08-1673 Owner-Operator Independent Drivers Ass'n., Inc., v. Mayflower Transit, LLC

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Transportation
Insurance

A chargeback for insurance is not an unlawful sale of insurance under 49 C.F.R. 376.12(i).
"Plaintiffs treat the chargeback as a sale of insurance by Mayflower. Yet it is not an insurer. It is not authorized to underwrite risks. The regulation requires motor carriers to purchase insurance underwritten by real insurers, so that persons injured by a motor carrier's operations may find a source of compensation more reliable than the motor carrier itself, which often is thinly capitalized. Mayflower is a large and solvent firm that has been in business for decades; it can pay for its own casualties (and will do so indirectly because its insurer will set an experience-rated premium that covers the costs of indemnity, plus a loading charge for the insurer's administrative overhead). But many other motor carriers are small, and some would take too few precautions against accidents if they anticipated that a major loss would lead them to declare bankruptcy. Then the owners would reap profits as they came in, and use the corporate shield of limited investors' liability to protect themselves against tort judgments. The insurance requirement prevents that. And the regulation places on the motor carrier under whose certificate the service is rendered the obligation to secure insurance; that makes enforcement much easier than placing a separate mandatory-insurance obligation on the many owner-operators who own and lease a single truck. Yet nothing in this rationale for mandatory insurance implies that lessors need not pay for the coverage secured through the motor carrier; as we've observed already, they will pay indirectly (through lower rates per mile) if they do not pay through a chargeback."

Affirmed and Remanded.

08-1673 Owner-Operator Independent Drivers Ass'n., Inc., v. Mayflower Transit, LLC

Appeal from the United States District Court for the Southern District of Indiana, Barker, J., Easterbrook, J.

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