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Imagine the following scenario:  you’re in your office when you get a call from one of your foreman that OSHA has just shown up to your job site.  The compliance officer is telling your foreman that they are following up on an anonymous complaint and they would like to walk the job site to conduct an inspection.  Your mind races to try to figure out who could have made the complaint and what it could possibly be about.  You tell your foreman that you will get to the job site as soon as you can, but you know that it may already be too late to prevent a citation. Has this happened to you? If it hasn’t, it likely will—especially since construction is considered to be a ‘high-risk’ industry. Navigating OSHA Inspections in the Construction Industry Under the Biden administration, OSHA is increasing its number of safety officers so that it can conduct more inspections. Furthermore, if a bill before Congress is passed then maximum fines could increase significantly. The bill proposes to raise the maximum fine for willful or repeat violations of OSHA workplace safety rules from $136,532 to $700,000, with a $50,000 minimum. The failure-to-abate fine would increase from $13,653 to $70,000. One violation could effectively put your company out of business, especially since the company is likely to receive multiple citations. OSHA typically prioritizes inspections based on 4 categories: Imminent Danger – Reasonable certainty of a fatality, therefore a top priority inspection. Fatality/Catastrophe – A report was made to OSHA and you can expect an inspection ASAP. Complaints/Referrals – A worker filed a complaint about safety or health hazard; a lower priority inspection. Programmed Inspections – Covers industries with high injury and illness rates, specific hazards, etc. This is the level of most inspections. What Can You Do to Survive an Inspection? First, do you have a written internal guideline for OSHA inspections?  If you don’t, create one immediately and make sure leadership, safety, superintendents, foreman and even your laborers and operators know what to do if OSHA shows up on a job site. Second, know how the inspection process works and what you should do to protect the company. OSHA does not and will not notify you of an inspection in advance. There’s a good chance that before making their presence known to your crew they have already watched your operations from afar. You have the right to refuse the inspection and request that the officer get a warrant, but this is not advisable in most situations. There are three parts to an OSHA visit: The Opening Conference: The OSHA officer will identify themselves, show a credentialed badge, and state the purpose and scope of their visit. The Inspection or Walk Around: This is their primary purpose for the visit. Review the scope of their visit and keep them within the scope. For example, take them directly to the area of the job site that they wish to see and take the most direct route to that area. The Closing Conference: This is where the officer will identify potential concerns and discuss next steps. The officer may request that you provide them with various documents within a certain timeframe. Third, approach this scenario knowing that OSHA is there to save lives and prevent injuries. Getting defensive and combative is likely not going to be helpful. Work with the officer in a manner of cooperation and partnership. Fourth, be prepared to address the critical areas the officer will focus on: Compliance issues Training records required by OSHA standards Records of injuries and illness – OSHA 300 log and 300A summary for 5 years Medical exams when required by OSHA standards Proper PPE Proper posting of required notices; for examples, the 300A summary must be posted from February 1st to April 30th On the inspection tour or walk around, make sure you do the following: Walk with the CSHO and never leave them alone or without an escort. Make sure everyone is wearing correct PPE, including the CSHO. Identify and photograph the same conditions the CSHO does and take detailed notes on what the CSHO is identifying and correct any unsafe conditions or behaviors immediately as this can build “good faith” with the CSHO. WARNING – Be careful because you do not want to agree that the hazard exists. Make sure the CSHO knows all photos are trade secrets. If an employee is to be interviewed, be aware they could be interviewed in private. CSHO could attempt to increase the scope of the inspection, but try to keep them on task as discussed in the opening conference. If asked questions by the CSHO, pause and think about your answer, only answer the question asked, and avoid arguing with the CSHO– it will get you nowhere, and you will likely lose. Once the inspection is over, you may not hear anything for several weeks or months because OSHA has up to 6 months to issue a citation.  Citations and penalties can be issued only by the Area Director and will arrive via certified mail.  As the employer, you are required to post the citations for 3 days or until abated– whichever is longer.  Penalties may be reduced based on your good faith in work with the CSHO, the size of your business, and your inspection history. As mentioned, there are several different violation types: Willful – This means that you knew there was an issue and that you intentionally and knowingly committed a violation. Serious – There is a substantial probability of death or serious injury and you likely knew or should have known the hazard existed. Other-Than-Serious – A violation has a direct relationship to safety and health, but likely would not cause death or serious physical harm. Repeated – A violation that is the same or similar to a previous violation. This could result in a significant penalty. Remember, there is an appeal process if you face citations.  This could be informal or formal and could escalate up to an administrative law judge for a ruling.  TIP: Even if you do not dispute the circumstances of the citation you can still dispute the classification of the citation.  For instance, you can ask that a Serious be reduced to an Other-Than-Serious.  This will reduce the penalty and may make a difference in how future citations of a similar nature are classified. To survive an OSHA inspection, being prepared is critical.  Have your guidelines written out and reviewed by your team.  Make sure that you or a member of your team are trained in OSHA rules specific to your business and can address issues before they become violations.  Work with an outside party to conduct a mock OSHA inspection.  Some OSHA agencies in certain states will conduct these for you. This has the added benefit of helping build “good faith” should an actual inspection occur.  Make sure you can document all of your safety training and that new hires and/or temporary employees receive safety training. Finally, be honest, cooperative and courteous. The OSHA officer has a job to do, just like you, and has a shared common goal– to make sure your employees go home safe to their loved ones. For further information on mock OSHA inspections or developing OSHA guidelines for your operation, please contact your Cottingham & Butler representative.

Employers across the country are facing a pronounced issue right now: too many open positions and not enough workers. On its face, it might seem like there are not enough workers available for jobs—hence all the openings. But, confoundingly, that’s not the case. The unemployment rate is still hovering just below 5%, translating to around 7.5 million unemployed Americans, according to the Bureau of Labor Statistics. Additionally, several key COVID-19 initiatives ended at the end of summer—expanded unemployment benefits ceased, and children returned to in-person classes. As such, many economists expected workers to be spurred back into the workforce this fall. That’s decidedly not been the case; while some individuals are returning to work, others are quitting in record numbers. This article explores the current labor market, offering potential reasons why individuals have been slow to return to work despite available positions and suggesting ways for employers to attract some of these workers. Factors Impacting Labor Shortage The current labor shortage is an interesting situation. On the one hand, there technically isn’t a shortage of labor, given the nearly 8 million currently unemployed workers. On the other hand, countless workplace openings haven’t been filled. In that sense, there is certainly a labor shortage. This section hones in on potential contributing factors, many of which stem from the COVID-19 pandemic. Fear of Contracting COVID-19 One obvious reason for the labor situation may be COVID-19-related fears. Some workers are simply afraid of contracting a serious case of COVID-19 at work. To some, remaining unemployed longer outweighs the risks of taking an in-person job. However, as more Americans get vaccinated, this may become less of a concern. Comfortable Savings During the pandemic, much of the country was in some sort of lockdown, with restrictions put on travel, gatherings, and business operations. In effect, many activities people enjoyed were suspended for nearly a year. That meant all the money that someone might spend on eating out, going to the movies, or attending concerts went into personal savings. Plus, individuals received generous stimulus checks and had access to enhanced unemployment benefits during this time, which also contributed to savings. Now, some workers are relying on those accrued savings to remain out of the workforce. Essentially, they are using their assets to hold out for a desirable job. Under normal circumstances, these people may have taken the first available position. But, with a savings safety net, they are able to wait longer. Reprioritized Worker Desires The COVID-19 pandemic caused workers to reevaluate their priorities, contributing to the labor shortage. Suddenly, workers began to rethink their priorities and the value of their labor. As the pandemic endured, a common thought was, “Is this job worth my mental and physical health?” Now, even as employees who were laid off are offered their previous positions, the answer among many has been a resounding, “No.” Paired with accrued savings, workers are now able to be more discerning with the jobs they accept. As such, a significant number have chosen to quit their current jobs while they search for more fulfilling options. According to several surveys, employees are looking for the following advantages when job hunting: Scheduling flexibility and/or telework options Access to employee benefits Greater compensation Job fulfillment Continued Caregiving Duties Finally, the COVID-19 pandemic has also affected the labor market through childcare issues. While many schools have returned to in-person learning, some have not. On top of that, some daycare facility rates have shot up due to staffing shortages and an influx of parents seeking child care. For some parents, the costs of daycare or the risks of in-person learning are too great. It may be more cost-effective to remain an at-home caregiver for a bit longer instead of returning to the workforce right now. Potential Employer Solutions Cumulatively, the factors contributing to the current labor shortage amount to more leverage for workers. Some workers realize that employers are desperately trying to fill positions. In turn, those workers are leveraging their labor to obtain positions they value more—holding out for the right offer. So, employers need to do what they can to make their open positions and workplaces ones that employees desire. Doing any less may severely impact both employee attraction and retention. That means implementing some of the aspects employees say they want, including the following: Scheduling and Work Location Flexibility During the height of the COVID-19 pandemic, many workplaces that were able to stay operational went remote. This meant sending most employees to work from home. Now that workplaces are reopening, many of those employees do not wish to return to in-person work. Instead, formerly remote employees want to retain their status. This leaves employers with a couple of options: allow telework for some positions or introduce a hybrid schedule (i.e., require some in-person days, allowing telework the rest of the week). In addition to helping cater to employee desires, telework also expands candidate pools, adding another incentive for employers. When a position can be done from anywhere, an employer doesn’t need to restrict hiring to a specific geographical region. It also enables employers to retain workers who may be interested in moving outside of a workplace’s region. Benefits Access Employee benefits are coveted assets in any workplace. Even narrow packages that just include health care can be supremely valuable among employees. They are valued even more by workers without access to them, such as part-time or service sector employees. In fact, access to employee benefits, or a lack thereof, is one of the reasons some workers have held off on returning to former positions. After living through a pandemic, it’s not hard to imagine why individuals aren’t eager to seek in-person jobs that don’t offer health care. Employers can consider how employee benefits packages might appeal to the kinds of workers they need. This could mean potentially expanding benefits options to some employees, such as part-time workers. Or, if an employer doesn’t offer any benefits, it might be worthwhile to consider adding some. Doing so could make a difference when trying to fill open positions or retain top talent. Greater Compensation Compensation is often brought up when asking employees what motivates them for obvious reasons. Simply put, individuals will likely respond to pay increases. If an employer has the budget for it, they can consider upping pay rates to attract workers or retain top performers. Alternatively, employers can think about other means of compensation—basically, perks or value-adds that increase the worth of a position. Examples of such perks include: Generous time off Bonuses for meeting productivity goals Periodic catered lunches Company-sponsored team outings Free beverages or snacks in the workplace Ultimately, employers should look for opportunities to demonstrate that they value their workers. Increasing compensation through the above means or otherwise can go a long way to showing that appreciation. Job Fulfillment Another attraction and retention strategy is improving worker perceptions about job fulfillment. Essentially, employers need to help employees answer the question, “Why is this job important?” The answer to that question will depend on the workplace and position, but there are some general ways employers can help in this regard. Namely, employers can directly address the matter in job descriptions by explaining how the position helps customers or a larger goal. Employers can also consider launching a branding campaign to help tell an important story. This could mean updating brand messaging, promoting certain initiatives or taking action on social issues. Summarily, such efforts help illustrate the values of a workplace. And when presented with a number of similar employers, workers are likely to decide where they want to work based on which company shares their values. Employer Takeaways The current labor shortage is due to several overlapping factors, many stemming from the COVID-19 pandemic. However, it’s not a traditional labor shortage in that there are still many unemployed individuals. The real crux seems to be that workers are leveraging the moment to obtain better jobs. It’s unclear how long workers will remain selective with their labor. Realistically, savings only last so long and, with ample vaccine availability, the pandemic may be under control soon. Workers may be compelled back into the workforce sooner rather than later. Yet, this may not be the case—the labor shortage might last months longer than anticipated. Therefore, it’s in employers’ best interest to listen to the desires of unemployed workers, such as flexibility and benefits. Understanding these drivers will be critical to attraction and retention efforts. At the end of the day, if an employer turns a deaf ear to what employees are looking for, they may be limiting the applicants they receive—both in terms of quality and quantity. In turn, this can severely impact an organization’s ability to grow and succeed. Reach out to Cottingham & Butler for more attraction and retention guidance.

‘Nuclear verdicts’ are increasing in frequency and getting bigger all the time. But what are ‘nuclear verdicts’ and why are they increasing? In a May 21, 2021 article on riskandinsurance.com, entitled “COVID-19 and Nuclear Verdicts: Disastrous Combination or Phantom Fear?” author Kiara Taylor noted: “Although a generally accepted definition of a nuclear verdict is one that exceeds $10 million, this arbitrary damages threshold fails to capture the problem adequately. A nuclear verdict is the classic disproportionate response: it so far exceeds a reasonable damages amount that only emotional or punitive juror motives can adequately explain it.” Social Inflation, Nuclear Verdicts, and Industry Turmoil Taylor goes on to identify a relationship between nuclear verdicts and another disturbing industry trend– social inflation. Put simply, litigation, insurance costs, and premiums all increase as society’s perceptions about what insurance covers expands.  As Taylor notes: “Social inflation and nuclear verdicts feed off each other in a vicious cycle of more frequent and escalating damages awards.” This poses enormous issues for the insurance industry.  With juries rendering more nuclear verdicts, insurance costs are increasing significantly, resulting in skyrocketing premiums, “which in turn threaten the continued existence of insurance industry clients, with the trucking industry offering a prime example.” The assertion that damages awards are escalating is well-supported by research.  According to a June 2020 research paper published by the American Transportation Research Institute (ATRI), entitled “The Impact of Nuclear Verdicts on the Trucking Industry”, the average size of verdicts from 2010 to 2018 increased from just over $2.3M to just under $23M – an increase of nearly 1000%. Escalating Damages and Industry Implications While there have been multiple nuclear verdicts over the last decade, with the largest ones ranging from $90 million to over $280 million, they were all trumped in a big way this past summer by a Florida jury that reached a verdict of $1 billion in a case involving a fatal trucking accident in 2017 wherein a teenager was killed by an inattentive truck driver while stopped in traffic for an accident involving another inattentive truck driver who was driving without a CDL and had a history of several prior crashes. Even though the driver whose truck collided with the teenager’s car was on his 25th hour of driving, couldn’t read English, had cruise control set to 70MPH, and didn’t brake until one second before the crash, the bulk of the verdict was for punitive damages against the truck driver that caused the traffic backup. As the frequency and size of nuclear verdicts increase, excess insurance carriers have fled the market, making excess insurance coverage both unaffordable and unavailable for many trucking companies.  This has forced even the largest trucking companies to reduce the amount of insurance coverage they carry, leaving them exposed and unprotected against a nuclear verdict.  Most trucking companies, if faced with a judgment that is millions (or tens of millions) of dollars in excess of their insurance coverage, would have to go out of business because they wouldn’t be able to pay it. Strategies for Dealing with Nuclear Verdicts So what can be done about it?  As stated in a Caseglide blog entitled, “What is a nuclear verdict?,” better communication and collaborative dialogue between both the defense counsel and claims teams can help mitigate the risk of a nuclear verdict. When a claims leader is informed late in the game that they could, and should, have settled and now they are headed to court, the results can be catastrophic. Along this same line of reasoning, I think Kiara Taylor hit the nail on the head when she wrote: “Pre-trial settlement is the easiest way to avoid a nuclear verdict.” Cottingham & Butler, with its dedicated team of Claims Advocates, can help with implementing both the mitigation and the avoidance strategies by encouraging and facilitating better communication and collaborative dialogue between the insured, the claims team, and defense counsel, and by encouraging pre-trial settlement all along the way.

The practice of contracting drivers has been standard since the mid-1990s and has helped trucking companies shift risk while providing drivers the freedom to operate a business of their own. In recent years, this model has been under attack, the most notable litigation being California’s Assembly Bill 5; which essentially would eliminate the traditional leased owner-operator model by stating independent contractors must do work “outside the usual course of the hiring entity’s business”. The next great challenge for the transportation industry relies on addressing these complexities to meet demand.  With labor laws changing and evolving, navigating who to employ– and how– remains a critical point of the hiring process.  According to American Trucking Association this past May, we are short 60,800 drivers.  If trends continue with freight forecasts, we could have a shortage of 160,000 drivers by 2028. So what options are available? One answer is other trucking companies. Freight brokers have long enjoyed the virtually unlimited capacity of their model.  The downfall has always been the consistency of freight for the trucker.  What if you could combine the benefits of freight brokers, and keep a consistent partner and stream of freight for the trucking company? Enter the Sub-Hauler Model The trucking company with the shipping contract turns itself into a third-party logistics company (3PL) or freight broker.  A dedicated cartage agreement or brokerage agreement is used to contact the sub-hauler’s trucks to the 3PL or freight broker.  The sub-hauler maintains their own authority, trucks, drivers, insurance, DOT compliance, and safety responsibilities. What makes this any different than any other brokerage/carrier arrangement? The main difference is consistent capacity and sub-hauler access to cost-saving products and services not available through common broker/carrier relationships.  The 3PL or brokerage must promise to keep the sub-hauler trucks filled with freight and in turn, the sub-hauler must agree that at least 75% of his revenue will be generated through the 3PL or broker. The sub-hauler can then access fuel discounts, safety resources, insurance, and equipment financing using the buying power of the 3PL or broker. Before you jump headfirst into the sub-hauler model, consider these items: Will you have enough freight to keep your sub-haulers at capacity? Do your shipper contracts allow you to broker freight? If not, you may still use sub-haulers; however, a different type of authority will be required. What type of operating authority will you need, freight broker or freight forwarder? What type of sub-hauler vetting process should you put into place? Will you use a registry monitoring service for authority and insurance compliance? Will sub-haulers use your trailers and need trailer interchange? What services, programs, and discounts should you create to attract sub-haulers? If converting leased owner-operators to sub-haulers, how much-increased revenue is needed to offset the costs of sub-haulers operating under their own authority (IFTA, IRP, permits, insurance, etc). To learn about how your owner-operator risk management strategies stack up against the best in the business, complete our virtual Risk Scorecard Assessment.

Roadcheck is an annual program conducted by the Commercial Vehicle Safety Alliance (CVSA), best described as a 3-day blitz held across the United States, Canada, and Mexico, taking place this year between May 4 – 6. It brings together roughly 13,000 inspectors across North America to focus on commercial vehicle inspections. The primary emphasis of this year’s Roadcheck is lighting on the vehicle side, and Hours of Service on the driver side, highlighted this year due to the fact that they topped the violation list during last year’s event. Vehicle Focus Drivers must remain inspection-ready on every trip. It’s the same mindset the office staff need every day– always audit ready, never knowing when something could happen to bring an investigator in. So what are some ways drivers can better prepare? Here’s an example of a pre-trip process to refresh your drivers’ minds, and maybe help them examine their current routines. While lights are not specifically listed here, a proper inspection should include the light check as they circle around the truck and/or trailer. Remember– it doesn’t matter if it’s a pre-trip, en-route, or post-trip inspection. The driver should have one inspection routine and always follow it. Inspectors continue their vehicle inspection on lighting, which accounted for 12% of all vehicle violations in 2020. Violations were deemed out-of-service (OOS) at a 7.66% rate. It makes sense that Hours of Service is also being emphasized this year, considering that this is the most cited vehicle violation of thus far, currently exceeding 150,000 violations just one quarter in! Two more violations also land in the 2020 Calendar Year Roadside Inspection Vehicle Violations Top 10 Red is displayed only at the back. Blue lights are reserved for law enforcement and are not legal on a CMV. It used to be, in Iowa for example, that you would be violated for any light out. This has now changed. Procedures are now that you would only be cited for mandatory lights that are inoperable. LEDs (light–emitting diodes) are longer lasting, brighter, smaller, and more efficient. However, they do not get hot like the incandescent lights, so in snowy weather, drivers have to remember to clean the lights off from snow build since it is no longer “automatic” from the light heat. Diodes make up the lights in an odd number. The regulation requires that half plus one needs to work. Therefore, if you have a 9-diode light, 5 need to be operable. Regulations on required lamps and reflectors can also be found in 393.11 at eCFR – Part 393. Be sure to utilize the reference table that breaks down the allowable colors for the various lamps. White, amber, and red colors and locations are clarified along with location, positioning, and vehicle types. Driver Focus The driver emphasis this year is hours of service. As stated above, the topic was selected due to high violation activity. The 2020 Calendar Year Roadside Inspection Driver Violations Top 10 also include three violations here with 12% of the violations and accounting for many Out-of-Service’s. False logs have always been a problem, and ELDs haven’t solved that… just improved and changed it. A big contributing factor to the false log violation is improper personal conveyance (PC) use. Remember that, in order to allocate time as personal conveyance, it really needs to be personal. Any activity in furtherance of business cannot legally be logged as personal conveyance. FMCSA has released a helpful section on its website that further breaks down this regulation. Be sure to reference this material as a refresher for your drivers, or to glean information for your driver orientation program. Other false log violations during audits come in from controlled substance and alcohol violations not getting logged as on-duty time. Log audits, roadside or office, also see fueling and roadside inspections causing false log violations. Drivers need to properly allot the time they spent on various functions. Plus, remember anything an owner-operator does in the furtherance of business is on-duty time of one sort or another. Let’s refresh what the on-duty definition is. § 395.2 Hours of Service Definitions On-duty time encompasses all time from when a driver begins to work or is required to be in readiness to work, until the time the driver is relieved from work, as well as all responsibility for performing work. On-duty time shall include: All time at a plant, terminal, facility, or other property of a motor carrier or shipper, or on any public property, waiting to be dispatched, unless the driver has been relieved from duty by the motor carrier; All time inspecting, servicing, or conditioning any commercial motor vehicle at any time; All driving time as defined in the term driving time; All time in or on a commercial motor vehicle, other than: time spent resting in or on a parked vehicle, except as otherwise provided in §397.5 of this subchapter; Time spent resting in a sleeper berth; or up to 3 hours riding in the passenger seat of a property-carrying vehicle moving on the highway immediately before or after a period of at least 7 consecutive hours in the sleeper berth; All time loading or unloading a commercial motor vehicle, supervising, or assisting in the loading or unloading, attending a commercial motor vehicle being loaded or unloaded, remaining in readiness to operate the commercial motor vehicle, or in giving or receiving receipts for shipments loaded or unloaded; All time repairing, obtaining assistance, or remaining in attendance upon a disabled commercial motor vehicle; All time spent providing a breath sample or urine specimen, including travel time to and from the collection site, to comply with the random, reasonable suspicion, post-crash, or follow-up testing required by part 382 of this subchapter when directed by a motor carrier; Performing any other work in the capacity, employ, or service of, a motor carrier; and Performing any compensated work for a person who is not a motor carrier. Remember that the September 29, 2020 HOS revision didn’t change the hours rules. The 11, 14, 60/70, 30-minute break, and passenger driver rules remain as is. It merely revised four guidelines on how the particulars are evaluated. This includes: The 30-minute break after 8 hours of driving is to be satisfied with a driver using a 30-minute on-duty break rather than the previous 30-minute off-duty period. The sleeper berth exemption offered additional flexibility in allowing a 7/3 split along with the 8/2 split. The Adverse Driving exception was modified by extending two hours to the maximum window during which driving is permitted. The short–haul exemption matched for the CDL driver and the non-CDL driver short-haul rule allowing the driver to lengthen the maximum on–duty period from 12 to hours and extend the distance to 150 air miles. Work with your drivers now. Evaluate your Hours-of-Service activity on your monthly violation statuses from your log reviews. Review your CSA HOS activity to see the kind of activity you have out there. Follow up with backup drivers that were previously coached post-violations – either roadside or in-house during your log audit reviews. Consider implementing some inspection days before Roadcheck 2021 starts on May 4th, and get the trucks in, without notice, to see what the equipment looks like as it rolls back in. Can you and your staff find some time to do spot checks out on the road in the next couple of weeks to see how the equipment is looking en route?  However, if you decide to prep for the event, make it as beneficial to your fleet and drivers as possible so you come back with clean inspections and limited infractions noted. Stay safe out there, and happy trails!

Background Information Each year, employers with health plans that provide prescription drug coverage to Medicare-eligible individuals must disclose to CMS whether that coverage is creditable or non-creditable. This disclosure is required regardless of whether the health plan’s coverage is primary or secondary to Medicare. The annual disclosure must be provided within 60 days after the start of the plan year. For calendar year health plans, the deadline for the 2021 online disclosure is March 1. What do I have to do? Plan sponsors are required to use the online disclosure form on the CMS Creditable Coverage webpage. This is the sole method for compliance with the disclosure requirement unless the entity does not have Internet access. The disclosure form lists the required data fields that must be completed in order to generate the disclosure notice to CMS, such as types of coverage, number of options offered, creditable coverage status, period covered by the disclosure notice, number of Part D-eligible individuals covered, etc. CMS has also provided instructions for detailed descriptions of these data fields and guidance on how to complete the form. If an employer’s group health plan does not offer prescription drug benefits to any Medicare Part D eligible individuals as of the beginning of the plan year, the group health plan is not required to submit the online disclosure form to CMS for that plan year. Please be advised that Cottingham & Butler does not engage in the practice of law and that information provided is not intended to be construed as legal or tax advice. Contact us if you have questions! Cottingham & Butler is committed to continuing to provide our clients with the most current and relevant information. If you have any additional questions regarding the Medicare D Disclosure Notice to CMS, please contact your Cottingham & Butler representative.

Independent Contractor Operating Agreements (ICOA) aka Owner-Operator Lease Agreements are governed by specific laws within the Federal Leasing Regulations. Violate these provisions and you may find yourself in hot water in the form of a class action lawsuit. According to transportation legal specialist Greg Feary of Scopelitis, Garvin, Light, Hanson, and Feary, the average cost to defend a class action lawsuit for violating truth in leasing laws is $25,000 per month. Cases normally drag on for several years and end with 6 to 7-figure settlements. Over 100 contractor v. motor carrier class action cases are active today. What steps can you take? Find out if your agreement meets the Federal Leasing Regulations. The Contractor Services Team at Cottingham & Butler can perform a checklist review of your agreement and advise if further action should be taken. If your agreement needs work, we can put you in touch with attorneys to revise your agreement at a discounted rate. A quality lease agreement might cost anywhere from $3,000 to $20,000 depending upon your situation. Compared to the cost of defending a class action, this is money well spent. Once you have a quality agreement in place, have an attorney review your lease at least every 18 months. Case outcomes and changes in state laws require regular tweaks to your agreement. We suggest budgeting $1,500 per year for these reviews. To learn about how your owner-operator risk management strategies stack up against the best in the business, complete our virtual Risk Scorecard assessment.

Competition for quality drivers has reached an all-time high Currently, the industry is short over 60,000 drivers, but most truckers say it feels like more. So what can a trucker do to solve this problem? Many have doubled down on lease purchases and owner-operator programs to attract drivers. But how are they doing it? Pay on percentage – Freight rates are at all-time highs and owner-operators know it. Carriers paying on mileage are at a disadvantage when freight rates are climbing. Adjusting mileage pay to compensate can be administratively crippling for a carrier. If mileage pay is necessary, consider a per-load override or “mileage booster” to keep pace with freight increases. Keep onboarding costs low – Efficient and effective orientation is critical to starting a good relationship with an owner-operator. Try and utilize electronic document processing to complete easy paperwork ahead of the orientation, such as Docusign or SignNow. Secure damage chargebacks via Deductible Buyback instead of collecting high escrows. Additionally, offer settlement deduct insurance programs to minimize owner-operator startup cash. Access to quality equipment – On average, owner-operators spend $2,400 per month on truck payments. Finding quality used equipment to fit a budget and keep maintenance costs in check is critical to owner operator’s success. Lease purchase programs and equipment financing can reduce the barrier to entry for a company driver looking for the next career step. Avoid leasing programs designed to take advantage of an owner-operator’s financial position. Are projected owner-operator revenues and expenses giving the owner-operator better net income than a company driver? If not, you may need to reexamine your approach. Resources American Truck Business Survey, September 2019

Have you completed “annual queries” on your current drivers? These are due by January 5th, 2021. By now, most of the industry is familiar with the required full query. However, as you may have seen in recent industry news, the “limited queries” (sometimes deemed “annual queries”) must be completed, as well. FMCSA’s Clearinghouse FAQs (Frequently Asked Questions) clarify the difference between the two types of mandatory queries. “A limited query allows an employer to determine if an individual driver’s Clearinghouse record has any information about resolved or unresolved drug and alcohol program violations, but does not release any specific violation information contained in the driver’s Clearinghouse record. Limited queries require only a general driver consent, which is obtained outside the Clearinghouse; this general consent is not required on an annual basis, it may be effective for more than one year. However, the limited consent request must specify the timeframe the driver is providing consent for.A full query allows the employer to see detailed information about any drug and alcohol program violations in a driver’s Clearinghouse record. An employer must obtain the driver’s electronic consent in the Clearinghouse prior to the release of detailed violation information during the full query.” Last Updated July 22nd, 2019 To summarize, the limited check tells you if your drivers are clean or if further digging is needed. This is applicable to all drivers running under your authority. Some Clearinghouse Need-To-Knows Limited checks DO NOT require the driver to register in the Clearinghouse. The driver DOES need to give the motor carrier consent for this query (outside the clearinghouse). This limited consent can be can done routinely through an annual consent – i.e. completed yearly. Another more efficient option is for your drivers to complete a single ongoing limited consent form (if it is worded properly). FMCSA has a sample consent form available in the Clearinghouse FAQs, found here. Consents are to be retained for 3 years after the date of the last query. The fleet MUST suspend operations for any existing driver NOT completing the consent and, therefore, not participating in the annual query. Should the limited query return that information exists on a driver, it will only say further investigation is needed. The motor carrier MUST, within 24 hours of the limited query, complete the full query or NOT use the driver in a safety-sensitive function. The driver must then approve (through the Clearinghouse) the release of the related data before FMSCA shares the detailed information with the Fleet contact. The motor carrier will be only charged once for both queries. Limited and full queries are $1.25 unless the fleet subscribes to a larger bundle package. A driver can access his/her own data by registering with the Clearinghouse and requesting their own data at no charge. Drivers must be queried once per year within 365 days from hire. Since the program went into effect on January 6, 2020, your annual queries are due by 1/5/21. For more information, visit FMCSA’s Clearinghouse Learning Center.

As we move into the final months of 2020, the pressures put on organizations across the country have increased, particularly for trucking companies.  Never mind COVID-19, civil unrest, and the interesting dynamics a presidential election year provides, the challenges trucking companies are facing with organizational and cost pressures – on top of an already difficult liability insurance market – are unparalleled. The Role of Captive Insurance in the Trucking Industry The overlap of the ongoing hard market that has seen rates increase for 39 straight quarters, and the fact that we are seeing a massive increase in the size and frequency of nuclear verdicts, is causing insurance premiums to rise and coverages to become more restrictive, requiring trucking companies to get resourceful and explore alternative risk transfer strategies, such as captives. The right captive can provide advantages in any type of insurance market, but they’ve become increasingly more attractive now as they help provide best-in-class trucking companies obtain fair pricing that is warranted based on their individual performance, superior coverage terms, higher limits, and improve their cash flow and long-term stability. Key Considerations for Successful Captive Participation A captive insurance program is different from traditional insurance in that it is owned and controlled by individual members with the primary purpose being to insure the operating risks of each company and gain control over the claims process. The companies that choose to join a captive make a conscious decision to partner with best-in-class companies who share their same vision, and together achieve superior results and capitalize on the return of underwriting profit. Cottingham & Butler: A Trusted Leader in Captive Insurance Cottingham & Butler, the U.S.’s largest transportation insurance broker, has been involved in captives for more than 25 years and has proven that group captives are a smart alternative risk strategy for savvy business owners. Chris Vogel, Senior Vice President of Cottingham & Butler’s Transportation Group, advocates that captives are a good fit for companies looking for more control over their insurance program and who want to be rewarded for their positive results. “The goal of the captive is to help our members lower their total cost of risk,” Vogel adds. “A captive is not for every fleet, but it is absolutely ideal for those that want control and are looking to capitalize for operating better than their peers and making investments to achieve superior results. We work with many fleets who have seen their cost decrease over the last 10 years contrary to most in the industry that are seeing them skyrocket.” Critical, though, to a company’s success in a captive program is the selection of its captive and risk-sharing partners. There are thousands of captive programs, but not all are built equally. When evaluating a captive partner, companies will want to ensure they are joining a group with similarly situated trucking companies and those that share common loss prevention and financial interests. It is also important to partner with a captive manager, claims administrator, and reinsurance partner who has extensive experience and positive standing in the transportation industry. The team at Cottingham & Butler has unmatched credentials and unparalleled success in the captive arena.  They have built a suite of businesses that includes a trucking claims administrator, safety consulting team, brokerage, and captive management, all with one goal in mind – to drive exceptional results for the trucking companies they work with.

The marketplace for commercial auto and excess insurance for trucking companies and businesses with heavy fleet exposures has been hardening rapidly over the past two to three years.  Unfortunately, for companies with those exposures, the expectation is that there will be little relief in the coming months. Challenges in the Commercial Auto Insurance Market Average commercial auto increases averaged just shy of 11% across all sizes of risks for the second quarter of 2020, which marked the thirty-five consecutive quarters of rate increases on that insurance coverage line. In spite of those steady increases, the industry results in commercial auto has seen little improvement over that time span. Impact of External Factors on Commercial Auto & Excess Insurance The combined ratio, which is a measure of insurance company profitability, moved into an unprofitable status in 201. In spite of continued rate increases, it has remained at unprofitable levels for the past decade. The COVID-19 pandemic brought new issues into the fold of the marketplace. With large portions of the country under stay-at-home orders, the frequency of auto liability claims dropped significantly. However, the benefit of that decline was somewhat muted by premium returns to companies that were shut down during that timeframe. Surge in Rates and Concerns in the Excess Insurance Market There is additional concern that a spike in the frequency and severity of claims dollars might be coming. The expected increase in auto usage and road congestion due to concerns with flying, buses, subways, and other forms of public transportation as states reopen drives the frequency concerns. Impacts that are occurring at higher rates of speed in areas of the country that have not reopened are leading to concerns around severity. It will take time to determine the true impact of these items on the industry, but given the results in the commercial auto segment over the past decade, expectations are that the rate increases will continue. We see a similar theme in the excess or umbrella marketplace where rates have sharply increased over the past few years. In the second quarter of 2020, commercial umbrella rates increased 20%.  This increase marked the highest of any line of coverage in the industry during that time, and marked the first time since 9/11 that a single line of business increased by 20% or more in a single quarter. Evolving Dynamics Leading to Shifts in Excess Insurance Landscape Factors such as litigation financing, distracted driving, and social inflation have driven the size of commercial auto claims exponentially higher over the past years. These factors have led to a dramatic increase in the average size of claim, not only for the verdicts in litigated claims, but also for the smaller claims settled out of court. Another by-product of these issues is that many insurance companies are no longer writing excess policies or are changing the amount of insurance they will offer to an individual insured. The increased costs of insurance and lack of capacity in the marketplace are leading companies to purchase less insurance in an environment where the need for larger limits is extremely high. For an in-depth market report of the commercial property/casualty space, reference the CIAB Q2 Market Index.

For more than 10 years, Cottingham & Butler has conducted an annual benchmarking survey of Employee Compensation and Benefits specific to the trucking industry. We provide two separate survey results – one specific to all Trucking and one specific to the Tank/Bulk segment. It is important to note that this year’s survey was completed before the COVID-19 pandemic. Below is the distribution of the carriers by load type of this year’s survey’s respondents. 2020 Trucking Survey Compensation Highlights Driver Compensation The majority (78%) of motor carriers reported to pay some or all drivers by the mile, with the average pay per mile increasing from $0.47 to $0.50. 65%+ of motor carriers also pay bonuses for referrals, safety and clean DOT. In addition, 50% of motor carriers pay per diem with a daily average of $42.22. The survey includes a detailed breakdown of compensation by pay type, as well as load type. Below are charts from the report containing some highlights: Non-Driver Compensation Compensation for non-driver roles saw varied responses. Mechanic/technician pay increased by nearly 10% increase from the prior year, while other roles such as safety director, fleet manager, and customer service had minor changes and slight decreases in the average pay reported across all survey participants. The chart below represents averages for all segments of the trucking industry.  The Tank/Bulk averages were 5%-10% higher across all positions. 2020 Trucking Survey Benefit Package Observations & Highlights Medical/Rx Plan Annual Cost per Employee – The average gross Medical and Rx cost per employee in 2020 was up just slightly compared to the prior year, from $9,640 to $9,680 per employee per year in the ALL trucking survey. In the Tank/Bulk survey, it went from $10,426 to $10,652 per employee per year. Medical/Rx Plan Designs – For the first time in 5 years, the average health plan deductibles increased, although slightly. Average deductibles were up to $3,100 from the prior 4 years at $3,000.   Out-of-pocket maximums, office copays, and pharmacy copays remained relatively flat from the prior year.  The Tank/Bulk Segment average deductible rose from $2,700 to $2,900 this year. Plan Options In 2020 more employers offered a second health plan as an option for employees. In the prior year, 43% of employers only offered 1 plan, with that number down to 34% in 2020. 56% of employers offered a Consumer Driven Health Plan with a Health Savings Account or Health Reimbursement Accounts as one of their plan options. Employee Contributions for Health Insurance Survey participants reported very similar rates in 2020 compared to the prior year, with a slight increase in average amounts charged for family coverage. Our team would be happy to discuss the results of the full 41-page survey report as you plan into 2021. You may contact either Kim Beck at kbeck@cottinghambutler.com or Jamie Bishop at jbishop@cottinghambutler.com.