Insurance Companies Likely to Take Hard Stance on Non-Domiciled CDLs

Potential Liability for Brokers

The implications extend beyond just the carriers themselves. The same insurance executive warned that freight brokerages utilizing motor carriers known to hire non-domiciled CDL holders could potentially face legal culpability. Plaintiffs’ attorneys may target brokers as well as carriers in lawsuits involving accidents with non-domiciled CDL drivers.

Several carriers have already reported increased scrutiny from their insurance providers.

One fleet executive commented that his insurance renewal was more stringent than prior periods, demanding:

• Pictures of drivers’ licenses
• Verification that driver domiciles match their CDLs and business entity
• Clean MVRs (Motor Vehicle Records)
• Correct address information on payment documentation
• Signed statements confirming certain previously leased drivers would not be affiliated with the company

Damian Gunjak, a trucking fleet executive, confirmed this trend: “Our captive provider already told us as much this year. A non-issue for us since we don’t hire unqualified, inexperienced drivers.”

Expert Recommendations for Risk Mitigation

Greg Reed, a partner at Hanson Bridgett LLP, advises that both trucking and logistics companies should take immediate steps to mitigate increased exposure to drivers with non-domiciled CDLs. His recommendations include:

• Conducting a comprehensive audit of all existing employee or contract drivers to identify those holding non-domiciled CDLs
• Engaging with frequently used carriers to determine the scope of exposure to non-domiciled CDLs
• Consulting with legal counsel to assess whether identified drivers have sufficient documentation to demonstrate their CDLs will not be revoked in ongoing audits
• Implementing processes to limit utilization of these drivers until their non-domiciled CDLs are confirmed or renewed
• Incorporating or reinforcing contractual language specifying that drivers must be properly licensed, have lawful employment status, and be qualified to operate commercial vehicles

Real-Time Risk and Coverage Concerns

Industry experts highlight a particularly concerning scenario: non-domiciled CDL holders may find their licenses revoked in real time as the Department of Transportation and state driver’s licensing agencies conduct audits. This could result in a situation where a driver behind the wheel suddenly lacks a valid commercial license.

According to Trucking Made Successful, “Many insurance companies will now be taking a very close look at the CDLs of drivers listed on the policy. According to several insurance agents, insurance companies are looking to deny coverage in cases of non-domiciled CDLs.”

The reasoning is straightforward: under the new rule, if a state becomes aware that a limited-term CDL holder no longer qualifies under the updated regulations, that license must be downgraded. With downgrades already occurring, insurance companies are understandably reluctant to insure drivers whose credentials could become invalid at any moment.

As the industry adapts to these new realities, carriers and brokers who proactively address these compliance issues will be better positioned to avoid both legal and insurance complications in the rapidly evolving regulatory landscape.

How Will Brokers Know About the Driver’s Status?

This is a big question that everyone is asking. If the broker isn’t aware of the legal status of a truck driver, how can they be held accountable? This might require additional screening or strict policies in carrier vetting for freight brokers.

Even if the freight broker lacks the knowledge or awareness of the driver’s validity or credentials, in the event of a major truck accident, the broker might be caught defending a potential nuclear lawsuit.

As my father, the founder of mega-fleet US Xpress, once told me, “In the court system, it’s not what you know that matters. It’s what a jury believes that you should have known that gets you in trouble. This is how nuclear lawsuits are often won against truckers in court.”