Industry Experts’ take on Carrier Qualification • Risk Management • Liability Mitigation • Federal Motor Carrier Safety Administration (FMCSA) and CSA scores

Discussion Transcript

Hello everyone, my name is Dan Kochkovski and I will be your host today. I would like to welcome you to our Round Table discussion group, where we will be taking a closer look at the matters of:

  • Carrier Risk Management
  • Liability Mitigation, and…
  • The Overall Importance of utilizing Carrier Compliance Solutions

But first, let me take a moment to introduce all our viewers. The first participant joining us today is Mark Draeb the president of SaferWatch™, a Motor Carrier Qualification and Monitoring Solution (website).

Jay Pelkey, Certificate of Insurance Expert, Partner at SaferWatch™ Assure (website).

We have Ben Armistead, Partner at Greenwich Transportation Underwriters – GTU for short (website).

Then we have Chris Burroughs, Senior Government Affairs Manager at the Transportation Intermediary Association – TIA for short (website).

Michael McKinney, President of A.M. Transport Services, Inc. (website)

Kevin Pasternack, National Sales Manager at Prophesy, a HighJump Product (website), and

Lance Roberts, Vice President at RMX Global Logistics (website)

Dan: Once again, welcome everyone! Now, I would like to give each one of you a moment to introduce the core competency of your respective organizations, to our viewers. Let’s go in the same introduction order and start with Mark… Mark take it away.

Mark: Thank you Dan.  SaferWatch is a carrier qualification and monitoring platform which helps brokers and shippers reduces liability through better risk management practices. It helps them qualify and onboard new and monitor existing carriers in a streamlined manner.  It provides proactive fraud analysis with fully customizable risk indicators.  The fresh data that SaferWatch provides helps brokers identify chameleon carriers, mitigate liability, and make educated risk management decision.

Dan: Thank you Mark.  Jay.

Jay: Thanks Dan, the SaferWatch Assure service provides freight brokers, 3PL shippers etc. with a motor carrier certificate of insurance or a commonly known as a COI data and image services.  SaferWatch Assure is by far the industry’s most efficient COI service provider.  Our service provides companies with mitigation of risk their exposure, streamlines their carrier on-boarding process, and efficiently monitors their existing carriers insurance certificates, and in fact, most of the time, customers who utilize the SaferWatch Assure receive lower rates on their contingent cargo or yearly E & O policy premiums.

Dan: Thank you Jay.  Ben

Ben: Thank you, Dan.  GTU serves as the largest underwriter and transportation and logistics insurance in the United States.  We are the largest logistics center underwriters specializing in A rated coverages and specialty coverages for primarily truck brokers, who are known as innovators in the industry and we’ve got great partners who work with us to make sure that our insurance product is the best it can be in the marketplace.  Thank you.

Dan: Thank you Ben.  Chris

Chris: Thanks Dan.  As Dan mentioned I’m with the Transportation Intermediary Associate, TIA.  We are the professional organization for the 3PL and freight forwarding industry.  We represent 1400 member companies. I’m on the government affairs side, so obviously advocating on Capitol Hill on legislative issues and regulatory issues with the Federal agencies.  We also provide memberships with valuable educational tools, etc.  So, looking forward to the conversation today.  Thanks, Dan.

Dan: Thanks Chris. Mike

Mike: Thanks Dan.  I’m with AM Transport Services, we are a third party logistics provider, located in Olney, Ill.  We’ve been in business going on 25 years.  In our portfolio of services we offer truckload, LTL, intermodal and some technology services as well.  The largest part of our business is on the truck load side.  We do go about it in a fashion where we really focus on the carrier sales side of the things.  We learn their needs through needs analysis and then take that known capacity and turn over to our sales team and then approach customers with known capacity, so today’s topic is good for us as well.

Dan: Thanks Mike.  Kevin

Kevin: Thanks Dan.  Prophesy was founded in 1986.  We were acquired by Accellos in 2008.  Accellos and High Jump merged this past June.  That created a company with 11,000 customers in 23 countries.  With operations in North America, Asia, and Europe. Our products are across the supply chain from WMS to 3PL, EDI, optimization, and of course transportation software.  The Prophesy Division, which I’m with, we specialized in the transportation area.  Our solutions includes on premise solutions, web-based solutions, cloud- based solutions, and range from asset to non-asset based operations from both small to large.  We look forward to the conversation today.

Dan: Thanks you Kevin.  Lance take it away.

Lance: Good afternoon Dan.  Thanks you very much.  First off our RMS Logistics is a 3PL and 4PL company that has been around for over 30 years.  We specialize in full truckload, but have services in LTL, Intermodal and International marketplaces.  We currently have 13 offices so one of our leading products is the fact that we are technology driven, so getting our carrier information to all of our brokers and our carrier sales teams is very critical in finding new carriers, meeting capacity constraints in today’s marketplace, as well as insuring that we meet all of our customers contractual needs and requirement from CSA, to FMCSA (Federal Motor Carrier Safety Administration) scores and regulations.  So, today is a very critical call for us and we appreciate being a part of it.

Dan: That’s awesome.  Thank you everyone for your though introduction of your respective organizations  and what they stand for, because that’s very important for our viewers to understand where is this business knowledge of business standards and regulations coming from.

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Carrier Risk Management - Qualification and Monitoring

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So now, in the first part of our discussion I would like to ask each one of you a question or two and leave the second part for addressing your own individual questions that pertain to your own interest.  So let me start with Jay Pelkey.

If the wording on a standard Acord Certificate of Insurance protects the insurance agent from inaccurate data, what is the point of obtaining one in the first place?

Jay: Well, like Lance said, the most obvious is your contractual obligation to either your customers or to your insurance company.  Generally all of those companies require that you perform some kind of due diligence practice to verify that a carrier that you are arranging shipments with has cargo insurance and right now obtaining a Certificate of Insurance to verify cargo insurance is in place is realistically the best way to do it, unfortunately.

Dan: And the other question I have for you Jay is: What benefit is there to a freight broker to be listed as an additional insured on a motor carrier insurance policy?

Jay: Well, that’s a loaded question.  There are so many factors involved in that, I mean.  You have to look at your contractual obligations with that customers stems from good communication with them, staying away from additional insured requirements is something I always stress just because it’s so involved, you know, what coverages do you need to be listed to be additionally insured or how do you become listed as an additional insured; the time constraints to become a listed as additional insured; it’s just a nightmare.

Anybody who attempts to do it can tell you the percentage of obtaining additional insured endorsement with your name on for cargo, auto, or general, or whatever, is a policy you want to be an additional insured to is just really difficult low percentage process.  So, you know, some companies think that if you list as additional insured it will entitle you to a cancellation notice, which would be fantastic, but unfortunately,  I think probably 99 percent of the state DOI government, or legal regulations for additional insureds require that the insurance companies provide only the first name of the insured with a cancellation notice.

You know, that’s the impression you will be out of luck.  The other part of that is thinking you are going to received defense cost coverage, reasonable defense cost coverage, and settlement.  You know obviously you look at each type of policy that you are listed as additional insured with and even see if any of that is realistic.  Generally when you are talking about cargo liability policy, settlement isn’t going to be paid to you because you are the transportation broker, not the carrier or the shipper, so you don’t have any insurable interest in the fright, so there would be no coverage.  Then obviously reasonable defense cost would probably be covered by your contingent cargo liability or your E & O liability policy, which ever one applies for the loss specifically.

Auto liability you know, you’re not driving the vehicle, so it’s hard for you to even qualify for defense coverage or settlement coverage.  Obviously settlement coverage is probably out of the question, unless you are talking about negligent hiring or poor due diligence.  In general you are not driving the truck so you can’t be legally responsible.  You aren’t driving it and they are not your employee.

In general, being listed as additional insured from the involvements of thousands of claims that I assisted with back in the day, there is not a lot of benefit of listing yourself as additional insured.  In fact, there is more risk of being found having more responsibility in the claim, or the movement of the freight, than you really do as a freight broker.  But, I think that is more than an hour long discussion, so we’ll save that for another day.

Dan: And one more quick question for you Jay.  What is the difference between the old cancellation wording and the new cancellation wording on an Acord form and what has been the consequential effect of this in the industry as a whole?

Jay: Ah, that’s a fun one.  Actually, when the old wording said that they would put a specific date on there saying if the policy cancels within , and then it’s fillable with  20 days or 30 days, they will endeavor to send a cancellation notice, which obviously means they will obviously make their best effort; they will make a reasonable attempt to send you a cancellation notice.  And the new wording says they will send it based off the policy provisions, which is absolutely the way to go if you are looking through the eyes of an insurance agent.  Obviously, if something happens with the fax, or an email, or the US postal service, which is an awesome place to start with blame, then you want to be protected, so the wording is there.  Saying you will endeavor to send a certificate and saying you will follow the policy provisions, which generally says you are going to send a notice to the name of the first name insured, there is not a lot of difference.

Taking out their protective wording, is beneficial to every insurance agent to send a cancellation notice out to as many people as possible.  So, that way, if someone one does want to file a claim or file a lawsuit, they are not looking at your insurance company, saying hey you guys, are the insurance provider for this insure or this carrier.  Legally there are so much benefits for the insurance agents to send cancellation notices that they do; and running an insurance monitoring service, I see it day in and day out we literally get thousands of cancellation notices throughout the month.

Dan: Thank you Jay.  Chris, let’s just jump to your courts now.  This again is Chris from TIA.  I have a couple of questions for you too.  Here is the first one.  What does TIA do as an organization, to assist its members in developing a carrier selection process?

Chris: Thanks Dan.  I think this is probably one of our most valuable member resources that we have; it’s our carrier selection framework that we began developing back in 2006.  With a committee effort made of up industry leading freight brokers, insurance folks, and even attorneys, and even a former FMCSA Administrator, Ned Sandburg, how also helped out as well, to develop it.  It’s an extremely important 50-page document, not only outlining CSA and kind of the role it’s played on carrier selection, we would like to say a lack there of, it should play a role on carrier selection, safety ratings, or the determination, but go through step-by-step things to look for when you are developing your carrier selection.  I can’t say enough about it.  We update it every year. We will update its release once again in April in 2015 in Orlando.

Dan: Thank you, Chris.  One more question.  What benefits could brokers gain by joining TIA and having access to motor carrier risk management companies like SaferWatch?

Chris: Yeah, so obviously you know as being a member you get access to the carrier selection framework.  Among our other frameworks that we offer to our members, we have a fraud task-force framework that is put together which kind of goes hand as there is a large portion of the carrier selection framework dealing with fraud, which is becoming such a big issue in terms of not only hiring carriers, but with fraudulent activities happens.  We branched that out into its own separate 40 page document framework.  In addition to those, great access to carrier monitor services, like SaferWatch™, like you mentioned, it’s always a benefit. I think it is also worth pointing out as a member you get access to the TIA Watchdog program, which is a database where members can go in and report fraudulent brokers, carrier, agents, etc., and you know a lot of our members have integrated this into their TMS and into their carrier selections criteria and processes.  And I’ll tell you it saves a lot of our members a lot of money over the years.  Really cracking down and sharing this information among members to identify who these bad actors are in the industry.

Dan: That’s pretty good to know, Chris.  Thank you.  Let’s jump to Kevin now.  A question for you, Kevin.  How does your software help to protect your customers from liability, related to carrier compliance?

Kevin: Thanks Dan.  The software actually does several things in that area.  First of all of course there are master files where all of the carrier data is maintained.  In that data includes things like BIPD and cargo insurance.  And in those areas when a user is going and trying to assign a carrier to a load the system will actually warn them if that insurance is going to expire in X number of days (X being a user definable time frame), or something that had already expired it would show them that as well and they can set their preferences to prevent using that carrier because something has already expired and created a hazardous situation.

In addition, right from the same screen if a user sees that insurance is going to expire they can simply click and automatically send an email or fax directly to the insurance carrier requesting a new COI and have that sent right to them and then go ahead and once again associate that right with the carrier and that would update the information.

Liability insurance – If a load that they book is going to exceed the liability coverage of a carrier, when they assign that carrier the load, once again the system will alert them with that information, or prevent them from using that carrier.  With our SaferWatch™ integration they get even more.  They are going to get warnings about the basics, they are going to get information about safety rating, you know if there are issues with the safety rating authority; if a carrier has lost their ratings and are out of service.  So those are some of the area from a the liability standpoint that the software will assist the customers.

Dan: Thank you Kevin.  I appreciate your comprehensive answer to my question.  Mike, how does the use of a carrier compliance and risk management solution benefit your organization and your customers?

Mike: Well, by using the SaferWatch product along with a CertData module, what we’ve learned with the full integration with our TMS is that it’s basically cut about 50% of the time off of our process that we were doing in regards to daily gathering, going to multiple sources or sites to gather information required for on-boarding and compliance and so needless to say, that extra time now people can actually spend doing things that matter in regards to the customer and carrier relationship developments and coming up with solutions to their needs.

Dan: Thank you Mike.  Lance, how does your company stay on top when it comes to contracting quality carriers?

Lance: RMX has taken a strong stance; we work with TIA and we’ve been members of them.  We work with third parties, we have a TMS system and our biggest thing is two-fold.  One, we pre-quality carriers when we are looking to do business with new carriers, by going out and setting standards in our software.  SaferWatch built a tool that allows us to pre qualify, so all of our carrier sales people can go out into the system and actually search for new carriers and new marketplaces that meet those customer standards that they are looking for.  And that is our first step, so that way when we go to on-board a new carrier they have already met our basic requirements of meeting our customer standards.

Then, our second layer is doing our process of contracts and on-boarding packets, but at the same time we have another layer of understanding our customer contracts in the system, so we can build another layer of protection on a customer by customer basis to really protect our customers from their liability limits, their concerns and restrictions.  We have some customers that have policies and procedures that require their product due to the regulations in their industries to be managed at a different level, or safety than what we would normally do.

Some customers break it down into a CSA score, or even into conditional, unconditional, or satisfactory qualifications.  So, the ability to have these tools in place for our brokers makes it easier for them to do their job without having to think about what each customer requirement are, as well as carriers, as well as our brokers.  No one has to think, we can preset it, based on contract obligations and our requirements, so we meet all of our standards which helps us to do a better job at due diligence management, and risk management from start to finish.

Dan: And the next question.  Do you think that by utilizing a carrier qualification and monitoring solution like SaferWatch you provide an additional value to your customers, and if so, what is the value?

Lance: So, like I said with the compliance in difference customers we find a lot of companies have different regulations within their industries and the only way for those customers to manage their business safely when the freight leaves their docks and goes to their customers is for them to utilize companies like us.  We have the software in place, we have the integration in place to manage their business in a way that we can actually proactively do the due diligence and risk management for them.  Some companies have higher cargo limits than others, some companies have lower limits.  The ability for us to preset those qualifications in our systems and monitor and assign the right carriers to the right freight is a very proactive stance.  We also have the ability, because of SaferWatch, we have the ability to take that data and give it to the customer on a monthly or quarterly basis to show them what their history was with those carriers.  It’s a very unique opportunity to get the customers a due diligence risk management tracking tool, which most of our software could not do in the past, so the ability to give that to people in almost real-time atmosphere is very helpful to our customers and keeps them and their litigation process under control. So, it’s a very proactive process that we’ve moved into.

Dan: Thank you Lance.

Ben, we all know GTU and we know how big it is, how successful it is, and so on, but you can please elaborate on what makes GTU so successful, and quite frankly, the market leader of logistics insurance in the US.

Ben: I think that’s a fair question.  At the end of the day we are students of the business, so even though we purport ourselves to be the leading underwriter in the class of business we are learning it every day.  What’s interesting about transportation insurance, at least to me, is that carrier transportation insurance is pretty commoditized.  You have commercial auto liability, physical damage, motor truck cargo, general liability, and it’s not differentiated by coverage and it’s mostly differentiated by just price.  On the logistics side it’s kind of the wild wild west and the policy forms that have been developed recently are light years different than those from the previous year.  What’s very clear is that the truck brokering community and the freight forwarding and third party logistics business is changing, it’s very clear that more and more shippers are requiring more of brokers, both contractually and from a service perspective.

And so, it’s very important that insurances tailor to meet those needs in such things as truck broker liability, which is an improvement over contingent auto liability and contingent cargo insurance that has a deadly theft or a couple of the improvements that have been made, and what we look for in the underwriting process, which a lot of these gentlemen to represent is where our charge is basically to underwrite those accounts in operations that exhibit best practices. So if they don’t exhibit best practices we are about trying to get them to exhibit best practice; and if they don’t exhibit best practices they are not a client of ours. So suffice it to say, the bar is being raised every day and we are part of raising that bar, just because as people are demand better coverages  you have to have a better operation to get those coverages.

Dan: Well Said.  Would you please give us an idea about why does GTU choose to partner with SaferWatch versus anyone else out there.

Ben: That’s a fair question too.  I would say that this is… Mark and John, and the people at SaferWatch are about as entrepreneurial an operation with data and the harnessing and the use of data that we’ve seen and we’ve ask them to make some changes to an overall algorithm that we’ve developed and so it was really interesting that this game has gotten a bit simpler because of SaferWatch and the underwriting process, and so what happens in the insurance processes is that you take an application, you answer the questions the best you can, and normally you have a case where a client either thinks and purports that their carrier selection process is better than it actually is.

So, what we do is get the answers to the questions and actually upload the data to SaferWatch, based on the carriers that an insured or a prospect would actually utilize, and actually grade them in an algorithm.  It is an eye opener and it is a free service that we offer, which is kind of, everybody seems to like it, especially the insurance agents who are trying to understand and be a better value to their customers as they are part of the overall underwriting process.  But, at the end of the day the SaferWatch information is the most up to date, the most robust, and the most changeable.  If there is some factor that is not working for you it can be tailored.  So, our underwriting today is different than underwriting a years ago and SaferWatch has been with us the whole time in making the changes that make us a better underwriter in the insurance marketplace.

Dan: That is great Ben.  From the sound of it seems like you have a great partnership with SaferWatch.

Well, thank you everyone for answering my questions.  Now, in this second part of this discussion I would like to give everyone an opportunity to address your own questions to other participants, individually, or to a group.  Let’s start with Mark.  Mark, you mentioned you have a couple of question, so go ahead.

Mark: Sure. Thank you.  Kevin, Based on your customers experience, do you think that integrated solutions are key to streamlined supply chain methods of work, and why?

Kevin: Thanks Mark.  There is no question that be a part of a HighJump family, being an SC provider, yes, integrated solutions are definitely the way to go.  And as a company we certainly provide all those solutions from WMS software to 3PL,  fleet transportation management, transportation management, trading partner integration, DSD, small parcel and it goes on and on.  Speaking specifically in the transportation area, integrations that we have today that assist our customers include EDI, certainly the SaferWatch integration which is the key integration to companies like as MacroPoint, and then web portals where customers can see information or pass information down to their customers, so there is absolutely no question that the integrated solutions are key to our customers’ successes.

Mark: Thank you Kevin and we are very proud of the integrations that we have with Prophecy and HighJump as well.

Mike, Lance already answered a similar question on SaferWatch integration, but I’m curious about A.M. Transport, as to what features of SaferWatch provide a competitive advantage to you and your business?

Mike: Sure Mark. Features, I would say it’s actually just the overall SaferWatch and the CertData Module. The product overall provides confidence and speed for our people.  Through the integration with our TMS our people know that at any given time that if a carrier is in our system, it’s got the most up to date and accurate information provided by SaferWatch.  And they can go forward with confidence that either they are in compliance or they are not, based on setting in our system.  Then that translates right over to the speed.  They don’t have a lot of decisions and questions that used to be asked, that no longer have to be asked. It’s right there for them at their fingertips, which translates into speed and as you know in today’s environment the competitive advantage then becomes do you get that truck before your competitions does.  So that’s where the competitive advantage would come into play.

Dan: Chris, you also indicated you had some questions for Mark, so go ahead.

Chris: Yes, thanks Dan.  The two questions I’m going to go ahead and lump them together because they are pretty much in the same vain..  Mark, when you are all are verifying carrier, what does SaferWatch do to insure the motor carrier is authorized to operate, insurance, kind of what of steps you go through, and then obviously as the leading industry carrier monitoring and qualification company, how do you differentiate yourself from your competitors?

Mark: Thanks, Chris, those are good questions.  Number of features if you will, and functions that we provide our customers, they have full access obviously to carrier authority, liability insurance, safety rating, all of their operations, all of this data comes from the FMCSA (Federal Motor Carrier Safety Administration) for the most part and a number of different sources and as you know are completely integrated with TIA’s Watchdog application and that data is right through our application where you can see that information and we also have with SaferWatch Assure, which Jay palkey leads-up, we provide insurance certificates.  Not only the data from the insurance certificates, but copies of insurance certificates if wanted as well and we hold that in our database.

Some unique features that we have are our fraud check and that helps to find chameleon carriers.  We also provide what could be a controversial subject, which is the CSA scores. As you know the CSA scores are a controversial subject.  I’ll talk little bit more on that.

Some of the things we have over our competitors is that we provide the most accurate real-time data and that and that translates directly into mitigating our customers risks.  We provide, especially on the COI, the certificate of insurance, we provide a service level guarantee and that comes directly where we are on top of any carrier of any certificate of insurance we may not have, which is getting less and less, but if we don’t have it every 15 minutes we check until we get that with insurance agents to make sure we get a copy for our customers.  Our customers are hard pressed to do anything better than that.  By far we are the most budget friendly carrier risk management solution for any company of any size, quite honestly.

The other thing that we actually believe outshines our competitors is our integrations.  Our integrations with companies like HighJump’s Prophecy.  Those integrations are second to none and those customers realize that benefit.

One of the things I find of interest is the CSA scores and we’ve being doing a lot of analysis with Ben over as GTU on the CSA scores.  It turns out that the percentage of carriers that actually have really poor CSA scores is really quite small and I’m wondering Ben, maybe I’m throwing this without you being aware of that, but I’m wondering if you can comment about that on what you find is the actual significance of CSA scores or that in particular based on how many carriers really do have concerns from the GTU prospective of bad CSA scores.

Ben: Well, I would say that it’s very clear based on the data SaferWatch has as an aggregator of data, you know exactly how many carriers have CSA scores, how many have many have 1,2,3,4 and 5 alerts and what’s surprising is how few and small the number is relative to those that have one or more than one alert; and so, candidly there are operations in our friends at the TIA or one in the carrier selection framework there would be a preference not to utilize CSA scores in the evaluation of carriers and I think everybody would like fore go that type of analysis.  But what’s so odd about the whole CSA uproar to me is that so few carriers, when you actually look at how many have 2 or more alerts, it’s fractional in comparison to the overall populous of carriers and so I guess as an industry what’s not been really reckoned with in its early days in the CSA scenario, but it will be interesting if anybody actually evaluates the number of carriers with basics and how that is a fractional component to the overall populous.  So, we recognize that there are inherent flaws with CSA.  We don’t think it’s fair, but we do know as insurance underwriters that CSA is actually scrutinized, and used by not by itself, but as a tool against a broker or forwarder in the court room.

Mark: Thanks, thanks Ben. The CSA scores along with all the other features we mentioned and more are all available on SaferWatch™ and Chris, thank you for asking that question.

Dan: Thank you Mark.  Kevin, you also indicated you have some questions for Mike and Lance, so please go ahead.

Kevin: Oh yes I’d like to ask Mike and Lance, what gaps in the transportation specific software has the largest challenges or inefficiencies in your organization and would you consider this a high priority  item to invest in, to resolve?

Mike: I guess I’ll go first.  I’m kind of jumping on what I mentioned earlier in the introductions.  What we recognize for us is the biggest gap in the transportation software is a way to effectively gather the needs and complaints that we see from our carriers, not just on a load history or type basis that a lot of the TMS products have, but a more of on a carrier CRM product.  We try to approach our carriers like we do customers, by doing true sales and needs assessment, and right now there seems to be a gap in being able to gather that information and being able to turn that over to the sales people where they can put that to use.  It is a high priority for us right now and we are doing some internal things to move that along.

Kevin: Thank You.

Lance: You know, risk management is a critical piece to our organization and probably every organization and I think that the timeliness and the ability to access the data in a real-time instant with SaferWatch we do get it more timely.  I can tell you our processes for risk mitigation, fraud prevention, have all improved drastically in the last few years just because of technology advancements like SaferWatch has provided.  The ability to get this data has really helped us and the biggest key with that is not only having to go to different third parties, but to integrate that information into our software. Unfortunately I think you know over the few years a lot of software providers have really advanced in their integrations with companies like SaferWatch giving us this data in a more timely manner.  You know, unfortunately as the TIA knows, the rules are constantly changing and it’s our job to try to stay on top of it the best we can, and the only way we can stay on top of it is to get more timely information from our TMS systems and have it integrated with third parties, so it’s very critical for us to manage this process, but it’s very challenging because as fast as the rules change in this game it’s hard for us to keep getting that data brought into our system because you know, as someone mentioned earlier, the CSA scores you know, it took a long time to get the CSA scores brought into our TMS systems, because a few years back we couldn’t get them.  So the ability to get them now because we do have customers that require CSA score management and monitoring, so that very critical for us and companies to continually evolve and stay ahead of the curve like SaferWatch has done, that is very critical for a company like us.

Kevin: Thank you.

Dan: Thank you both.  Now let’s go to Mike.   Mike you mentioned you have a couple of questions for Chris and Jay, so go ahead please.

Mike: Great, Thanks Dan.  Sure I’d like to start with Chris.  Chris, I wonder if you could give us an update on what the current status is with the HR4727 legislation and then also your opinion, do you think we in the near future get to the point where the FMCSA’s (Federal Motor Carrier Safety Administration) carrier safety rating actually becomes the ultimate indicator of whether a carrier is safe to operate. Thank you.

Chris: Thanks Mike.  Just in terms of some background, Mike mentioned HR4727, which is a piece legislation we have been working on with congressman Jimmy Duncan, Republican from Tennessee in this congress, which is a few days from being over.  Simply put HR4727 would create a national hiring standard for brokers, shippers, receivers, and forwarders that says three things: that prior to tendering a shipment to a carrier that entity has to insure that the motor carrier is properly authorized to operate by FMCSA (Federal Motor Carrier Safety Administration); two, it has to ensure they have the proper insurance in place, and three, that that carrier is not unsatisfactory.

We’ve been working with congress on this bill really to eliminate negligent selection lawsuits for a lot of our members who have been having to deal with this and really remove the confusion and vagary behind the CSA scores and their role on carrier selection.  Really what our industry needs is predictability and now what they are faced with constantly when they hire a carrier is basically Russian roulette, you know for a better sense.  There is no predictability, you now in Tennessee a broker may be liable for hiring a carrier with a 75 and the basic score in Virginia it could be a 65 and Texas could be a 57.  These are hypotheticals, but you know we are trying to create that national hiring standard to eliminate these lawsuits and have the CSA scores not be manipulated by the courts.

Current status is, it was introduced in the house as I mentioned by Congressman Duncan, we have nine co-sponsors.  The ultimate goal is to have it attached to a multi-year transportation re-authorization bill.  We are hopeful we can get this done with the next Congress. The committee staff are already working on it, developing it.  We are working closely with them and we feel like we are in a pretty good position right now.  I think that with the Republicans taking control of the Senate.  Historically they have been a little more friendly towards business, a little more I would say opposed to trial attorneys because Congressman Duncan, whom I introduced, was a trial attorney himself and so they are a little more pro-brokerage industry and business, so we are little bit more hopeful with taking this to the senate.

The agency next year is supposed to work on the safety fitness determination rule-making, which would link the CSA basic scores with the actual safety rating, in addition to the full compliance reviews and the road-side inspection data that is gathered from enforcement. As everyone knows on the call here, it continuously gets pushed every year back, month by month, so we are somewhat optimistic that they will get it done and we will be tracking it very closely, which is why we’ve been pushing for legislative fix, because the agency continues to do drag their feet.  I know they are getting a lot of pressure from the carrier groups and other groups about the quality of the data, linking that to a safety rating. So, to answer your question, we are somewhat optimistic we can get these two things together soon, which would really be the true fix for our liability issues.

Mark: Chris, are there any other regulatory items that are on the agenda that may affect the freight brokerage industry for 2015?

Chris: Yes, obviously the safety fitness determination rule-making, as I mentioned, is supposed to begin developing it April 2015. Two years after that before it’s implemented, even if it is done starting in April.  I think two other things to play close attention is, one, is there is a final rule due out on the prohibition of cohesion rule-making they undertook this year, which bars brokers and receivers from coercing a motor carrier from doing something illegal or breaking their commercial motor vehicle rule.

Obviously something in this industry we can all agree with is no driver should have to be coerced into doing something illegal.  The problem with this rule-making was that it really sets brokers and shippers up for vicarious liability concerns.  It establishes employer-employee status between a broker and a motor carrier and even went as far to put language in the rule-making that a broker should check in on a carrier as he is moving the load along the route, insuring that he has enough hours left.  Obviously these are all types of things that defense attorneys would pick up on, if they were to actually happen.  Controlling the carrier holds them vicariously liable.

The second thing definitely worth mentioning is last week the agency put out an advanced notice of proposed rule-making, looking to increase the minimum insurance for motor carriers in terms of the liability coverage for them; currently set at $750,000.  There was no figure attached to it at this time.  There has been this piece of legislation put out by a member of Congress in Pennsylvania that asked to be set at 4.5 million dollars.  I know that figure is kind of the one the agency is looking to the direction they might take.  This is something we are already tracking extremely closely really because it’s an impact on not only the motor carrier but really true specific impact on owner-operators.  Those one or two trucks and the cost associated with that, and if they could cover that or not.  So it will be interesting to see when the comment period closes in February and they should come out with the figure sometime next year.

Mark: Thank you, Chris.  Mike, I think we are back to you.

Mike: Thanks Mark, thanks Chris.  My other question was for Jay.  Jay I was just curious if you are aware of any cases where a broker or shipper has relied on the data provided by a compliance service such as SaferWatch when defending a case or regards to a liability type issue.

Jay: You know, I can speak on behalf of insurance certificate data being used in court but I think maybe Mark can jump in after I’m done and talk a little bit about safety ratings, authorities, CSAs and such.

Insurance Certificates in the last 20 years that insurance monitoring companies have been around, there has never been a situation where a certificate of insurance was not acceptable in a court of law.  So, that is a good thing for companies that are concerned about listing themselves as a certificate holder as opposed to insurance monitoring companies. I have heard of the certificates used by other monitoring companies I’ve worked for in the past, or that consulted for in the past, being used in court, so they do stand up in court and the good thing is they have never been an issue, more importantly I think.  Hopefully that answered your question.

Mark: This is Mark – I can jump in on that.  The advantage of using a product like SaferWatch in particular, what we do is we take a snapshot of the data that our customers view so when you view a carrier it takes a snapshot of what the data is at that particular time so, so it’s there to back up any court case you might have in the future.

The advantage of using SaferWatch obviously is you end up using a carrier that should be qualified and the idea is you don’t end up in court because you are using qualified carriers.  To date, that I am aware of, we do not have any court cases that have come up where any of our customers have used data from SaferWatch.

Dan: Thank you, Jay.  Thank you, Mark.  Let’s go to Lance now.  Lance.

Lance: Jay, do you think customers find value in providing a service level agreement to check for insurance certificates every 15 minutes for a load waiting?

Jay: That’s a really good question and you know I’m not going to take up the whole time here, but in the past the insurance monitors was really focused on monitoring insurance certificates, which is a great thing obviously, but when you are booking a load with a carrier you want the insurance certificate right away.

In the past I think what most companies did is they set up a new carrier, they got the insurance certificate and then they passed it on to a  monitoring company to use them maybe later on in the future, if they end up using the carrier.

You know, when we started this venture my main focus was to use my resources and specifically go after the insurance certificates on the carriers that you are using right now. So, we started the service level agreement.  Obviously we cannot guarantee how quickly an insurance company or an insurance agent will send us a certificate, but we can guarantee that we will work on it at hard as you will or a lot of times, better.   So we will go after a carrier’s insurance certificate the moment you send us the request and then every 15 minutes until that certificate of insurance is in.  So, usually when we have the certificate we are 100% faster on new carriers, and when we don’t have it, we are either better or equivalent to what you are doing in house.  And I think from what I’ve talked to a lot of my customers, we’re better from what they did before.  So, that it’s less expensive for us to do it than someone in house to do it.  So yes, I see a lot of benefit of that real-time request on demand feature in our service level.

Dan: Thanks a lot Jay.  Let’s now go to Ben

Ben: For me it’s important to be able to distinguish the information you can get online versus the information that you can get out of an insurance certificate.  Would you talk a bit about what is different about the information you can get online versus actually verifying it in a physical certificate and why that matters and why people should not only have the data from SaferWatch but a physical certificate as well, if you would.

Jay: The insurance company does not send the FMCSA (Federal Motor Carrier Safety Administration) a certificate of insurance.  They file a MS190 for the auto liability policy.  The MS190 is stronger than a certificate, so it does things like it holds the insurance company liable no matter what the scheduled vehicles are on the policy, which is fantastic.  It also requires that the insurance company provide the FMSCA with a 30 day cancellation notice before they can actually cancel it.  So if some policy gets canceled and a freight broker utilizes the carrier they have to honor that claim from the freight broker, which is stronger than an insurance certificate, obviously.  The problem is, that, number one, it’s only for auto liability, and number two, generally a freight broker has a shipper agreement where they say they’ll verify at least a millions dollars in auto liability coverage.  And, like Chris was saying, currently right now it can be as low as $750,000.  So, you have to get both.  You need to find out what the actual limit is, which is on the certificate of insurance, and you need to get the data from the FMCSA (Federal Motor Carrier Safety Administration), which is a stronger cancellation policy than the certificate of insurance.

The other part of that is the cargo liability insurance.  Cargo information is only for property brokers on the FMCSA (Federal Motor Carrier Safety Administration) and it’s only up to a certain amount, so I think it’s the BMC32 endorsement which only holds about $5,000 of liability for the carrier, so you really need to have the certificate of insurance showing the cargo liability limit.  I think that answers your question, you got to have both basically and they’re pretty inconsistent, because of where they come from.

Mark: I’d like to put another interjection on that.  The cargo insurance that is provided on FMCSA (Federal Motor Carrier Safety Administration) is only for household goods anyway, so it doesn’t apply to anything or any other carrier.

Jay: Thank you Mark. He’s listening to what I mean not what I say.

Dan: Okay, that’s great.  Well, that’s all the time we have for today.  I really thank you for your participation in this rich subject matter and aspiration to share your expertise, not only with the industry leaders seated at this discussion table, but more importantly with our viewers.

I would also like to encourage our viewers to share their thoughts and comments regarding the subjects we just covered and to continued sending their questions regarding similar motor risk management topics, or any other related top they would like us to cover.

So again, thank you very much for your participation and see you again in the near future.

 

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