No Risk? Know Risk. A Fleet Safety Risk Management Primer
No Risk? Know Risk. A Fleet Safety Risk Management Primer
to minimize one of your greatest risks as a manufacturer:
truck liability exposure.
During my commute to the office the other day, I passed two trucks, both heavily loaded, one with roof trusses and the other with stacked pallets. Neither truck listed the manufacturer of the materials, which led me to conclude that a third party had been hired to transport both these loads. Looking at these cargoes also got me thinking about the intricate loading processes involved, as well as the necessity that the driver truly understand and be prepared for the risks that exist as these loads travel at 65 mph. Accident potential, in terms of frequency, and accident loss, in terms of severity, was all I could think of. So much for how we lawyers think!
One of the greatest risks facing component manufacturers and lumber and building material dealers (and pallet manufacturers, for that matter) is their automobile and, particularly, their truck liability exposure. This includes managers and salespeople in pickup trucks and passenger vehicles, but especially applies to truck drivers who transport trusses, lumber or building materials. Truck accidents are prevalent. Furthermore, the jury awards in truck accident cases can be extremely high. The Bureau of Labor Statistics, for example, reported in 2006 that 25 percent of all construction industry deaths were transportation related. While motor vehicle loss increases with the number of vehicles operated, there is a potential for a serious loss even when only one vehicle is used in the course of your business.
If your company owns automobiles, pickup trucks or tractor-trailer rigs, or if your employees use their personal vehicles on company-related business, you should have fleet safety and risk management controls in place. Similarly, if you use independent truck operators or carriers, you may be liable if they are inadequately insured, and you may face other unknown risks, which I will discuss below. In either case, your company ought to have basic guidelines or best practices in place to ensure the safety of your fleet from injuries to drivers themselves, injuries to third parties, and the preservation of your company assets.
The SBCA TRUCK program is, of course, a good place for component manufacturers and lumber and material dealers to start when developing their fleet management best practices. In this article, I want to delve into some of these issues, starting with the considerations and risks of using independent truck operators and carriers and concluding with the elements to consider to improve your fleet safety program.
Considerations & Risks When Using Independent Truck Operators & Carriers
• Maintain valid and well-written contracts with all third-party carriers, shipping agents or brokers. Many component manufacturers and lumber and material dealers actively contract with third-party motor carriers, who in turn hire drivers and/or trucks to make the actual deliveries. It is also not uncommon for shippers to utilize shipping agents who actually work for one or more motor carriers to help arrange the placement of trucks for the shippers. A broker, on the other hand, is usually hired and paid by a shipper. That broker then places the freight order with a third-party driver or carrier, and the shipper pays the broker for the services provided.
• Whenever a motor carrier is utilized, directly or through a shipping agent, it is important a written contract exist that, among other terms, addresses delegation of responsibility (e.g., securing load and unloading responsibilities, if any), adequacy of insurance coverage, and soundness of financial position.
• If brokers are utilized, while additional risks exist, it is equally important to have a written contract in place setting out the process to follow in the selection of carriers or owner-operators, the insurance required of the broker and all carriers or owner-operators, and driver safety ratings. With brokers, where a component manufacturer pays the broker for each load and the broker in turn pays the carrier or owner-operator, there exists the possibility of double payment liability. Case law, which applies in all 50 states, requires that if a carrier or owner-operator is not paid by the broker, regardless of the fact that the shipper paid the broker, the shipper may legally have to pay the carrier or owner-operator. In other words, the shipper may have to pay for the load twice.
• Many shippers also hire owner-operators, who may even own their own truck or who otherwise operate the trucks owned by the shipper. The shipper may claim the owner-operator is an independent contractor and not an employee, even preparing a written agreement that spells out an independent contractor status. Unfortunately, both state and federal government agencies, and plaintiff lawyers representing one or more the owner-operators, have sued in many of these types of situations on the basis of “independent contractor misclassification.”
– The state and federal government’s interest is to increase tax revenues, which are more easily attainable when a company treats a driver as an employee and not an independent contractor.
– Plaintiff lawyers, on the other hand, allege that companies that misclassify employees as independent contractors deprive such persons of various rights.
• When shippers choose to meet their freight handling with third-party carriers, brokers or owner-operators, it is also essential that the shipper is sure to have the right insurance coverage in place on their own corporate automobile insurance policies.
Considerations & Risks for a Solid Fleet Management & Safety Program
Certain minimal fleet management practices should be in place where a component manufacturer or lumber and building material dealer own their own vehicles, including trucks, and operate those vehicles with company employees.
• Prepare and follow a written standard that defines who is eligible to drive a company vehicle, including minimum driver qualifications such as age, experience level and acceptable driving record.
• Develop written rules and policies for the use and maintenance of company vehicles or employee-owned vehicles that are used on company business.
• Verify that anyone driving a company-owned vehicle or personal vehicle on company business has a driver’s license for the type of vehicle they are driving. The Federal Motor Carrier Safety Administration (FMCSA), fmcsa.dot.gov, establishes the conditions in which a Commercial Driver’s License (CDL) is required. The individual states are required to make sure their existing testing and licensing programs are compatible with the FMCSA requirements.
• If a driver is required to possess a CDL to operate what FMCSA describes as a “Commercial Vehicle,” that driver also falls under the drug and alcohol testing requirements, regardless of whether the driver crosses state lines or not.
• Driving records are a key to any effective fleet management program. A motor vehicle record (MVR) must be obtained, reviewed and assessed. The MVR will provide a record of the state of license and traffic violations, suspensions, or cancellations. Review the MVR within the first month of hire, and at least once or twice a year, especially for those drivers with spotty records. In terms of assessment, you may want to consider that more than two violations or preventable accidents render an acceptable driver to either a borderline or poor category. Serious offenses should be particularly evaluated. An alcohol- or drug-related offense in the past five years should probably preclude a particular driver. You may also want to determine that the following offenses in the past five years preclude a driver: careless driving, chemical test refused, driving on a suspended or revoked license, fleeing or eluding a police officer, leaving the scene of an accident, passing a stopped school bus, reckless driving, or speeding 20 mph over the limit.
• Many third-party motor carriers and companies that own and operate their own fleets conduct comprehensive background checks on prospective drivers, including citizenship, past employment, work history gaps, and criminal history. I recently came across an addendum to a general contractor customer contract form that spells out in detail that no suppliers will deliver materials to that general contractor’s jobsite unless the supplier has performed criminal background checks on its drivers and rejects any driver “charged with or convicted of any felony offense, or any sex or sexually related offense, or who is listed as a sexual predator/sexual offender...”
• Not only should fleet management practices deal with the operation of trucks and truck drivers, but companies who have their employees utilize their personal vehicles for company business should be on an approved driver list. Likewise, an MVR should be obtained, the driver should have minimum insurance coverage in place, and the personal vehicle being used should be inspected at least once a year by the company.
• A component manufacturer fleet management program also must include discussion and training with respect to the loading of trusses onto trailers, the securing of the trusses to the trailer, the unloading of trusses, and how to effectively operate a vehicle loaded with trusses.
SBCA scoured federal transportation regulations and gathered best practices from around the industry to develop the TRUCK program. This driver training program is specific to the structural components industry and provides a strong foundation for both new and experienced drivers on everything from proper cargo loading and securement to safe cargo delivery and inspection at the jobsite.