August 2014

Should I Hire This Driver, or Not?

If you have to ask the question, you already know the answer. (And asking your insurance agent to make the call does NOT take you off the hook.)

The driver shortage shows no signs of improving any time soon. Demographics and economics are conspiring against fleet operators. Fewer individuals are entering the industry while at the same time freight is strengthening.

There are profits to be made these days if only drivers can be secured. And trucking firms are doing whatever they can to attract new drivers. Recruiting budgets are rising; sign-on bonuses, driver perks and benefits are all increasing as motor carriers compete not for freight which is abundant, but for the drivers they need to pull those loads.

It is tempting in this environment to hire drivers you really know you shouldn’t. Don’t do it. Because we all know deep down that the old saying we heard from our parents and that we have probably repeated to our own children is still true: “Decisions have consequences.”

Consider a person’s decisions at the dinner table. If you make enough bad decisions over time about what you eat you’ll gain weight and eventually suffer diminished good health. Risks of high blood pressure, diabetes, strokes, heart attacks – even cancer – all increase with obesity. Decisions. Consequences.

Think about your equipment. If you make enough bad decisions in the maintenance garage, you’ll surely be sorry in the long run. When you stretch out the time between your PMs; running too long on your tires, not freshening the vehicle fluids when needed, adjusting the brakes, replacing bulbs, what happens? Your equipment becomes much less reliable. Eventually you will have problems with mechanical breakdowns – you’ll start piling up vehicle out of service citations, maybe even costly accidents. Decisions. Consequences.

It is no different with your driver hiring decisions. Decisions about which drivers you hire – or don’t – will have consequences. Over time, this is a certainty. Gambling against the odds simply doesn’t pay off. Bad decisions in hiring can have the worst possible consequences and put your entire company at risk.

Your insurance company provides you with Recommended Driver Hiring Standards. This is a risk management guide and should be taken seriously. When you are deciding whether to hire a driver and his driver record causes concerns, it is tempting, even commonplace, to send the MVR to your insurance agent and ask for their guidance. This seems prudent but it is actually a bad idea for a number of reasons.

During the underwriting process, an insurance carrier tries to evaluate the totality of your risk and thus generate a premium amount that will allow for them to pay incurred claims and also generate required profits. If the premiums are too low, the carrier suffers financial loss and eventually goes out of business or withdraws from writing trucking risks. If the rates are too high, the insurance company will not be successful in attracting truckers as clients. Properly pricing to the market is the balancing act of any business. The problem with insurance is it is impossible to determine the true costs of providing the coverage until after the policy has expired. Sometimes years after.

So the underwriter tries to navigate down the road by looking in his rearview mirror. What do we mean by this? Underwriters have to predict the future by looking at past experience. They have a number of tools to do so. One of the most accurate tools is the driver’s MVR. But don’t ask the agent (or the company) to approve a particular driver based on their driving record.

Insurance professionals should not comment on a motor carrier’s specific driver hiring decisions because employment decisions must be made solely at the employer’s discretion. Actually, it is a violation of the Federal Fair Credit Reporting Act, if we insurance types make a determination that affects the employability of an individual based upon a “consumer report” such as an MVR.

With that being said, it should always be the shared goal of the insurance carrier and the motor carrier to comply with the stated guidelines regarding experience, moving violations, years of holding a valid CDL, etc. We use the term "guidelines" because that is what they are, a guide. They are rarely enforceable terms in the insurance contract. Nor should they be.

Ultimately the fleet owner must conduct their business the best way they see fit, and the insurance company will react accordingly by evaluating the risk and the losses and setting appropriate premiums for a new policy or renewal.

The reason why insurance companies are such sticklers for clean MVRs is twofold (and both are in the motor carrier’s best interest): 1) the worse the MVR, the more likely the driver is to have an incident that will cost you and the insurance company money. (Please trust us on this, there are always exceptions, but the general principle holds true), and 2) the BETTER the MVR, the easier it is to defend the driver AND YOUR COMPANY in court and thus limit damage awards.

Here is the question you never want to hear, “Ladies and gentlemen of the jury, do you think it was a good decision on the part of this motor carrier to hire this particular driver, knowing how poor his driving record was?” Keep in mind the threat of punitive damages (not covered by insurance) is real. If the courts find a motor carrier had wanton disregard for the safety of others due to its bad decisions in hiring they may award substantial punitive damage awards that can put a motor carrier out of business. Decisions. Consequences.

The opposite is also true. Consistently hiring drivers with clean MVRs while closely monitoring your drivers’ records throughout the year (not just taking a peek at

insurance renewal time) will put you in the best possible position if you ever suffer a bad claim that must be defended in court.

It’s often not easy to make the good decision - especially when you have empty trucks and freight piling on loading docks. But even one short-sighted decision to hire a driver with a poor driving record may cost you dearly. Repeated bad decision-making over time invariably will result in poor CSA scores and is exceedingly likely to result in poor insurance claims history with resulting higher insurance rates.

These consequences should always be considered whenever you find yourself asking the question, “Should I hire this driver, or not?

“Good judgment comes from experience… experience comes from bad judgment.”