MotorTruck Fleet Executive Magazine Article & Ontario Trucking News - Part 2

By Lina Demedieros

Alternative to WSIB Impacting Profitability
PART II

Last month we spoke of the variety of contracts in the market purchased as alternatives to Workplace Safety and Insurance Board. This month we wanted to illustrate how each contract would respond to a common claim to the individual owner operator and potential exposure to decreasing profits for the transport company.

Case Study #1

45 year old Owner Operator with $200,000 in Gross Earnings. Client protects his/her income for $3,000 monthly for both Injury and Illness. He has jack knifed his tractor trailer, sustained a back injury the diagnoses is soft tissue damage and he finds out that he has degenerative disc disease. Prognosis for recovery is 12 months.

Scenario #1 Non-cancelable contract/Guaranteed Renewable

Since these contracts generally have a 30 day waiting period, the Owner Operator absorbs one month of loss of earnings. This contract was fully medically and financially underwritten at time of application a benefit paid monthly of $3,000.00, total payout $33,000 for eleven months.

Scenario #2 Cancelable or Conditionally Renewable.

These contract typically contain limitations on soft tissue. In most instances, the O/O will be paid for a maximum of 60 days as a line haul driver. The degenerative disc disease will be covered solely under the soft tissue section of this policy and/or the illness portion. Since benefits are payable from the very 1st day of Injury the total payment is $6,000. Total Loss $30,000 to the Owner Operator.

Scenario #3 Association Plan

Like the cancelable or conditionally renewable contract, this contract would respond similarly. Degenerative Disc Disease is a condition that is commonly limited under these contracts. Since degenerative disc disease commonly occurs with repetitive use, this may be deemed to be an illness normally covered under the illness benefit. However if the contract states clearly it will pay only 60 days the total payment is $6,000. Total loss to the Owner Operator is $30,000.

In scenario #1, Clearly the Owner Operator is paid and really has no motivation to collect under the statutory accident benefit of your fleet insurance policy. The total loss represents only one month of earnings, similar to a hold back. He also has no problem collecting on the degenerative disc disease diagnosis. The application was medically underwritten and he had no diagnosis of the condition prior to entering into the contract with the insurer. The condition is covered.

Scenario #2 & 3, Clearly, the Owner Operator will consider the statutory accident benefits available under your fleet insurance policy. The transport carrier may have endorsed, recommended or implemented a plan without any professional due diligence exercised at time of enrollment. The company may have mandated an alternative to Workplace Safety Insurance Board with Injury Only coverage as a minimum requirement of injury only. This would leave the owner operator with a major problem.

Case Study #1a

Where an Owner Operator is accidentally totally disabled and becomes a paraplegic; each one of these contracts would respond differently. At this time, the terms, conditions and limitations will actually determine your total payout.

In Scenario #1 The Non-Cancelable and Guaranteed Renewable would pay benefits until age 65. The insurer would attempt to rehabilitate the O/O to re-integrate him/her back in the work force. No limit is generally found under rehabilitation. Benefits continue to be paid. Integration with The Canada Pension Plan would be attempted and the difference would be paid by the insurer.

In Scenario #2 The cancelable or conditionally renewable contract contains limitations on rehabilitation, Once this benefit is exhausted, he may or may not qualify to continue to receive benefits. He would be completely dependent on the overall response to treatment, definition, terms and conditions within the contract. If they are unfavorable, the Owner Operator would consider going against the carriers statutory accident benefits under your fleet insurance .

Scenario # 3 The Association Plan with a total payout “maximum limit” may pay out a lump sum or a lifetime annuity depending on the type of association plan purchased. This again is a potential exposure to the Owner Operator and the transport company.

While purchasing the cost effective programs may save you 45% money in comparison to Workplace Safety Insurance Board and more inclusive programs; the cost savings may be illusory.

Many times the savings you thought you found are coming out of your own personal pocket or the under your fleet insurance. It certainly pays to talk to your advisor about proper risk management to help increase your profits and avoid any surprises at claim time.

Lina M. Demedeiros
Living Benefits Specialist
E&O.E.

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