Risky Business

Multis - The Good, The Bad and the Uglies - Both Sides

Hi Everyone,

Well, it appears I’ve touched on “the elephant in the corner” in my last 2 blogs this week, The Good, the Bad and the Uglies – Motor Carriers and Owner Ops.   I originally thought I’d sum up this third blog with the Pros and Cons “Multis” vs “Traditional” relationships between Owner Ops and their Motor Carriers.

I have to say, I think the current threads on E.O. have done a much better job than I, because those responding are “in the trenches” themselves.   What better source could we all have?   I encourage everyone to read the E.O. thread “Should you run for Multiple Carriers?"

Part of the Goal of this 3 part series is to point out challenges to Expediting when the “Uglies” get a foothold with the “Bads” well on their way, and how much they can change cost parameters in insurance and other overhead for everyone.

But more importantly, I think there’s a collective feeling of apprehension and anxiety everywhere, and we’d all like to feel more confident of our futures.

I believe the current feeling of unsteadiness can be reversed.   I believe Owner Operators CAN feel self-assured and stable in their lives again, and rates can be $1.10 or equiv again...or more  

I believe Motor Carriers can have the confidence to take the risk to move forward to bring on more salespeople, dispatchers and Owner Ops.

While a series of economic events over the past few years haven’t helped our industry, I believe the Expediting Community itself has the ability to reestablish itself as the “Elite” segment of Trucking if Good Motor Carriers and Good Owner Ops work together on both ends.

My goal of this series is to make that happen.   How do we do it?

Owner Ops, if you choose the “Multi”, understand that with each new Motor Carrier you add you are likely reducing the amount you will earn on your next run.   It’s simple supply and demand.

I’m exasperated hearing the stories of the “Multi” Owner Op who took the run at seventy cents only to be offered 90 cents a few minutes later from the other Motor Carrier he’s contracted to at the same time.

Who do you think is looking out for you, or the MC who offered you seventy cents or ninety cents?    

No one can continue to run their Small Business for long at seventy cents per mile.   When you accept this, you are dooming yourself to the life of a gypsy, never earning enough money to grow, much less become a Fleet Owner.

It’s common to think “more is better”.   Well, that’s not always the case, at least in Expediting. Bottom line, if you choose the “Multi”, limit your Motor Carriers to two or three…at the MOST.  

Then make sure you are communicating with your 2 or 3 Motor Carriers as to who ELSE you are contracted with, so they have some control over bidding if they choose to monitor.

Is this difficult to do when the wolf is at your door?   Yes, absolutely.   That’s why some of you with this challenge need to go to a “Traditional” model.   The "Multi" structure isn't for everyone. 

The “Big Boys” may annoy you, you might not like their rules, but they are stable, honest and they have the resources to survive tough times. 

Motor Carriers, there are “Good Multis”, following their due diligence and working hard to grow their companies fairly and honestly.  Load Providers have the tools to monitor and determine who you should be brokering loads to….Work with Who You Trust.

By now, I honestly think we all know who the “Bad” or “Uglies” Motor Carriers are…it’s a small community.     If you’re brokering your loads to a dishonest Motor Carrier, or one who is bidding down the loads…stop doing it or stop complaining about the “Multis” running down rates.

From an insurance standpoint, the “Multi” structure of Cargo Vans and Sprinters hauling for more than one Motor Carrier became possible when ISO allowed the prior “Trucker” Insurance Form (contract) to be replaced with the “Motor Carrier Form” or “Business Auto” Form. It means the insurance coverage COULD now follow the Owner Op first, versus automatically defaulting to the Motor Carrier as it had in the past.  

Why do I say COULD instead of WILL? Because it depends WHICH type of Form the Insurance Company uses, and how it’s “triggered”.    Why am I telling you this and why should you care what type of Insurance “Contract” you’re on?

The “Multi” model does NOT WORK with an insurance company using old Contract Forms.   PRIMARY does not necessarily pay PRIMARY for the Owner Operator when he’s leased on to a Motor Carrier.   This leaves EVERYONE at risk.

(The same is true if a Motor Carrier isn’t on the “Multi” model, but asks their Owner Ops to provide their own Primary Commercial Auto Liability and Cargo….we’re talking insurance structuring here.)  

It’s the Insurance FORM or CONTRACT that matters.   You just can’t slap down some insurance that says “Unlimited” and “Additional Insured” and expect an Owner Operators’ insurance to automatically apply as PRIMARY Liability when he is leased on with a Motor Carrier on a Trucking for Hire operation.

Yes, it’s confusing, and yes, it’s very dangerous when it’s not administered correctly.   Even on a Progressive policy, the only company I know of that has researched this structure, there are intricacies that must be followed and it’s why you have a Expediting Insurance Specialist Agent to advise you that there’s much more to it than just “Unlimited Radius” and “Additional Insured.”

Bottom line, while I personally may think that some Owner Operators are better off under the “Traditional” model, especially someone looking for stability…I understand why some choose to be a “Multi” Owner Op…and I emphasize contracting with ONLY 2 or 3 Motor Carriers TOPS.  

It is a business model that exists, is growing and may be morphing.

We have a new model on the radar; we’ve nicknamed “The Hybrids”.

These are Motor Carriers that require some Owner Operators to be exclusive, but allow other Owner Operators to haul for more than one entity.   They have some Owner Ops on NTL, and require others to provide their own Primary Commercial Auto Liability and Cargo.

Can you see the potential exposures from an insurance standpoint when they aren’t administered correctly?

I believe there’s good and bad on both the “Multis” and the “Traditional” models, so it’s likely to be the same with “The Hybrids”.

In the end, we’re all in this together in our unique Expediting Community.   “Good” Motor Carriers and Owner Ops moving forward with honesty and integrity regardless of business models will build a more stable, well-paying Circle of Trust for everyone.

Warm Regards, and have a great weekend everyone!

Shelly Benisch, CIC    

[email protected]   

MyCISagent.com