Understanding Workers’ Compensation for Owner-Operators vs. Fleet-Based Trucking Companies
Trucking is a critical and rewarding industry that drives the American economy. But it also comes with serious challenges and risks—long hours, heavy equipment, and the dangers that come from road travel. Because of this, injuries can be common. And that’s why worker’s compensation insurance is so important. It’s a critical form of protection that helps cover medical expenses, lost wages, and other support for drivers hurt on the job.
But not all workers’ compensation coverage is the same, and it varies significantly for owner-operators versus a fleet-based trucking company. And it’s critical to know the key differences, what the law requires, and how each type of operation can manage risk, stay compliant, and control costs.
Owner-Operators vs. Fleet-Based Trucking Companies
Owner-operators are independent contractors who run their own trucking businesses. They provide and maintain their own equipment, cover their own operating costs, and are not classified as traditional employees of a trucking company.
In contrast, drivers working for fleet-based trucking companies are traditional employees who operate company-owned trucks. The employer typically handles operational expenses and likely provides standard benefits like health insurance.
When it comes to risk management, owner-operators bear the responsibility of securing and maintaining their own insurance policies, while drivers for fleet-based companies rely on their employers for coverage, marking a notable difference between the two.
Coverage for Fleet-Based Trucking Companies
In most US states, fleet-based trucking companies are required by law to hold workers’ compensation insurance coverage. In the event an employee is injured on the job, it provides coverage for all necessary medical expenses, a portion of lost wages, and, sometimes, disability rehabilitation and survivor benefits. It also ensures legal protection for the company. Its cost is covered by the fleet-based trucking company and is calculated by employee classification, payroll information, safety record, and claims history. Workers’ compensation insurance generally limits the employee’s ability to sue the company they work for related to the covered incident.
Coverage for Owner-Operators
True owner-operators are generally exempt from legal requirements to hold workers’ compensation insurance, but it is still wise for them to have some sort of protection in the event of injury. In fact, the companies they may lease their vehicle from or drive on behalf of may require it. Otherwise, owner-operators could personally bear the devastating financial burden of a work-related injury. Instead of traditional workers’ compensation coverage, owner-operators utilize occupational accident insurance. It provides protections and benefits like workers’ compensation coverage, such as covering medical expenses and lost wages due to job-related injuries, at a lower cost. However, it usually has lower benefit limits than workers’ compensation insurance, such as lower limits for medical expense coverage, partial coverage of lost wages, and a time limit to receive benefits. Occupational accident insurance also does not limit the options of the owner-operator to pursue legal action against a company they contract with. If an owner-operator does take on additional employees, they will likely be subject to legal requirements to carry workers’ compensation insurance.
Since truck driving often entails multi-state travel, it is critical for both owner-operator and fleet-based trucking companies to understand the insurance requirements of the states they will operate in, and select a policy that accommodates that.
Because of the significant cost difference, a fleet-based trucking company may be tempted to classify its employees as contractors to negate the requirement to provide workers’ compensation coverage. This could cause significant liability issues for the carrier and costly insurance premium adjustments.
Managing risk is a crucial part of the trucking industry, for owner-operators and fleet-based trucking companies alike, especially when it comes to covering work-related injuries. That’s why it is critical to work with the right insurance partner who can help you understand your legal and regulatory responsibilities, cultivate a safety culture, choose the right type of coverage, and manage claims.
At SWZ, we are proud to specialize in meeting the insurance needs of the trucking industry. We also provide a complimentary SCORE Report to help you assess your safety profile and see how it may be affecting your insurance premiums. Request your copy today.
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