Risky Business

Multis - The Good, The Bad and The Uglies - MCs

By Shelly Benisch, CIC with Commercial Insurance Solutions (CIS)
Posted Mar 11th 2013 8:33AM

CIS_Logo_27.jpg This is part 1 of a 3 part series on the Multi - Today's focus, the Motor Carrier end

Hi Everyone,

So let’s talk about The Multi. This is what many on the ExpeditersOnline.com Open Forum call it. We refer to it as the "Non-Exclusive Contract" relationship between a Motor Carrier and an Owner Operator. But let’s use Multi it’s short and snappy.

The Multi first appeared on our radar about 6 years ago. Where it came from, what inspired it and how the arrangement morphed into Expediting to such a large degree is a very long blog for another day.   I’ll be glad to go into in the future for anyone who is interested. Bottom line, it is a new business model that is actively in use today by over 100 Expediting Motor Carriers. When we realized early in that this model was a growing trend, CIS/Progressive integrated our research and analysis of possible exposures and recommended precautions to protect all parties.


The TEANA board had one of the best Transportation lawyers in the U.S. review this "new phenomenon" a few years ago. Henry Seaton summed it up best, "the devil is in the details". So, let's share some of those "devilish details". The GOOD, the BAD and the UGLY!

First the Good

The Good Motor Carrier understands that by choosing the Multi model the insurance structure must match the risk.

He knows that when he promises on his Motor Carrier Certificate of Liability that he maintains $1 Million Liability and $100K Cargo, that all of his Owner Operators also carry those limits..essentially limits must be the same "on all ends at all times" or there is a potential gap in coverage.
 
He would never allow his Owner Operators to provide any lower limits of insurance because that would be a lie to the Expediting Community that the coverage doesn't match and won't support a claim. It seems like a "no brainer", but he also knows to reject an Owner Operator who tries to offer proof of insurance from a company that DOES NOT INSURE Expediting Owner Ops on a 24/7 Unlimited Radius basis (and other particulars).

Acuity, Allstate, American Farm, Auto Owners, Geico, Grange, Great American, Great West, Hartford, Lloyds, Nationwide, Northland, State Auto, State Farm & Zurich simply DO NOT insure Individual Expediters with the specific coverage requirements unique to our industry.

He knows that following the proper procedures of insurance monitoring and verification is time consuming and difficult, but he understands his due diligence protects everyone in the chain including Shippers, other Motor Carriers within the Sylectus network, and HIMSELF. Bottom line, he knows that his word is good in the Expediting Community, and he’s respected for it.

Now the BAD

I’m amazed how many MULTI Motor Carriers jumped onto this model without the proper knowledge and operate by "copying the other guy". These Motor Carriers are lax in their due diligence and apply proper procedures only when it is convenient.  Usually these MULTI companies begin operating with ignorance of how to construct a safe matrix, but I’m sad to say many eventually drift further down the dangerous path of greed and desperation to gain more market share.

They want to add Owner Operators so desperately that they get careless, and no, it’s not easy to monitor and verify proper coverage at all times.that’s why there’s forms to follow to make the job more manageable.

Some Bad Motor Carriers are within a circle of Owner Ops that are just bad apples…they just want to cheat everything (next blog). The BAD are seriously risking their business and often don't know it. They are well on their way towards UGLY.

 And Sadly - The UGLY, these are truly The DANGEROUS Motor Carriers amongst us. 

Ugly "Multi" Motor Carriers understand the model, know the proper procedures required to keep it safe, but disregard them to gain any advantage for themselves. They are willing to take risks in order to game the system in insurance, safety and honesty. They attract and accept the “rouges", even encouraging cheater Owner Operators.

Apparently they believe misrepresenting their coverage on Certificates of Liability to haul for specific shippers requiring increased coverage is acceptable.  To be specific,  promising $2 Million Commercial Auto Liability and $250K Cargo to Shippers and other Motor Carriers, knowing full well that their Owner Ops are carrying only $1 Million Liability and $100K Cargo OR LESS is DANGEROUS. Those complicit in passing off "Umbrella" or "Excess" coverage of an extra $1 or $2 Million for Commercial Auto Liability, when the extra coverage extends only to General Liability - nothing to do with the vehicles - are dangerous as well.

For anyone hauling for more than one company, the insurance coverage required is Primary, or 24/7.Depending greatly on each individual’s ratings criteria and unit, rates can vary from $2,700 per year to over $7,000/year for the coverage required.

Good Multi and Traditional format Motor Carriers understand that there is no free lunch in any aspect of life, and you gotta “pay to play” to uphold safety and protection.   All overhead in business fluctuates, and a well- managed operation maintains stability for its Owner Ops.   As overall insurance rates correct for the added risks and losses, OR economic times become more challenging….the Uglies will look to cheat more.  

The Ugly Multi companies and their O/Os are also the main suspects in keeping Cargo van & Sprinter per mile rates low.     After they tap out their resources by offering ridiculously low rates per mile, stiffing their Owner Ops on monies owed to them due to that “technical small print in the leasing contract”, and generally hurting a whole lot of people they pop back up as Chameleon Carriers under a new MC number.

The good news is that within the next year I believe a number of the "Multi" operations will no longer exist.   Clearly, these will be the Bad and the Uglies.
Why?  Increased auditing and stricter underwriting by insurance companies will result in more non-renewals and cancels of insurance policies for Motor Carriers.   
But insurance isn’t the only factor, Sylectus has incorporated a Work with Who you Trust concept.   With full participation by the "Good" Motor Carriers, it will go a long way to support a respectable core group for honest trade.

CIS/Progressive is committed to insuring “Good” Expediters.   But for the “Bads” and the “Uglies” forget raising rates, there won’t be any coverage at any price for Motor Carriers. This would be a good time for the MULTI Motor Carriers to examine if they are the Good, the Bad or the Ugly, and change accordingly if warranted.

Also, I wanted to share this in a blog format, so everyone in our Expediting Community including my Owner Ops, can know what’s going on behind the scenes and make their business decisions going forward intelligently and thoughtfully.

Next blog Wed, March 13th, The Good, the Bad and the Uglies - Owner Operators.

Shelly Benisch, CIC   
[email protected]  www.MyCISagent.com