000 that will not be paid to you upon a total loss. If your value was at $62,000 your rate would have been $280 more in this instance. (Above figures are intended for illustration purposes only).
We understand that there might be some upgrades an extras that you feel make it worth more, so if you do have those upgrades maintain receipts for those items e.g., rims, new paint, specials kits and engines, etc. Regular maintenance does not increase the market value. So, before you give a stated value for your equipment, check your local markets to determine the value of the unit. The market value should be based on the zip code in which the vehicle is registered.

Your physical damage policy is normally an annual policy which means it cancels and renews on an annual basis. Your stated value should do the same. Make sure to make appropriate adjustments to the stated value each policy renewal to ensure the appropriate stated value.

FMCSA to allow for better removal of citations from the MCMIS

Dec, 2 2013 – FMCSA has published a notice in the Federal Register that announces changes to its Motor Carrier Management Information System (MCMIS) to allow the Agency to upload the results of adjudicated State citations for roadside inspection violation data.

FMCSA is modifying its MCMIS to accept adjudication citation information with a violation that (1) was dismissed or resulted in a finding of not guilty; (2) resulted in a conviction of a different or lesser charge; or (3) resulted in conviction of the original charge.

The Agency’s State partners will be directed to modify their processes and procedures to capture the adjudicated results associated with roadside inspection violations and upload the information to FMCSA.

Currently, the FMCSA merely advises their DataQ analysts to exercise discretion and good judgment in determining whether fairness dictates removal of the violation from the State and Federal database. However, the Agency found that some states will automatically remove a violation associated with an adjudicated citation for which there is no conviction, while others do not unless evidence submitted to the court supports a finding that the violation did not occur. The Agency believes the changes will improve roadside inspection data quality and consistency.

The comment period for this notice ended January 2. You can view details and comments at www.regulations.gov using Federal Register Number: 2013-28795.
FMCSA intends changes to apply to citations occurring on or after the implementation date.

The table below indicates how the adjudicated outcomes documented in MCMIS
will impact the use of the cited violation in FMCSA’s SMS and PSP databases:

Result of adjudicated citation associated with a violation uploaded to MCMIS:

Violation in PSP:

Violation in SMS:

(1) Convicted of original charge

Retain violation

Retain violation

(2) Not guilty/Dismissed

Remove violation

Remove violation

(3) Convicted of different charge

Retain AND indicate violation as “Resulted in conviction of a different charge”

Retain AND indicate violation as “Resulted in conviction of a
different charge”; SMS severity weight set to lowest BASIC* value

Adjudicated Citation:

A citation that has been contested and resolved through a due process proceeding in a State, local, or administrative tribunal, regardless of how the action is resolved, whether by a judge or prosecutor or as part of a plea agreement or otherwise.