Can Your Business Survive a Not at Fault Accident?
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The good news is the accident was the four wheeler’s fault. The bad news is that it may put you out of business.
In the last twenty-seven years, Benton & Parker has seen this happen hundreds of times when insureds have had accidents that were not their fault. We know that getting the tow bill paid and your truck fixed is just the tip of the iceberg. All too often owner operators go out of business because they could not collect money for their ongoing expenses (downtime) while their truck was unable to run. |
An article by Attorney Kelsea Eckert featured in Transport Topics caught our eye this month. She does a great job of defining the problem and giving you an idea of your rights should this happen to you.
Benton & Parker knows that in these circumstances many times a lawyer will be required to help you get payment for downtime. Benton & Parker does not have a relationship or receive compensation from Eckert & Associates, P.A., however we would suggest that you consult with them should the need arise.
Time is a precious commodity for an owner-operator. When an accident happens, that downtime means you’re not making money. When an accident is not your fault, you should be compensated not only for repairs, but for downtime losses as well, i.e., financial business losses you experienced because of the accident.
At least, that’s the way it should be. The reality is that the other driver’s insurance company may agree to pay for the dents, but not the downtime. Some adverse insurance companies and motor carriers offer under $100 per day. Some pay only what it would have cost to rent a truck (if you could even do so). And some won’t pay any downtime if the equipment is totaled.
Most owner operators make much more than company drivers. You are running a business. Owner-operators’ businesses have legitimate income and expenses. Your business losses should be compensated fairly by the other side when you’ve been hit.
Most states’ laws allow for reasonable downtime losses to be paid. This is often calculated from the date of the accident until you’re on the road again. It is important to note that even though you are the victim, you must mitigate, or lessen, your damages during this time, if you can. For example, you should rent another truck if possible. If you cannot rent a truck because of your specialized equipment or because of your agreement with your motor carrier, you should gather evidence to prove that you tried.
So how do you prove what your actual losses are? Through financial records, like past settlement sheets and fuel tickets, income and expense records. You may need a statement from your motor carrier or broker about continued load availability, proving that you would have had work during the time you were down. If your motor carrier has a policy excluding third-party leased equipment, you may need to provide this written policy to the adverse insurance firm to show that you could not mitigate your damages.
Adverse insurance companies may demand your tax returns. However, in this author’s opinion, tax returns are not an appropriate measure of income for a downtime claim. They don’t reflect the true operating income of a rig. Net taxable income is not a measure of lost revenue. It is every tax accountant’s mission to show a low net income for their clients. This is why even enormous corporations often show minimal net income or losses.
A more appropriate measure of income is net operating income. This is basically gross income minus fuel, tolls and other variable expenses. Only those receipts that go away when you are not driving should be included in the calculation. The other expenses remain. For example, you must pay your insurance premiums monthly whether or not you’re on the road.
Your lost income includes money that would have been used to pay fixed expenses, like:
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Equipment payments. | |
Equipment insurance and medical insurance. | |
Telephone and cell phones. |
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Licenses and fees. | |
Mortgages. | |
Accounting, bookkeeping & office expenses. |
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401(k) contributions. |
These are expenses you have to pay whether you are working or not. Just as that adverse insurance adjuster relies on a regular weekly paycheck to pay his or her household expenses, you rely on a portion of your gross operating income to pay both your business expenses and your personal, daily living expenses — whether deductible for tax purposes or not.
If your truck is totaled, most state laws say you should also be paid for each business day you are down. The other driver’s insurance company may claim that your days down are from the date of the accident until the date you receive payment for the totaled truck. This calculation is not appropriate because it takes time to find a suitable truck with the proper equipment. The more specialized asset your tractor or trailer is, the longer it takes to find a replacement for that asset and cannot be located and replaced overnight. Once equipment is located, it must be made suitable for operations. Often this includes the time and money involved in obtaining U.S. Department of Transportation licenses, approval from the motor carrier to which you are under contract, employers and brokers, safety inspections, replacement of tags, placards, licenses, etc.
Many courts across the country have held that the proper calculation of days includes a reasonable amount of time after payment has been made to the insured for a total loss. Many of those courts are allowing downtime to continue until the loss ceases to exist, as long as the victim has made reasonable attempts to mitigate their damages.
As an owner-operator, you have rights. These will vary from state to state. You have the right to speak with an attorney about your downtime claim.
Eckert & Associates, P.A. is a transportation law firm helping owner operators across the country who have been in accidents and have claims. Some of the claims they pursue in include: downtime/loss of use, deductibles, rental, reimbursement, loss of contracts, out of pocket expenses, property damage, and total loss issues. There is no fee for the consultation and no attorney fees are required to begin since the firm works on a contingency fee basis.
If you have a claim, feel free to contact them at (904)278-7688.
Attorney Kelsea Eckert lives in Florida and has been practicing law since 1988. She represents owner operators, transportation companies, and insurance companies. You can learn more about her practice at www.downtimeclaims.com. She welcomes your calls and questions.
What is the Vehicle Maintenance BASIC? The Vehicle Maintenance Behavior Analysis and Safety Improvement Category (BASIC) is one of seven categories that the Federal Motor Carrier Safety Administration’s (FMCSA) Compliance, Safety, Accountability (CSA) program uses to determine how a motor carrier ranks relative to other carriers with a similar number of safety events (i.e., inspections, violations, or crashes). The Vehicle Maintenance BASIC specifically addresses the requirements within the Federal Motor Carrier Safety Regulations (FMCSRs) Parts 393 and 396 to properly maintain a commercial motor vehicle (CMV). Proper maintenance includes, for example, ensuring that lamps or reflectors are working and tires are not worn. Some example roadside safety violations that may cause a motor carrier to rank poorly in this BASIC include operating an out-of-service vehicle or a vehicle with inoperative brakes, lights, and/or other mechanical defects, and failure to make required repairs.
21. “All journeys have secret destinations of which the traveler is unaware.” – 
