Court rules on mover’s insurance fee

| August 09, 2010

Mayflower Transit may assess a 10-cent per mile fee on its owner-operators to cover the cost of insurance, a federal appeals court confirmed Aug. 9.

The Owner-Operator Independent Drivers Association had sued Mayflower, arguing the chargeback amounted to a mandatory purchase of insurance from the motor carrier, which is prohibited by federal regulations governing motor carrier lease arrangements.

The U.S. Court of Appeals for the Seventh Circuit agreed with the federal district court’s ruling that a chargeback differs from compulsory purchase of insurance. Plaintiffs say that to pay for something is the same thing as purchasing something, the appeals court said. “But that can’t be right. Suppose that Mayflower were to cover the cost of insurance by reducing the amount it offers per mile of transportation.”

That clearly would not violate the federal leasing regulations. Mayflower is not an insurer and is not authorized to underwrite risks, the appeals court said. Moreover, the regulation itself recognizes that a chargeback for the cost of insurance is not a sale of insurance.

OOIDA did chalk up one victory in the Seventh Circuit decision. The district court had ruled that OOIDA’s claims were subject to a two-year statute of limitations, but the appeals court said parties in such lawsuits have four years in which to file suit.

The court’s opinion is available on the Seventh Circuit’s website.

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