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Editor’s Note: FMCSA said following this issue’s deadline that motor carriers may ignore notices of investigation for revocation of authority based on cancellation of cargo insurance policies on or after March 21 if they have a service date of Feb. 19 or after.

By Daniel P. Bearth, Staff Writer

This story appears in the March 14 print edition of Transport Topics.

Thousands of motor carriers have received erroneous warnings from the Federal Motor Carrier Safety Administration recently about the possible loss of their operating authority due to the cancellation of cargo insurance policies that the agency no longer requires in most cases.

The letters, signed by Kenneth Rodgers, chief of FMCSA’s commercial enforcement division, stated that “any operations without such insurance are unlawful.”

The problem is that the letters are wrong, industry executives said.

Insurance industry officials said they’ve been told by FMCSA that a computer glitch is responsible for triggering the issuance of “Notice of Investigation” letters to nearly 6,000 carriers with cargo insurance policy cancellations pending.

“I spoke to Mr. Rodgers,” said Ira Lipsius, president of Central Analysis Bureau, a New York-based organization that provides filing services for insurance companies. “He advised that the [information technology] department cannot come up with a fix, but the system is programmed so that after March 21 the notices will no longer be sent.”

For-hire motor carriers and freight forwarders, except those that handle household goods, are not obligated to provide minimum levels of cargo insurance as the result of a change in regulation that takes effect March 21.

Carriers still must have insurance to cover bodily injury and property damage, however.

Lipsius said he asked Rodgers to issue a letter clarifying the issue and explaining how carriers should respond. “He said it would be considered,” Lipsius said.

In the meantime, the notices have generated considerable confusion and consternation among insurance agents and motor carriers.

“Once you get a notice of investigation, it’s like a red flag to the folks at DOT,” said Marilee Wilkinson, an agent for Schoolar & Associates Insurance in Jemison, Ala., who said she has fielded calls from a number of motor carrier clients who received the notices from FMCSA. “My truckers are very upset because they have no idea why they were under ‘investigation’ and neither did I until I read the letter and saw that it referred to cargo insurance.”

In the letter, FMCSA’s Rodgers states that “failure to comply with the terms of the insurance requirements and of this decision shall result in revocation of its operating rights registration, effective 30 days from the service date of this notice.”

Wilkinson said the loss of operating authority is a serious matter to truckers. “That’s their livelihood,” she said. “You threaten that and truckers are going to panic.”

Insurers could face possible lawsuits if the notices result in economic harm to carriers, said Frank Oleskiewicz, chairman of the transportation committee for the Inland Marine Underwriters Association, a trade group representing cargo insurers.

“People are worried about putting vehicles on the road,” he said.

Just getting an explanation from FMCSA for the mix-up was difficult, according to Dan Parrish, an insurance agent in Marietta, Ga., who said he called the toll-free number provided in the letter only to have the call cut off after 10 minutes on hold with no chance to leave a message.

“It’s ridiculous,” he said.

Wilkinson said she eventually was able to talk with someone at FMCSA who advised her to “just ignore the letters.”

“I believe if they wanted to [reprogram the computer], they could do it,” said Lipsius. “They have very competent people. It’s a question of getting the bureaucracy to move.”

Even if the letters were issued by mistake, Wilkinson said, there remains a question about whether a record of the notice will remain in a carrier’s safety file, and whether information about the notice of investigation could be passed on to roadside inspectors.

“We can’t have trucks red-tagged,” said Dawn Pellham, owner of Pellham Cutting Inc. in Saint Helens, Ore., a small carrier that hauls logs and lumber products. Pellham said she has considered asking her insurance agent to re-file the cargo policy for the dozen or so trucks in her fleet and then cancel after March 21.

“I don’t have time to deal with it,” she said.