The driver of a commercial vehicle carrying 78,000 pounds is going too fast around a corner, loses control, and rolls down a 40-foot embankment. He is found hanging upside down in the truck by paramedics called to the crash. You have a Lease agreement with the driver/operator that states he will carry his own workers’ compensation coverage. Are you protected under the Motor Carrier law that became effective on August 10,2022?
The transportation industry, specifically commercial motor carriers and drivers, are a critical part of our economy and society. Colorado Workers’ Compensation System disfavors independent contractors as they are not covered or controlled by the Colorado Division of Workers’ Compensation for benefits if they are injured.
Prior to 2005, there was an effort by our legislators to provide an option for commercial independent contract drivers to obtain similar benefits to Colorado’s workers’ Compensation System. The legislature enacted 40-11.5-102 that permits lease agreements between company and drivers while allowing the driver to remain an independent contractor. This would allow the drivers to make the determination on how to run their independent business, create some certainty in their status as an independent contractor, and reduce the cost of insurance to both the driver and the company they are contracted with. However, in order to remain an independent contractor, the driver must carry “similar” insurance coverage that is offered under workers’ compensation. If the driver does not have similar coverage, they are presumed to be an employee of the carrier.
On November 12, 2002, a driver for USF Distribution Services, Inc., sustained severe injuries when he was involved in a motor vehicle accident during a delivery to one of USF’s clients. Both the driver and the company agreed that the “Independent Contractor Agreement” between the parties included the provisions of C.R.S. § 40-11.5-102(1). The driver participated in an occupational accident insurance program that was provided to meet the requirement of the statute under C.R.S. § 40-11.5-102(5)(a), requiring that a lease agreement must provide for coverage under workers’ compensation or a private insurance policy that provides similar coverage.
A dispute arose as the driver, a/k/a/ claimant, made a claim against USF for additional workers’ compensation benefits against their insurance company. At the trial court level, the Administrative Law Judge (ALJ), made a determination that the claimant was in fact an employee of USF because the occupational accident insurance program did not provide” similar benefit” as required under C.R.S. 40-11.5.102. The explanation was that the benefits offered were substantially less than those outlined in the Workers’ Compensation Act. This determination was upheld ultimately by the Colorado Court of Appeals in the case of USF Distribution Services, Inc v. Industrial Claim Appeals Office, 111 P.3d 529 (Colo. App. 2004). The court reasoned that the obvious purpose of the statute is to ensure that the lessor is not relieved of liability for workers compensation benefits unless the independent contractor has comparable benefits available.
After this case was decided it was clear the issue that must be determined was a definition of “similar coverage”. Based on this case the courts were essentially requiring that any personal insurance or occupational accident policy must be equivalent to a workers’ compensation policy. That was not the intent of the statute, and it was left up to the Insurance Commission to define “similar coverage”. The insurance Commission was not developing a definition. Therefore, Colorado Motor Carriers Association, (CMCA), while working with the legislature stepped in to define “similar coverage” which is currently outlined under C.R.S. § 40-11.5-102. This was over the objections of the trial lawyers who wanted to define coverage that would have been in excess of typical cost of a workers’ compensation claims that are statutorily limited.
The provisions of this statute, among other things, require that the lease or contract with a commercial vehicle operator of 16,000 lbs. or more, who is the owner, is leasing, or is purchasing the commercial vehicle, is offered a workers compensation policy or similar coverage, and if so, the operator is exempt from the definition of employee for workers’ compensation issues. The agreement must outline whether the lessor or lessee pays for the insurance policy and whether there are restrictions to the company status if someone other than the operator is involved in the business. The policy must pay similar benefits and have a minimum of $1,500,000 coverage.
Mr. Bill Sterck, Esq., worked with CMCA in drafting proposals of C.R.S. § 40-11.5-102 for the legislature to consider in defining “similar coverage” that was ultimately enacted. One of the primary issues seen today is that policies fail to provide the required minimum coverage amount. Bill Sterck, Esq. and Jessica Melson, Esq. are both CMCA Allied members and are available to further discuss this and any others questions you may have.
Effective: August 10, 2022
C.R.S.A. § 40-11.5-102
- 40-11.5-102. Lease provisions–definitions–rules
(5)(a) Any lease or contract executed pursuant to this section must provide for coverage under workers’ compensation or an occupational accident insurance policy that provides similar coverage.
(a.5) If an operator of a commercial vehicle obtains similar coverage pursuant to this subsection (5), then the operator:
(I) Is excluded from the definition of employee for purposes of section 8-40-202(2);
(II) Shall notify the division of workers’ compensation in the department of labor and employment of the election, in a manner determined by the director of the division of workers’ compensation by rule; and
(III) Shall, along with the motor carrier and contract carrier, provide proof of the similar coverage upon request to interested parties, including the carrier’s workers’ compensation insurance provider, the division of workers’ compensation, and the division of insurance.
(b) As used in this subsection (5), “similar coverage” means:
(I) Insurance benefits designed for independent contractors and sole proprietors who reject workers’ compensation coverage and elect, pursuant to this subsection (5), coverage providing medical, temporary and permanent disability, death and dismemberment, and survivor benefits that are subject to regulation by the division of insurance in the department of regulatory agencies. The specifications of the insurance, including overages, exclusions, policy limits, and the amount, if any, of any deductibles or co-payments, must be filed with the division of insurance. The specifications must meet or exceed standards set by the division of insurance and the standards must specify that the benefits offered by the insurance coverage must be at least comparable to the benefits offered under the workers’ compensation system.
(II) For services performed by operators of commercial vehicles, an occupational accident insurance policy that provides a minimum aggregate policy limit of one million five hundred thousand dollars for all benefits paid for the benefit of the operator, including medical, temporary and permanent disability, death and dismemberment, and survivor benefits.
(c) The lease shall provide for the payment of such coverage by either the lessor or lessee. If the lease provides for the lessee to pay for such coverage, proof of coverage shall be maintained by the lessor for the duration of the lease and the lessor shall not have liability for failure of compliance by the lessee.
(d) Notwithstanding any other law, if an operator of a commercial vehicle, a motor carrier, or a contract carrier obtains similar coverage pursuant to this subsection (5), articles 40 to 47 of title 8 do not apply.
(e) Repealed by Laws 2022, Ch. 167 (S.B. 22-035), eff. Aug. 10, 2022.
(6)(a) As used in this section:
(I) “Commercial vehicle” has the same meaning as set forth in section 42-4-235(1)(a)(I)(B).
(II) “Operator” means the operator of a commercial vehicle:
(A) Who owns, is purchasing, or is leasing the commercial vehicle from any person other than the motor carrier; and
(B) Is the sole proprietor, owner, or partner of an applicable entity; a shareholder of a corporation where there are no more than two shareholders of the corporation; or a member of the applicable entity.
(b) For the purposes of subsection (6)(a)(II) of this section, the ownership, purchase, or leasing of a commercial vehicle by an applicable entity is deemed ownership, purchase, or leasing of the commercial vehicle by the sole proprietor, owner, or partner of an applicable entity; a shareholder of a corporation where there are no more than two shareholders of the corporation; or a member of the applicable entity.
Credits
Added by Laws 1990, H.B.90-1333, § 1, eff. June 8, 1990. Amended by Laws 1992, S.B.92-75, § 4, eff. June 6, 1992; Laws 2004, Ch. 255, § 34, eff. May 21, 2004; Laws 2018, Ch. 203, § 1, eff. Aug. 8, 2018; Laws 2022, Ch. 167 (S.B. 22-035), § 2, eff. Aug. 10, 2022.
- 42-4-235. Minimum standards for commercial vehicles–motor carrier safety fund–created–definitions–rules–penalties
(1) As used in this section, unless the context otherwise requires:
(a) “Commercial vehicle” means:
(I) A self-propelled or towed vehicle:
(A) Bearing an apportioned plate;
(B) Having a manufacturer’s gross vehicle weight rating or gross combination rating of at least sixteen thousand one pounds and used in commerce on public highways; or
