Filed Under:Agent Broker, E&S/Specialty Business

Occupational accident coverage: Protect the company by protecting the drivers

As any motor carrier knows, America runs on trucks. Motor carriers play a vital role in keeping our factories and offices supplied and our store shelves stocked. But these motor carriers also are aware of the intrinsic risks associated with constantly being on the road. Both employees and independently contracted drivers know that at any time they could be involved in a catastrophic accident. Luckily, the employee driver is protected under the motor carrier's workers' compensation policy. But what about the independently contracted driver?

Prudent motor carriers should protect themselves and also independent owner-operator drivers by offering them comprehensive occupational accident insurance coverage.

Typically, an occupational accident coverage policy offers three components: accidental death and dismemberment, accident medical and accident disability. The coverage is not a general medical or health policy, but rather a specific cause-and-effect policy triggered by an accidental injury that occurs in the course of an insured driver's work. That would include injuries sustained in an accident while en route to a delivery or in slip-and-fall incidents in the course of the driver's duties.

Unlike workers' compensation, which covers employees, occupational accident policies provide coverage for independent contractors. Workers' compensation, paid by the employer, is mandated in most states; occupational accident coverage, which is purchased by the independent contractor through the company, is not.

Motor carriers that do not provide workers' compensation for their employees nor sponsor an occupational accident program for their contractors run the greatest exposure to expensive lawsuits brought by these employees or contractors in the event of a serious injury. It is more common, for trucking companies to at least provide workers' compensation for employee drivers, clerical warehouse staff and other employees of the organization. That leaves out a crucial group for motor carriers: the independent drivers they rely on to extend their capabilities. Providing both workers' compensation for employees and occupational accident for independent contractors offers the greatest protection for everyone.

Maintaining momentum

Occupational accident coverage is crucial in the trucking industry, which depends heavily on owner-operators who own their own rigs and lease their services to motor carriers. According to the Bureau of Transportation Statistics, trucks carry three-quarters of the value of freight shipped around the U.S., and for-hire trucks transport nearly 45 percent of the total. At the same time, trucking remains one of the most dangerous occupations due to long hours, long distances, heavy traffic and bad weather.

Given this fact, there is a high incidence of injury and death in the trucking industry, making it imperative for motor carriers to offer their owner-operator drivers a comprehensive occupational accident coverage plan that will cover them in the event of injury, or provide benefits to their families in the case of death. When an uninsured driver is seriously hurt on the job and faces medical bills he cannot pay, the only recourse may be to take legal action against the motor carrier. Such lawsuits often seek to establish the owner-operator or contract driver as an employee so they become eligible for workers' compensation benefits to defray the costs of their treatment or disability.

Besides helping to protect both the motor carrier and the driver, occupational accident policies can help companies retain and recruit high-quality drivers. By sponsoring such a plan and providing a financial safety net for drivers and their families, motor carriers communicate to their drivers that they value their services.

Independent yet protected

Occupational accident programs additionally help to maintain the contractual arms-length relationship between the company and the independent driver. By purchasing occupational accident coverage, drivers reaffirm their role as independent contractors rather than employees.

The distinction between employee and independent contractor is crucial. If a company treats an owner-operator as a regular employee, such as by paying for benefits, the company can become subject to a workers' compensation audit and find itself liable for workers' compensation premiums, which are particularly high in the trucking industry. For that reason, motor carriers typically perform administrative functions for the occupational accident coverage, but do not finance it, nor can they mandate that a driver buy a specific policy. Rather, they act as plan sponsors by offering independent truckers the opportunity to buy occupational accident coverage and deducting the premiums from the driver's settlements or pay.

A fork in the road

When seeking a new occupational accident coverage program or assessing a current policy, there are several key considerations. The insurance company should be reputable, with a solid track record in the industry and professionals who really understand the trucking industry and motor carriers' specialized needs.

The actual policy limits are crucial, as inadequate limits may force injured drivers to file a workers' compensation claim. Medical bills from a serious trucking accident can run into the hundreds of thousands of dollars. Added to that are the disability payments needed to see a driver through a long recovery. Typically, it is those claims in excess of $50,000 that can trigger a lawsuit.

With that in mind, policies should offer limits that include $50,000 accidental death and dismemberment coverage with a survivor benefit of $200,000, $1 million accident medical coverage with a 104-week benefit period, and temporary total disability coverage of $500 per week. Prompt and professional handling of a driver's claim can also be a key deterrent to legal action.

Accidents happen

Ultimately, an insurer's claims handling is where the rubber meets the road. It is important for the insurance company to have a high-quality claims facility, a strong claims payment history and a professional claims-handling staff. Ideally, there should be integration of claims and underwriting, which can minimize gaps in coverage. And ultimately, a smooth claims process ensures that drivers going through a difficult period receive high quality service.

In addition, the insurer should have a history of working to keep claims costs low. The insurer should offer a preferred provider network and actively encourage drivers to use that network in order to contain costs. The lower the claims costs, the lower the premiums for drivers will be.

The occupational accident program itself should offer a comprehensive definition of "dispatch"--that is, the duties that are considered a part of a driver's contract. Policies with a dispatch definition that is too narrow may not cover drivers when they are performing work in accordance with their contracts, but not while in actual transit to pick up a load, carry it or unload it.

Moreover, for motor carriers with both employees and independent contractors, using one insurer to provide both workers' compensation and occupational accident coverage may offer significant advantages. Placing both coverages with one insurer provides greater efficiency in claims handling and reduces the need for a workers' compensation audit.

Added value for valued drivers

Besides offering occupational accident coverage, motor carriers should be aware of value-added benefits that are available for their owner-operator drivers. In one example, a driver injured far from home was hospitalized and while at the hospital his identification, money and clothes went missing. Fortunately, the driver had taken advantage of added coverage offered by the motor carrier that provided both travel assistance and identity theft protection. In the end, the driver got home safely and the lost documentation was restored.

These value-added programs can include travel assistance benefits that would fly a spouse to visit a driver in a far-away hospital and pay to get the driver back home. Motor carriers also might offer a prescription drug discount plan for drivers and their families, or consider add-ons such as identity theft protection, an important consideration for truckers who spend so much time on the road.

Occupational accident coverage is a critical component of a motor carrier's insurance needs. It protects the drivers and their families from the medical costs of accidents, and it protects the company by deterring workers' compensation lawsuits by uncovered drivers. Motor carriers who offer inadequate coverage--or none at all--are needlessly exposing themselves and their drivers. Just as a responsible owner-operator wouldn't think of going out on the road without making sure that critical maintenance has been performed, motor carriers should take the time to tune up their occupational accident coverage and make sure that they're good to go.

Nothing included in this article should be construed as legal advice or underwriting opinion.

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