Many carriers use owner operators in order to expand their ability to provide services to their customers. Most carriers rely on the owner’s status as an independent contractor when assessing business costs, including liability issues as well as tax issues. Below are two cases (one a taxing case, and one an insurance coverage case) involving owner operators.
I. Insurance Coverage:
In Guidry v. U.S. Agencies Casualty Insurance Company, 213 So.3rd 406 (La. App. 1st Cir. 21617) plaintiff was the driver of a vehicle which had been leased to a motor carrier. The driver was injured in an accident caused by a third party motorist. The liability insurance issued to the third party driver was insufficient, and Mr. Guidry filed suit for uninsured motorists coverage (UM coverage). Mr. Guidry sued the carrier’s commercial auto insurer as well as his bobtail insurer. Both insurers asserted that the other insurance company had the primary UM coverage. The central issue was whether or not the driver was acting “in the business of” the motor carrier at the time of the accident.
The facts established that Mr. Guidry’s compensation was based upon a percentage of the load. The accident occurred after Mr. Guidry had dropped off the load. The bobtail insurer denied coverage under the UM policy claiming that Mr. Guidry was “in the business of” the carrier at the time of the accident. The motor carrier’s commercial auto insurer denied that Mr. Guidry was in the business of the carrier at the time. In its final analysis, the court found that Mr. Guidry was not in the business of “the carrier” at the time of the accident. The court expressly noted that the driver was paid by the mile for his delivery, and that his delivery had been completed. He was not being paid by the motor carrier for any of his activity; thus, he was not doing “the business of” the motor carrier.
Citing 49 CFR § 376.12, the bobtail insurer asserted that there was a presumption that the carrier (and the carrier’s insurer) was responsible for the negligent acts of the motor carrier’s driver. The First Circuit rejected that argument noting that the presumption only arises with regard to claims by third parties. The presumption does not apply to claims made by the motor carrier’s driver.
The significance of the Guidry case is that the court recognized that an owner operator who has dropped off the load, and is no longer being compensated, is not automatically doing “the business of” the motor carrier. While the holding may be limited to the specific facts of that case, it certainly raises the possibility of a bright line test that helps to clarify when a motor carrier is responsible for the negligence of an owner operator.
II. Unemployment Taxes:
Delta Logistics v. Employment Department Tax Section, 361 Or 821 (2017), involved the question of whether a motor carrier could be assessed unemployment taxes for drivers of vehicles which were the subject of a federally regulated equipment lease. Oregon law had an exemption from unemployment benefits for truck owners that leased their vehicles to carriers and “personally operate, furnish and maintain” the leased vehicles. The Oregon Employment Department Tax Section (Department) sought to assess Delta Logistics unemployment taxes on drivers who were provided by owner operators, but who were not the actual owner operator. In essence, the department took the position that the exclusion applied only to the “owners” that “personally operated” the vehicles, and not to any drivers provided by the owner operator. The Oregon Supreme Court rejected the Department’s argument.
While much of the court’s decision was based upon an analysis of Oregon law, it is important that the court took a practical approach towards the problem, and recognized the true nature of owner operator agreements (including the fact that some owner operators provide multiple units with drivers). Again, while the holding of this case may be very fact specific, it reflects a very common sense approach towards the issue which may be helpful in other cases (inherently, this case appears to recognize that compliance with federal regulations – including exclusive contracts between the owner operator and the motor carrier – does not automatically make the owner operator an employee of the motor carrier.
As mentioned in previous articles, the clear identification of when a driver is an employee, and when he/she is not, continues to shift with the sands of time.
