Opinion: Owner-Operators, Keep Those Wheels Turning

By Kelsea Eckert

Attorney at Law

Eckert & Associates P.A.

This Opinion piece appears in the Feb. 20 print edition of Transport Topics. Click here to subscribe today.

If you’re an owner-operator and your wheels aren’t turning, you’re not making money. If another vehicle slams into your truck when you have the right of way, it means you’re facing downtime through no fault of your own. That means 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 offer only $75 to $100 per day. Some pay only a percentage of the days actually down. And some won’t pay any downtime if the equipment is totaled.

As an owner-operator, you are not a company driver. You are running a business and you typically make more than a company driver. Owner-operators’ businesses have legitimate income and expenses. Your business losses should be compensated fairly by the other side when you’ve been hit.

Downtime losses should be calculated from the date of the accident until you’re on the road again. You should be paid the amount of your lost operating profit, and if you can mitigate, or lessen, your damages during this time, you should do so. For example, you can rent another truck.

However, in order to prove your business losses, you will need to provide the other party with a variety of financial records, including past settlement sheets and fuel tickets. You may need a statement from your motor carrier or broker about continued load availability. Some motor carriers have policies excluding third-party leased equipment. If this is the case, 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, tax returns are not an appropriate measure of income for a downtime claim. Tax returns do not reflect the true operating income of an owner-operator’s 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, for example:

• Equipment payments.

• Equipment insurance.

• Medical insurance.

• Licenses and fees.

• Office expenses.

• Accounting and bookkeeping expenses.

• Telephone and cell phones.

• Mortgages.

• Medical insurance.

• 401(k) contributions.

• Other nonvariable expenses.

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, you also should be paid for each business day you are down. The other driver’s insurance company may say 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. Although the argument might work in an automobile claim, it does not work in the case of a tractor-trailer claim.

Business property is different than personal and recreational property. The more specialized the business asset, the longer it takes for replacement of that asset.

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.

To carry it to an extreme, a totaled space shuttle would take a very long time to replace because of its plethora of specialized equipment and parts. A tractor-trailer is certainly not a space shuttle, but it is a significantly specialized vehicle. Typically, specialized vehicles cannot be located and replaced overnight. Furthermore, once a tractor is located, it must be made suitable for operations. This may include 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.

As an owner-operator, you have rights. These will vary from state to state. Remember that if you are having trouble with a downtime claim, you also have the option of speaking with a legal professional about how to best present your claim and protect your business.

Eckert & Associates P.A., Fleming Island, Fla., handles downtime and other transportation claims across the country for owner-operators.