The Federal Motor Carrier Safety Administration (FMCSA) has recently re-evaluated the minimum levels of financial responsibility for motor carriers, and a new minimum will likely be announced soon. This task was delegated to them by the Department of Transportation (DOT) Secretary, who was assigned the task by Congress.
There is a serious need for this value to be changed. The last time this number was adjusted was in 1985. The original rulemaking allows room for the amount to be altered every four years to compensate for inflation and other economic factors.
In the DOT’s July Significant Rulemakings Report, the dates of the rulemaking process have been pushed back about a month in all stages. The end of the public comment period is December 26, 2014, and it is unclear when, if passed, the rule would take effect.
After analysis of the financial responsibility of motor carriers, the FMCSA released the summary of their report, Examining the Appropriateness of the Current Financial Responsibility and Security Requirements for Motor Carriers, Brokers, and Freight Forwarders – Report to Congress.
The FMCSA study revealed “preliminary support for increasing the current levels of financial responsibility.” There are a couple of key takeaways from the study. They found that catastrophic motor carrier-related crashes are relatively rare, accounting for less than one percent of all Commercial Motor Vehicle (CMV) crashes. However, the costs for severe and critical injury crashes can easily exceed $1 million, which is more than the carrier’s current financial responsibility.
The study also revealed that current insurance limits do not cover the cost of catastrophic crashes, mainly due to increased medical costs. They provided examples of current minimums adjusted for inflation and rising medical costs. In all categories, the amount of financial responsibility increased by approximately five times. This particular example claims that $3.2 million is an appropriate amount of responsibility for carriers today.
The FMCSA report summarizes the results of other studies on the same topic. The Pacific Institute for Research and Evaluation (PIRE) published a report assessing the minimum levels of financial responsibility for motor carriers. The report found that the current level of $750,000 for motor carriers of property was too low, and should be closer to $10 million with an index for inflation and productivity growth.
The Trucking Alliance published a similar report assessing the minimum levels of financial responsibility for motor carriers. First of all, they found that many carriers are already covering more than the $750,000 that they are responsible for. But if all carriers in their study had kept the minimum requirement, they would not have been able to cover 42% of crashes involving injury or property damage.
The current levels of minimum financial responsibility for motor carriers haven’t been updated since 1985, and it is certainly time for an update. There is now a growing wealth of information suggesting that the amount be increased. There is no doubt that a change of policy will occur sooner rather than later.