Leasing out Equipment?

Call your insurance agent first!

If you have trucks and/or trailers sitting in the parking lot and you’d like them to generate some revenue to help pay the bills by leasing them to a third party company or an independent owner-operator, you’d be wise to contact your insurance agent first. To clarify, I’m not talking here about truck/fleet owners utilizing lease-purchase agreements with drivers in this story, rather lease agreements with independent third-party companies or individuals who assume the responsibility for the safe operation of the equipment.

Take for example one of my customers. They have one truck, and when they started the business, they had one trailer. When that initial trailer suffered a mechanical issue, there was an unexpectedly long period of downtime waiting for necessary repair parts. To minimize the loss of revenue, the customer elected to purchase a second trailer and remove the initial trailer from the policy. Several months later, that trailer had finally received the repair it needed — the owner contacted me and wanted to place the repaired initial trailer back onto the policy.

They informed me they were leasing the trailer to a third party and they wanted the trailer to be insured while in the third party’s possession.

I had the unfortunate obligation to inform them that if they leased out any equipment to a third party, the leased equipment would not be covered while in the “care, custody and control” of that third party. Additionally, all the insurance companies I have access to (10-plus) would not offer the coverage they sought. Insurance that provides coverage for our equipment while it is leased out is hard to come by.

The best guidance I’ve ever received for insurance came from an underwriter. It is especially relevant if we want to insure equipment we lease to a third party. He said: “Usually, you can find insurance for anything if price is not an object. So I am not saying you can’t, just I wouldn’t know where it would be.”

Bottom line, if/when we locate an insurance company who will offer us a quote for equipment we want to lease out, it’s almost a given that the quote will be cost-prohibitive for most truck owners and especially for independent owner-operators or small fleets.

Why? Equipment leased to a third party has a much higher claims rate. Both trucks and trailers that are leased out have an increased potential to be damaged, stolen, abandoned or vandalized when compared to the equipment we operate ourselves or equipment we hire drivers to operate for us.

As a result of this reality, the insurance carriers I represent (accounting for the majority of insurance companies who insure owner operators and small trucking companies in the United States) do not provide any coverage for equipment leased out in this manner. Or, depending on the insurance company, they will only provide limited coverage. Specifically, coverage may be available only when the equipment we lease out is currently not under a lease and is in ourcare, custody and control.”

What it all boils down to is if you don’t have the correct insurance coverage while leasing equipment to a third party and you file a claim for a loss, that claim can be denied. The best way to illustrate this is by using a couple of hypothetical yet realistic scenarios.

Lease agreement for both scenarios: John Doe of John Doe Trucking has signed a lease agreement for a term of 1 year with you for a 2022 dry van trailer. As per the lease agreement, John Doe provides you with a certificate of insurance which provides proof of physical damage coverage up to $50,000 for a “non-owned trailer” which is in his “care, custody and control.”

Scenario One: With three months to go on that one-year term, John Doe, without notifying you and without your knowledge, returns the trailer during non-business hours. When you return to work on the next business day you find the trailer. To your dismay you see the trailer has been topped. That is to say, the top of the trailer hit a bridge and has suffered extensive damage. You contact John Doe and he denies that he returned the trailer damaged. You then contact the insurance company on John Doe’s certificate of insurance and file a claim. The insurance adjuster for John Doe’s insurance policy notifies you that John Doe had removed the non-owned trailer coverage 8 months ago. Because there is no coverage for non-owned trailer, your claim is denied.

Scenario Two: Six months into the lease term, John Doe failed to make his lease payment. You attempt to contact John Doe but his number is not in service, the notices you sent him via registered mail are returned and his emails bounce back to you. You check the FMCSA and discover his company John Doe Trucking is “not authorized.” You then contact your local police department and report the trailer as stolen, and contact the insurance company on John Doe’s certificate of insurance to file a claim. The insurance adjuster for John Doe’s insurance policy notifies you that John Doe’s insurance was canceled two months ago. Since John Doe has no current insurance policy, your claim is denied.

After exhausting your attempts with John Doe’s insurance company to recover your losses in the scenarios above, you then file a claim with your own insurance company. During your insurance company’s adjuster’s information gathering and investigation of the claim, the adjuster discovers that the equipment the claim is for is/was leased to John Doe Trucking and was in that company’s “care, custody and control” at the time of the incident that led to the claim for the loss. Your commercial auto insurance policy (as most all do) excludes coverage for any of your equipment that is leased to a third party. Because the trailer is/was under a lease and in John Doe’s “care, custody and control,” the claim can be denied.

If you are already leasing out equipment and have not disclosed that to your insurance agent, I would encourage you to contact them today.

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When in Crisis Mode

What actions to take to reduce soaring insurance premiums and stay in business.

What do I do now to stay in business?

This is not a topic I enjoy or take any pleasure in writing about. However, by doing so I hope to help any aspiring or new truck owner to avoid making decisions that later result in financial hardship and loosing their business.

Recently I’ve received an increase in calls from truck owners who are struggling to keep their businesses afloat. All blame the increase in their insurance premiums as the cause of their situation. Most believe it’s a result of their greedy xxxxxx insurance carrier who doesn’t care if they go out of business or not. As an Independent Owner Operator myself, these calls have been especially difficult for me. While honesty is always the best policy and it’s the only way I know how to help, it’s not always well received.

All of those who have called and asked me for help share many things in common. Still in their first year of business, they have:

  1. Grown their fleet of trucks and hired drivers (usually includes at least 1 family member).
  2. Failed to vet drivers and only hire drivers with clean or at least good MVR’s.
  3. Not limited their claims by dismissing drivers whose actions resulted in a claim(s).
  4. Waited until there are few options available to be able to remain in business.

Sadly most who find themselves in this circumstance seldom recover and make it to their 2nd or 3rd year in business. All would have benefited had they read From Independent Owner/Operator to Small Carrier and avoided this unfortunate circumstance by implementing the strategy outlined in my article What goes into calculating your trucking insurance premium rate?

Unfortunately none of those I have spoken with are aware that the their business decisions has caused the consequences they find themselves in. Put another way, it’s not the fault of greedy insurance company. Rather, as difficult as it is to hear, it’s self inflicted consequences by the unaware business owner’s decisions.

After I have finished that very difficult part of these conversations, next is the inevitable question from the truck owner “what do I do now to stay in business?” I always tell them the good news is there is a path to stay in business and lower your insurance costs. Few however are receptive to what is necessary to save their businesses and lower their insurance premiums. All to frequently it is because it involves downsizing which most are unwilling to do. Each and every time downsizing is not an option it is always because downsizing means telling a family member they can’t work for them any longer. I’ve had fathers and sons, brothers and brothers-in-law all tell me that downsizing wasn’t an option because of a family member being a driver. This is why few recover and save their businesses. Instead they elect to attempt to continue business as usual to a very unfortunate and completely preventable demise.

Additional changes to your insurance policy that are far less impactful in the amount they reduce your premium can still be effective tools to utilize to save money. These changes include:

  1. Reducing your radius of operation.
  2. Locate and Operate your business outside of regions with high insurance premium rates such as New York City, Los Angeles, Chicago, Miami, etc.
  3. Removing coverages that are not required such as General Liability, Hired Auto, Non-Owned trailer, etc.
  4. Adjusting the commodities you transport in favor of non-hazmat, less-risky, lower cost and nominal risk of theft commodities.
    1. Removing commodities such as:
      1. All hazmat
      2. Electronics
      3. Pharmaceuticals
      4. Shell fish
    2. Replacing with commodities such as:
      1. Canned goods
      2. Paper
      3. Non-alcoholic beverages
      4. Agriculture products such as grain & feed
  5. Increase your deductibles to the maximum amount offered by the insurance company.

If you’re truly in crisis mode, the first step to reducing your insurance cost is to identified and take advantage of all/any of these 5 listed options. Then, concurrently, downsize your operation to one truck, one trailer and yourself as the driver if you’re not already there. This will provide you the best possible opportunity to save your business.

To get more great business tips and trucking news visit Overdrive extra!

From Independent Owner/Operator to Small Carrier

Properly plan and prepare BEFORE buying equipment, hiring drivers or growing your company.

Once I overcame my setbacks and began enjoying success as an Independent Owner/Operator, I was convinced I was ready to be a successful small carrier with a fleet of 5, 10 or more trucks. I did not remain on that path for long. I quickly discovered that the nominal ROI (return on investment) compared to the added stress and headaches of having that small fleet simply wasn’t something I was going to be financially able or willing to continue. I’ll share the conclusion of my experience shortly. Before that, let’s look at some of the challenges we face when growing from and Independent Owner/Operator to a small carrier and/or fleet.

The 3 most common methods of growing our trucking businesses is by purchasing trucks and hiring drivers, leasing trucks to our authority that are either owned by the driver or by a fleet owner and lastly by purchasing trucks and selling them to an entrepreneur using a method known as lease purchase agreements. For the purposes of this article we will focus on those who purchase trucks and hire drivers.

When planning to grow our company, the impact to our commercial auto insurance (trucking insurance) is the easiest to prepare for. There are some fundamentals that make it fairly simple to estimate the increase in our insurance premiums when we are considering to add a truck, trailer and driver to our policy. All things being even (same truck type, year and value, same trailer type, year and value and same or similar driver age and MVR) our insurance will be double when we increase from a one truck operation to a two truck operation. The biggest variant to that way of estimating our premium increase is always the driver. As drivers, our MVR’s are seldom similar for a variety of reasons. More often than not, company drivers looking for a new job tend to have more infractions on their MVR then us owner operators will typically have. Generally speaking, us owner operators make a conscience effort to be more diligent to protect our MVR for obvious reasons. If we do not it will negatively impact our insurance premium costs as well as risking our business itself. I always advise my insurance customers to use an MVR service to check any driver they may be considering to hire prior to purchasing the equipment. That will help avoid the potential hazard of making the biggest mistake of all – hiring a driver that isn’t acceptable to the insurance company or a hiring driver who causes our insurance to increase to an un-affordable annual premium.

Hiring and retaining drivers is the most challenging concern with growing a company. The first mistake I made was believing the drivers I hired, some of whom were friends I had known for years, were going to stick around for a long time to come. I was seriously mistaken. Driver turn over is financially devastating for multiple reasons.

The immediate dilemma when we lose a driver is the truck is not generating any revenue to pay for its fixed costs such as loan payments, insurance premiums and registration. The longer the truck sits idle the more desperate we become to hire a new driver. Frequently that results in us hiring the first available driver our insurance carrier is willing to allow us to add to our policy. More often than not this new driver will have a less than stellar MVR and will result in an increase to our insurance premium. As an example, recently one of my insurance customers added a driver that had several infractions on their MVR. Adding that driver increased their policy premium from approximately $13,000.00 a year to about $28,000.00 a year!

Keep in mind we are discussing truck owners who purchase trucks and hire drivers – The next challenge we face with our drivers is proper classification. If we get it wrong we have a serious risk of running afoul with compliance. I’m not referring to compliance with the FMCSA, IFTA, UCR, IRP, etc. Rather I’m referring to agencies that few of us would ever want to cross sabers with.… the IRS and each state’s Departments of Labor. Being out of compliance with either or both of these can, and has many times over, lead to some of the most devastating consequences I have ever seen a truck owner experience. Unfortunately many truck owners have been incorrectly lead to believe that they can classify drivers as “Independent Contractors” and issue them an IRS form 1099 instead of the correct IRS form W-2. Both the IRS and all the states I am aware of state’s Departments of Labor have very clear and defined conditions in which an individual can be classified as an independent contractor. There is no gray area. A driver we hire to drive trucks we own or lease is an employee and not an independent contractor. As such when we hire drivers we are required to have both Workers Compensation and Unemployment insurance as well as collect the social security from the driver’s wages and pay the matching amount as required by the IRS. As a general rule of thumb if we hire a driver for a salary of $1,500.00 a week, as employers, it will cost us an estimated additional $1,500.00 a week for Workers Compensation insurance, Unemployment insurance, matching social security and any additional benefits such as medical benefits or a 401K. These additional costs brings our total cost of hiring a single driver to an estimated $3,000.00 a week.

For me, to grow my trucking business, I elected to buy and sell trucks using the lease purchase method. It was a disaster. The drivers who signed the lease purchase agreements discovered that it was a lot harder being an owner operator than it was being a company driver. They all elected to return to being a company driver. That resulted in my having trucks I was paying for that were not generating any revenue to be able to pay for them. So I considered hiring employee drivers. I crunched the numbers and considered the risk. It was painfully obvious to me that I would be better off accepting my losses and returning to being an Independent Owner Operator. I sold the extra trucks and trailers and returned to a one truck operation with myself as the only driver I had to worry about. It was the best personal, business and financial decision I ever made owning trucks.

To get more great business tips and trucking news visit Overdrive extra!

Don’t be lured into dishonesty to reduce your insurance premiums

The consequences of dishonesty when it comes to the information provided for an insurance policy can be devastating.

Recently a gentleman from Indiana contacted me. He said he was starting his own trucking company and would like a quote for insurance. He said he had prior experience owning a trucking company and was looking to re-enter the industry. We discussed trucking in general and it was apparent that he had significant prior experience in trucking. We even exchanged a few truck driver stories and our individual experiences of the negative impact on trucking the ever growing FMCSA regulations are having on the industry. All in all a very good conversation between two old school truck owners.

We began and completed his application together. He provided his driver’s, truck’s and trailer’s information along with his specific operation details. It was looking very promising. I was optimistic for him and believed he would receive quotes that would be on the lower end of premium rates.

I submitted his application to several insurance companies as I typically do, to see which insurance carrier would provide him the lowest premium for the amount of coverage he was seeking. To my surprise ALL insurance carriers “declined” (a polite word for refused) to offer an insurance quote. I reviewed all the information…. No drivers had any tickets or violations, there was only one insurance claim from the gentleman’s past (not uncommon for most of us) and the trucks and trailers were all newer. I wanted to learn more and see if there was something I did incorrectly that caused all the insurance companies to decline to quote this gentleman. I contacted one of the insurance carriers I had submitted his application to. They informed me that his previous FMCSA operating authority had been revoked by the FMCSA because his insurance had been canceled by the insurance company.

That’s when I learned, as Paul Harvey used to say “the rest of the story.” Everything the gentleman told me about his trucking past was true. But it was what he didn’t tell me that caused all the insurance carriers to decline to quote.

I called him and asked if this was a mistake or if he knew his previous FMCSA operating authority had been revoked because his insurance had been canceled. That’s when he disclosed why he was re-entering the trucking industry with a new FMCSA authority. Remember the one insurance claim? That claim was for an accident that one of is trucks was at fault for and both THE TRUCK AND DRIVER WERE NOT LISTED ON THE POLICY. The gentleman only listed one of his many trucks on his commercial auto policy and purchased a personal auto policy for his additional trucks to save money. As a result he was not able to purchase any insurance to get his previous FMCSA operating authority reinstated. He believed he could simply start a new company and be able to continue his trucking business. That is not the case. Even worse, he will most likely never be able to own a trucking company again.

If you are ever tempted or if anyone (a business partner, friend or even an insurance agent) suggests for you to mislead your insurance company, don’t do it! Some of the most common deceptions (lies) I have encountered are:

  1. Not including all vehicles owned or operated on the policy (this includes trucks and trailers)
  2. Not including all drivers on the policy
  3. Utilizing someone else’s address as a garaging address
  4. Utilizing a P.O. Box address as the physical location of the business

While these deceptions can reduce your premium they are also valid reasons an insurance company can cancel your insurance policy. Once that happens it follows you like a bad smell after hitting a skunk. No matter how hard you try you just can’t get rid of it and nobody wants to park next to you in the truck stop. Similarly, that’s how insurance companies deal with dishonest truck owners.

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Trucking – Never Been Better!

2007 Peterbilt & Reefer Trailer

There has never been a better time to own a truck and operate your own authority! Most truck owners would strongly disagree with me. Most all of my detractors would cite the high cost of fuel, the ever increasing maintenance costs and most of all the ELD mandate.

Lets start with the biggest obstacle to profitability. The ELD mandate. To be clear, I do NOT support the ELD mandate. However, if you are using an ELD there are a few nominal positives that have came with the FMCSA forced ELD mandate. Since the April 1st date of full enforcement the truck availability has dramatically decreased creating a vacuum of trucks and an increased volume in available freight. This has led to 2 very positive circumstances for truck owners. Rates are significantly increasing and load availability is excellent. So higher margins per mile and less down time between loads.

If high fuel costs are cutting into your profits then I strongly recommend you read my posts “How Does IFTA Work,” “Fuel Surcharge” and “Carrier Rate Agreement or Carrier Contract.” You should never loose profits due to the fluctuation of fuel prices. Likewise and equally important, neither should your customers. If you demonstrate fairness to your customers in your “Carrier Rate Agreement” and utilize a “Fuel Surcharge,” you will earn their respect and enjoy a long term business relationship together.

There is no doubt maintenance costs are on the rise for everyone. You can and should use all available resources to minimize your maintenance costs. Such as installing a quality “Oil By-Pass Filter” on your truck, locate “Junk Yard Truck Parts” and utilize “After Market Truck Parts.” All 3 of these will decrease your maintenance costs and down time while simultaneously increasing your profitability.

Without any doubt at all, the best way to fully maximize the current opportunities in the trucking industry is to own a 1990’s model year truck or older. In doing so your operating costs will be less (lower or no truck payment, lower insurance rates and no DPF or DEF down time / repairs / costs) and you will not be hamstrung with the ELD mandate. You will enjoy operating a higher quality of service and reliability for your customers and they will appreciate you for it. Anyone with a 1990’s or older model year truck will always be more profitable than a model year truck requiring an ELD.

How to be Profitable Owning a Truck

Standing in front of my 2007 Peterbilt.

David sent me a message that is all to common for new truck owners. His concern is how to be profitable owning a truck.

“How did you manage to make a profit? It seems as though I find loads but they are so underpaid that it feels I’m only making money to cover the fuel. I would appreciate any input you have!”

In order to answer David’s concern of how to be profitable owning a truck, “How did you manage to make a profit,” I am going to make a few assumptions.

1. There is a truck payment

2. There are no or few direct customers

3. “Agents” or “Professionals” are being used for some or all compliance

For me, initially profit did not come easy. In fact, in the very beginning it didn’t come at all. In my first week of owning my first truck I suffered a major set back. My truck blew out the front rear end. To make matters worse, the mechanic discovered that the previous owner had custom machined gears made and put them in both rear ends. So I had a decision to make. Give up or fight back. I have a “Never Fail” mentality so giving up wasn’t and isn’t part of my vocabulary. So I took the harder path of fighting my way back from financial disaster. My key decisions that helped me overcome my setback and succeed were as follows.

1. Do the hardest and most demanding loads because they pay the best

2. Run the maximum amount of miles I possibly could

3. Improve my equipment to lower my operating costs

4. Stay as tight fisted with my money as possible

While all those sound easy they can be very difficult to implement and stay committed to. I’ll take them one at a time.

Do the hardest and most demanding loads because they pay the best. For me this meant going back to LTL. To me LTL is some of the most aggravating freight there is especially with a refer. Fighting traffic to get all the pickups and deliveries completed on time, the unsavory atmosphere with most refrigerated freight shippers and receivers, the never ending “Wait” for the product and baby sitting the refer just to name a few. I point this out because I knew how much I hated it but it is what I knew had to be done to meet my self inflicted demand of “Never Fail.” So I reached out to a broker I knew who specialized in refer LTL and I verified with my direct produce customer that he could buy produce and load me out of California. You know what, it worked too! To learn how to locate direct customers and find out more about customers in general read my posts “Trucking Customers – Vital for truck owners,” “Meeting Potential New Customers” and “Find Customers Who Need Your Truck.”

Run the maximum amount of miles I possibly could. Along with recognizing the need to return to LTL freight I knew I had to maximizes my cash flow and profits. That meant keeping the left door closed and running as many miles as I possibly could. I knew what lane that meant I had to run. I gave up my modest Illinois to Florida and began LTL pickups in Indiana, Illinois and Iowa and delivering to cities throughout southern California. Then I chased produce up and down the coast with pickups and delivered it to Chicago. Yep, it worked as well!

Improve my equipment to lower my operating costs. This one takes the longest. My finances dictated what I could do and when I could do it. Bottom line is “Preventative” maintenance is vital. When you know something is going to need repairing, fix it on your terms not the truck or trailers terms! In doing so it won’t cost you as much money, down time or lost revenue. So even if you need to borrow or use plastic, always do preventative maintenance! When you can, make modifications to your equipment to lower your operating costs. If you look closely at the pictures there are a lot more changes than just the paint job to my 1999 International. I have a great post detailing many of the successful modifications and another post on how to save money on parts.

Stay as tight fisted with my money as possible. I have been accused of being a “tight wad” more times than I can count. I proudly ware it as a badge of honor! That may seem to contradict what I said about preventative maintenance when in actuality it goes hand in hand. Paying for something that cost a lot on your own terms is being frugal to the max. You are ensuring that even though it does cost a lot today, it is a small percent of the cost if you waited for it to be a disaster. Even though I wasn’t aware of my rear end issue, if I had, I could have gotten it fixed on my terms and not caused my financial crisis. So I learned two lessons from my first weeks owning a truck. First and most important, always have a financial back up plan and do better preventative maintenance.

As to my 3 assumptions to answer David’s question.

There is a truck payment. If you discover that your truck payment is simply unrealistic you do have an option. Purchase a truck that will be within your budget and sell your current truck. While that may sound harsh, it is the best and most financially sound option available to you. You can learn more about my truck choices and what I recommend in my posts “Choosing the Right Truck” and “Avoid the FMCSA ELD Mandate.”

There are no or few direct customers. Read the section above “Do the hardest and most demanding loads because they pay the best.”

Agents” or “Professionals” are being used for some or all compliance. In most all cases I have very little use for “Agents” or “Professionals” for most day to day compliance issues and in many other cases. I do my own IRP, IFTA, UCR, Canadian eManifest (yes, I go to Canada), MCS-150, Weight and Distance, Highway Use Tax, New York Highway Use Tax, Oregon Mileage Tax and everything I have failed to remember while typing. The reasons are simple. Once you do these for yourself you will become efficient (fast) at them, have a better understanding of your business and save in most cases thousands of dollars. All are a plus for you as a truck owner. If you’d like to learn more on how easy and low cost it is to get your own authority read my post “How to get an FMCSA Operating Authority.”

Last, choose an easy to use software to help you manage your money. I designed TruckBytes and continue to use it today with my own trucking company.

I hope my experiences and lessons have helped you know How to be Profitable Owning a Truck. If you have questions or would like for me to expand on anything I discussed in this post please let me know! I’m happy to accommodate.

Find Customers Who Need Your Truck

Your ability to find customers who need trucks will put you on the right path to success. Establishing your own direct customers is the best way to guarantee a dependable cash flow. When you provide a direct customer with dedicated reliable trucking services they will be more apt to pay you on time and keep you loaded with their product. Both of which help make an excellent business relationship for years to come.

The most effective way I found my customers is by keeping my eyes and ears open when making pickups and deliveries. Look at the product on the docks or at the locations and gather all the information you can. Look for company names and address on boxes, product or anywhere else. Ask questions of the shipper or receiver like…

  1. Do you get that product every week?
  2. Does the same truck bring it or pick it up each week?
  3. Could you use a reliable dedicated truck?
  4. Who can I talk to?

Ask the drivers making pickups and deliveries questions to like…

  1. Do you haul this load every week?
  2. Did you get it from a broker?
  3. Do they have other loads every week?

You will be surprised at how much information you can gain just by politely talking to people at the shippers and receivers. It is important to point out to be respectful, polite and above all cautious. If they don’t want to discuss it with you thank them for their time and if you think an apology is in order to keep the peace then by all means apologize! Don’t be offended if a shipper or receiver doesn’t want to discuss their product shipments because they are most likely an employee that is not responsible for locating trucks. That is why you politely ask “who can I talk to?” If a driver doesn’t want to discuss his load it’s most likely because he owns his truck, he’s feeling threatened and wants to protect his relationship with his customer. Very understandable of a fellow truck owner. A sincere apology, congratulating them for acquiring such a valued customer and asking them for advice from their success would be the best response. They still may not talk to you but you have taken the high road and defused the situation.

Potential customers that need trucks are located everywhere. I have been known to stop as soon as I notice a business with trucks that are pulling the same trailer that I am pulling or that I am considering pulling (dry van, refer, step deck, dry bulk, etc.). There is nothing wrong with stopping, introducing yourself and meeting a potential new customer face to face. Business parks and business districts are a treasure-trove of potential new customers. Search them out and introduce yourself to as many businesses who will allow you the opportunity. In fact I have enjoyed more successful negotiations when I meet the customer in person even when walking in unannounced. They are able to read my body language, look into my eyes and see my confidence and commitment to their success. That is more valuable than anything you could put in a written contract or express over the phone. If at all possible meet with your potential and existing customers as often as possible. The rewards of a successful business relationship are increased immeasurably!

Take full advantage of customers who need your truck by learning how to get your own Operating Authority.

Additional Insured

What EVERY truck owner needs know

Customers and/or truck brokers (this includes freight forwarders and freight brokers) requesting to be added to a truck owner’s insurance policy as an “Additional Insured” has become a common practice in the trucking industry.

When a dispatcher for a truck broker asks me to add the truck broker as “Additional Insured” I always ask them, why? Without fail I will get 1 of 2 answers or sometimes both:

1) So we know if your insurance is canceled and when it is due to renew.

2) It’s just what our company requires from carriers and truck owners.

Neither of these answers provide a valid justification for any customer or truck broker to request to be added as “Additional Insured” on a carrier or truck owner’s insurance policy.

When we provide a customer or truck broker a traditional certificate of insurance (COI) with the customer or truck broker listed as the “Certificate Holder” (NOT as “Additional Insured”) they have all the information about the insurance policy they need including:

1) Name Insured (the carrier and/or truck owner)

2) All amounts of insurance coverage (liability, cargo, reefer breakdown, non-owned trailer, etc.)

3) Policy start date and end date

4) Insurance company

5) Insurance Agency

If the customer or truck broker wants to know if a carrier or truck owner’s insurance has been canceled all they have to do is visit the FMCSA SAFERSYS website (https://safer.fmcsa.dot.gov/CompanySnapshot.aspx) to view the status of the carrier or truck owner’s insurance policy. This is public information that is provided by the FMCSA and is available to anyone who wishes to verify the insurance status of a carrier or truck owner. ALL commercial carriers (everyone with an FMCSA operating authority) are required to have liability insurance. ALL insurance companies are required to provide your insurance information to the FMCSA including the start date, expiration date and if your insurance is canceled for any reason they are required to update the FMCSA of the cancellation date immediately.

Now that we have established that there is not a justification for including a customer or truck broker as “Additional Insured” for the purpose of notification of cancellation or renewal date one has to ask why do they want it then? In order to answer that question we have to know what “Additional Insured” really means and how it can be used by a customer or truck broker.

First lets discuss the basics – An “Additional Insured” is an endorsement. An “Additional Insured” endorsement does exactly what it sounds like it would do. It adds another party, in this case a customer or truck broker, to the policy as an insured. When an “Additional Insured” endorsement is added, there is a change made to the policy. It specifically extends insurance coverage to the “Additional Insured” customer or truck broker placed on the policy. It then provides insurance coverage to the “Additional Insured” who can then, without any additional consent (because consent has already been provided by adding them to the policy as “Additional Insured”), submit a claim against the carrier or truck owner’s insurance policy. Now you may ask why would a customer or truck broker file a claim on a policy they are listed as “Additional Insured?” The answer is going to surprise you… because they either don’t have enough insurance or especially in the case of a truck broker, they have no insurance at all! Thus they rely on you the carrier or truck owner to provide them with free insurance.

Even more important, being listed as “Additional Insured” means the customer or truck broker can avoid their liable obligations – The carrier or truck owner’s insurance company can not sue anyone listed on the policy. This includes “Additional Insured.” If the customer or broker is liable for bodily injuries or property damage that the carrier or truck owner sustains they can not be sued by the carrier or truck owner’s insurance company for those damages. Those customers and truck brokers who are given an “Additional Insured” endorsement on a carrier or truck owner’s insurance policy simply want to make certain that if in the event you, the carrier and/or truck owner, suffer a bodily injury or your truck and/or trailer or other property are damaged in which they are liable for (legally responsible for) they don’t have to pay for it!

My solution – When a customer or truck broker asks me to be listed as “Additional Insured” on my insurance policy, I first ask them the above mentioned 2 questions. Then I inform them of what “Additional Insured” really means followed up with: “If your company can’t afford adequate liability insurance or isn’t willing to be responsible for it’s actions, then your company isn’t a company I’m willing to take the risk to do business with.” Then I continue my hunt for my next load.

No customer, truck broker or their loads are worth granting them “Additional Insured” on my insurance policy!

The trucking industry is complex and changing. To learn more check out the entire category Business of Trucking.

Planning for a Negative Economy

Planing for negative economic swings is a must for all truck owners. There are plenty of warning signs that have been detailed recently by several economists and business publications such as lombardiletter.com, Fortune.com, Bloomberg and Fox Business that indicate our economy is beginning to slow. That means less freight transportation opportunities for non-essential items. Products such as: building materials, boats, RV’s, new vehicles, electronics, plastic products, books, general house hold goods and the list of products that will all be negatively impacted is endless. Avoiding transporting these types of products and choosing a more economy resistant product is your best defense against a slow economy or even a recession or depression.

My view of the best freight to haul is based on my business philosophy. I strongly believe in consistent and reliable cash flow. In trucking that means hauling freight that is the most reliable during both good and bad economic times. Currently the economy is booming and my article “Trucking – Never Been Better” outlines some of the best times I’ve enjoyed in Trucking. However, economies are ever changing and the days of our good economy are certain to end. Preparing now for a negative economy ahead of it’s impact on trucking is your best defense from a financial disaster.

Transporting food, especially refrigerated food, is the most consistent freight to transport that is the least impacted by a bad or down economy. Food is the last product that consumers stop purchasing. As such, choosing a customer that supplies refrigerated food products to the most basic supplier of foods to consumers is the most stable freight you can transport. If you have a choice to haul fresh beef to a grocery store warehouse or to haul fresh Caviar to an exclusive retailer you would be more secure hauling the beef. Beef products are purchased by a much larger customer base and are a staple of virtually every home in the United States and around the world.

Nothing is a guarantee. But it does seem obvious to me that transporting fresh food products that are a staple in almost every home refrigerator in American is the most resistant to economy swings. Thus they are the very best product to haul to enjoy a successful and profitable trucking business.

Drug & Alcohol Clearinghouse

What Every Truck Owner Needs to Know

The latest FMCSA burden on truck owners is the new Drug & Alcohol Clearinghouse. In an already over regulated industry this new requirement adds yet another hurdle to overcome to be compliant when operating your own FMCSA Operating Authority. All who have an FMCSA Operating Authority are required to participate in the FMCSA Drug & Alcohol Clearinghouse. The FMCSA even went out of their way to single out Independent Owner Operators such as myself.

An owner-operator (an employer who employs himself or herself as a CDL driver, typically a single-driver operation) is subject to the requirements pertaining to employers as well as those pertaining to drivers. Under the Clearinghouse final rule, an employer who employs himself or herself as a CDL driver must designate a consortium/third-party administrator (C/TPA) to comply with the employer’s Clearinghouse reporting requirements (§ 382.705(b)(6)).

Unlike the ELD mandate, there is not a way to avoid this compliance obstacle. You must participate in the Clearinghouse or face the certain consequences that are sure to follow if you do not. To avoid those consequences I strongly suggest creating your FMCSA Drug & Alcohol Clearinghouse account as soon as possible. In doing so you can continue to operate compliantly and not have a target on you for an FMCSA audit. Here is how to get it done.

The first step is to create an FMCSA Drug & Alcohol Clearinghouse account.

Authorized users must register to request access to information in the Clearinghouse. You will need to sign in with a login.gov account to begin your Clearinghouse registration.

On the surface that seems simple enough. However, when you examine the details a little closer you’ll discover that you can’t use your FMCSA login PIN or your USDOT login PIN. In order to create a FMCSA Drug & Alcohol Clearinghouse account you must first have a login.gov account. Once you have created your login.gov account you will be able to continue. As a truck owner with an FMCSA Operating Authority you will create an “Employer Admin” account. If you are an Independent Owner Operator there will be an option to select specifically for Independent Owner Operators. As an Independent Owner Operator, once you have successfully created your Employer Admin account you will want to register as a Driver as well.

The next is to select you Drug & Alcohol Consortium.

Designate Your C/TPA (required)
As an owner-operator, you are required to work with at least one consortia/third-party administration (C/TPA) to manage your drug and alcohol testing program. You will need to designate your C/TPA(s) in the Clearinghouse before they can conduct queries and/or report violations on your behalf.

Once you have created your account as an Employer Admin, you will need to select your Drug & Alcohol Consortium provider from the FMCSA Drug & Alcohol Clearinghouse participating consortiums. This is where you can run into issues. If your Drug & Alcohol Consortium is not listed, they are NOT an approved Drug & Alcohol Consortium. You must contact your Drug & Alcohol Consortium and ask them to register with the FMCSA Drug & Alcohol Clearinghouse or you will need to choose another Drug & Alcohol Consortium provider who is approved by the FMCSA Drug & Alcohol Clearinghouse and compliant.

Lastly, you will be required to purchase a “Query Plan.”

All employers of CDL drivers must purchase a query plan in the Clearinghouse. This query plan enables employers, and their consortia/third-party administrators (C/TPAs), to conduct queries of driver Clearinghouse records.

Registered employers must log into their Clearinghouse accounts to purchase their query plan. Query plans may be purchased from the FMCSA Clearinghouse only.

For Independent Owner Operators, I recommend purchasing the “Flat per query rate ($1.25), for limited and full queries.” It is by far the most affordable and does exactly what you need without over paying.

There are a multitude of other compliancy rules and regulations you must comply with when having your own FMCSA Operating Authority. To learn more about them read my post How to get an FMCSA Operating Authority.