Last issue, 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 income for $3,000 monthly for both injury and illness. He has jackknifed 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-cancellable 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 monthly benefit of $3,000 is paid, with a total payout $33,000 over 11 months.

Scenario #2

Cancellable or conditionally renewable.

These contracts 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 first day of injury, the total payment is $6,000. Total loss of $30,000 to the owner/operator.

Scenario #3

Association plan

Like the cancellable 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 his 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.

In Scenario #2 and #3, clearly, the owner/ operator will consider the statutory accident benefits available under his 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 and 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-cancellable and guaranteed renewable would pay benefits until age 65. The insurer would attempt to rehabilitate the O/O to reintegrate them 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 cancellable or conditionally renewable contract contains limitations on rehabilitation. Once this benefit is exhausted, they may or may not qualify to continue to receive benefits. They would be completely dependent on the overall response to treatment, definition, terms and conditions within the contract. If they are unfavourable, the owner/operator would consider going against the carriers statutory accident benefits under his fleet insurance.

In 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 and 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 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.