(CN) – Motor carriers can recoup the cost of mandatory insurance through “chargebacks” to truck drivers, the 7th Circuit ruled, rejecting a challenge from drivers who own their own rigs.
The Owner-Operator Independent Drivers Association in Indianapolis challenged Mayflower Transit’s reduction of the drivers’ per-mile rate through “chargebacks” for public injury insurance.
Federal law requires motor carriers to have insurance on all vehicles for public injury and damage. The insurance requirement prevents carriers from taking too few precautions and then hiding behind the “corporate shield of limited investors’ liability” when accidents happen.
The court held that chargebacks do not constitute an illegal sale of insurance to owner-operators.
Chief Justice Frank Easterbrook observed that owner-operators will pay for insurance “indirectly (through lower rates per mile) if they do not pay through a chargeback.”
The lower court had dismissed some of the claims as untimely after concluding that the statute of limitations is two years, not four.
But the law explicitly provides a four-year limit, the 7th Circuit noted, and U.S. District Judge Sarah Barker overstepped her authority in ruling that Congress erred by imposing the four-year limit.
“A judge’s belief that Congress planned to do something different but bollixed the job does not alter what the enacted statute provides,” Easterbrook wrote. “What Congress meant to do, but didn’t, is not the law.”
Easterbrook concluded that chargebacks for the cost of insurance are legal, because actual insurers — and not motor carriers — are the ones selling the insurance.
“Plaintiffs treat the chargeback as a sale of insurance by Mayflower. Yet it is not an insurer,” Easterbrook explained.
“The regulation requires motor carriers to purchase insurance underwritten by real insurers, so that persons injured by a motor carrier’s operations may find a source of compensation more reliable than the motor carrier itself, which is often thinly capitalized,” he wrote (original emphasis).