September 2015

3 Problems Motor Carriers Face with the SMS Model

Motor Carrier
The Miscommunication and Misuse of Motor Carrier Data

When assessing the safety of a commercial auto operation, there is more freely available information today than ever before. As with all data that is easily accessible in the information age, there are people trying to capitalize on how this information is used. In a prior article, CAB Usage in Underwriting Truckers, we discussed how insurance companies and underwriters utilize this data to try and better determine the safety culture of an operation. However, the use and interpretation of this data is not limited to the insurance industry, which is leading to disputes over the measurements gathered and the availability of data.

First, let’s quickly establish what data we’re talking about. The Federal Motor Carrier Safety Administration (FMCSA) created the Safety Measurement System (SMS), the source of this data, and its associated scoring methodology as part of the CSA 2010 initiative. The intent of the initiative was to make the roadways safer by identifying those trends in motor carriers that might show a direct connection to loss frequency. Determinations for trends and scores are based on the aggregated history of all DOT violations that are discovered during the roadside inspection of a motor carrier, and it is this violation data – ranging from a cracked windshield to speeding in a school zone – that is the focus of the current dispute.

The Problem with the Data
1. The relative scale on which a motor carrier’s SMS score is determined suggests that there will always be a subsection of motor carriers (10%) on the road that are deficient and should be removed from the roadways. Without question, the intent of the SMS model is to make the roadways safer, and eliminating those motor carriers who are presenting a greater hazard to the public by their actions is one of the best ways to go about doing this.  However, without establishing a true baseline by which motor carriers can be judged, a situation is created where the same operation which has been deemed acceptable today may be deemed deficient at the next review. Similarly, an operation in one peer group may be deemed acceptable while an operation with the same history in a separate peer group would be deemed deficient.
The strongest argument in support of the relative scale is that the flexible nature encourages motor carriers to constantly better their operations, and that the number of new entrants into the market will offset the percentages that are being removed from the roadways. Were peer groups not a factor in the model, the argument would have a stronger footing, but with its inclusion in the model, there is still an inconsistency whereby the same quality risk may be deemed both acceptable and unacceptable based solely on the peer group in which they fit.

2. The methodology used to determine the severity weights for each violation has been brought into question by insurers and associations that represent motor carriers, as the stated score isn’t necessarily indicative of an accident. The most frequently cited example of a questionable score is a seat belt violation – where a driver failing to wear his or her seat belt is assigned a severity weight of 7, and considered a greater indicator of accident frequency than violations such as following too close, failing to yield right of way, and failing to obey a traffic control device.Read More »3 Problems Motor Carriers Face with the SMS Model

Public Auto Insurance Program

In partnership with A rated program administration we are happy to offer a Public Auto Insurance Program for-hire and courtesy operations with primary nature-of-use transporting passengers, such as airport transportation, churches, courtesy (assisted living, hotel/motel, etc.), daycare, limousine, sightseeing/guided tours, social services, and employer van pools. Geography: Nationwide except AK, CA, MI, NJ, and NY. Ineligible risks: Taxis, Emergency and… Read More »Public Auto Insurance Program

Deer Collisions Season Started

What weighs 200 pounds, reaches speeds of up to 45 mph and can cost you thousands of dollars in a split-second? Deer collisions cost U.S. drivers millions every year, with an average repair cost of more than $4,000 for each claim. Odds for a deer collision double from October through December, so it’s time to understand the difference between comprehensive… Read More »Deer Collisions Season Started

Protection for Project Owners and Developers: Which Policies Work Best?

project developerA realistic evaluation of the risk that confronts project owners during and after construction indicates most owners are exposed to considerable liability. The ownership of property (including the ownership of buildings undergoing renovation) and construction work completed by contractors are two obvious examples.
While much of the risk is with the contractors, it is a mistake to conclude the owner has no potential for liability. While obtaining the status of additional insured on the contractor’s CGL policy or requiring the contractor to provide an OCP policy helps protect the owner, such coverage is quite limited and should not be the only liability coverage available to the owner. 
Owners of construction projects should have their own liability coverage. The Owner’s Interest CGL policy should be in place during construction to close the gaps in the owner’s liability insurance program and assure more adequate protection.
A Case Study

Condo Builder, Inc. is to build a residential development of 50 condos on a parcel of land that has been acquired by Condo Builder’s newly formed subsidiary, Haven Hills, LLC. As the project owner, Haven Hills will contract directly with Quality Contractors, Inc., an unrelated general contractor, to perform all construction work. At this point, the owners of Condo Builder begin to think about liability insurance to protect Haven Hills as the project owner. Which coverage works best for Haven Hills?

Additional Insured Protection – General Contractor’s CGL Policy
In the past, Condo Builder had not purchased liability insurance for the project owner, but instead had relied solely upon the owner’s status as an additional insured on the general contractor’s CGL policy. After all, the general contractor is in control of the construction site – so how could the owner be liable?

Unfortunately, Condo Builder learned some hard lessons on their last project – the Garden Estates project – whose owner was Garden Estates, LLC.Read More »Protection for Project Owners and Developers: Which Policies Work Best?

Reduce Risk from Wearables

Reduce Risk from Wearables

Image courtesy of franky242 at freedigitalphotosnet

With the growth in wearable technology across all types of industries, companies that never before considered themselves in the technology business face new risks they need to be prepared for. Being aware of these threats and following strategies to help protect against them can help businesses focus on the growth opportunities that connected technologies make possible.

How Does Wearable Technology Work?

Wearable technology combines form and function, integrating the functionality of once-bulky devices into wearable gear in the form of watches, eyeglasses and more. These types of devices follow a common basic template for how they work. First, sensors capture impulses and translate them into actionable data. Then, microprocessors extract, transform and load data to a transmittable format. Finally, transmitters wirelessly send data to cloud storage for further processing and reporting.

With applications ranging from health and fitness monitoring to employee monitoring and safety, people can expect tremendous expansion driven by the health care industry, the corporate sector and consumer demand. According to PwC, over 80% of consumers said an important benefit of wearable tech is its potential to make healthcare more convenient, and 68% said they would wear employer-provided wearables streaming anonymous data to an information pool in exchange for lower health insurance costs.¹

What Are the Risks?

Read More »Reduce Risk from Wearables

3 Exposures to Consider on a Builder’s Risk Policy

3 Exposures to Consider on a Builder's Risk PolicyHard, Soft and Business Income Expenses

The resurrecting construction industry means that builder’s risk submission activity is on the rise. As such, it’s important to understand this line of business. Here’s an overview of some things to consider on a builder’s risk policy.

Construction contracts generally require the building owner or the contractor to purchase and maintain a builder’s risk policy. The policy provides coverage for loss or damage to the unfinished building’s construction materials on the work site during the course of construction, subject to certain restrictions and exclusions. The policy can also be extended to cover existing structures if the project is a renovation. Exposures are broken down into three general parts: hard costs, soft costs and business income or loss of rents.

Hard costs are the tangible assets that comprise the construction project; quite simply, the costs of material and labor associated with a project – also known as “sticks and bricks.”

Soft costs, also known as Delay in Opening Expenses, are usually covered and limited by special endorsements to builder’s risk property policy. Coverage is provided for additional construction
loan interest, real estate taxes, marketing and re-leasing expenses, administrative expenses, and architectural/engineering fees which are incurred as a result of a covered loss – one that causes delay in completion of a project. These expenses can be further broken down into two sub-categories: construction expense and additional soft costs.Read More »3 Exposures to Consider on a Builder’s Risk Policy