Insurance Companies Likely to Take Hard Stance on Non-Domiciled CDLs

https://www.freightwaves.com/news/insurance-companies-likely-to-take-hard
-stance-on-non-domiciled-cdls 

Enforcement and Insurance Implications

A change in insurance policies could be coming to the trucking industry,
signaling a major shift in their approach to non-domiciled commercial
driver’s licenses (CDLs). As enforcement of the new non-domiciled CDL
rule takes shape, insurance companies are likely to position themselves
to avoid potential liability exposure. 

According to an insurance executive at one of the largest brokers in the
country, who spoke on condition of anonymity, he expects that insurance
carriers are likely to implement policy changes that explicitly prevent
the hiring of drivers with non-domiciled CDLs within the next year. The
concern stems from the potential for “nuclear verdicts” in accident
cases involving non-domiciled CDL holders, as juries may show little
sympathy toward carriers employing drivers whose licenses may be invalid
under the new regulations—especially after DOT Secretary Duffy has come
out so strongly against the states that issue non-domiciled CDLs. 

His words of warning when referring to carriers and brokers looking the
other way on non-domiciled CDLs: “It’s all over.” 

Potential Liability for Brokers

The implications extend beyond just the carriers themselves. The same
insurance executive warned that freight brokerages utilizing motor
carriers known to hire non-domiciled CDL holders could potentially face
legal culpability. Plaintiffs’ attorneys may target brokers as well as
carriers in lawsuits involving accidents with non-domiciled CDL drivers. 

Several carriers have already reported increased scrutiny from their
insurance providers. 

One fleet executive commented that his insurance renewal was more
stringent than prior periods, demanding: 

Pictures of drivers’ licenses
Verification that driver domiciles match their CDLs and business entity
Clean MVRs (Motor Vehicle Records)
Correct address information on payment documentation
Signed statements confirming certain previously leased drivers would not
be affiliated with the company 

Damian Gunjak, a trucking fleet executive, confirmed this trend: “Our
captive provider already told us as much this year. A non-issue for us
since we don’t hire unqualified, inexperienced drivers.” 

Expert Recommendations for Risk Mitigation

Greg Reed, a partner at Hanson Bridgett LLP, advises that both trucking
and logistics companies should take immediate steps to mitigate
increased exposure to drivers with non-domiciled CDLs. His
recommendations include: 

Conducting a comprehensive audit of all existing employee or contract
drivers to identify those holding non-domiciled CDLs 

Engaging with frequently used carriers to determine the scope of
exposure to non-domiciled CDLs 

Consulting with legal counsel to assess whether identified drivers have
sufficient documentation to demonstrate their CDLs will not be revoked
in ongoing audits 

Implementing processes to limit utilization of these drivers until their
non-domiciled CDLs are confirmed or renewed 

Incorporating or reinforcing contractual language specifying that
drivers must be properly licensed, have lawful employment status, and be
qualified to operate commercial vehicles 

Real-Time Risk and Coverage Concerns

Industry experts highlight a particularly concerning scenario:
non-domiciled CDL holders may find their licenses revoked in real time
as the Department of Transportation and state driver’s licensing
agencies conduct audits. This could result in a situation where a driver
behind the wheel suddenly lacks a valid commercial license. 

According to Trucking Made Successful, “Many insurance companies will
now be taking a very close look at the CDLs of drivers listed on the
policy. According to several insurance agents, insurance companies are
looking to deny coverage in cases of non-domiciled CDLs.” 

The reasoning is straightforward: under the new rule, if a state becomes
aware that a limited-term CDL holder no longer qualifies under the
updated regulations, that license must be downgraded. With downgrades
already occurring, insurance companies are understandably reluctant to
insure drivers whose credentials could become invalid at any moment. 

As the industry adapts to these new realities, carriers and brokers who
proactively address these compliance issues will be better positioned to
avoid both legal and insurance complications in the rapidly evolving
regulatory landscape. 

How Will Brokers Know About the Driver’s Status?

This is a big question that everyone is asking. If the broker isn’t
aware of the legal status of a truck driver, how can they be held
accountable? This might require additional screening or strict policies
in carrier vetting for freight brokers. 

Even if the freight broker lacks the knowledge or awareness of the
driver’s validity or credentials, in the event of a major truck
accident, the broker might be caught defending a potential nuclear
lawsuit. 

As my father, the founder of mega-fleet US Xpress, once told me, “In the
court system, it’s not what you know that matters. It’s what a jury
believes that you should have known that gets you in trouble. This is
how nuclear lawsuits are often won against truckers in court.” 


-- 
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