We are leasing owner-operators onto our authority. Who insures what?

If you are an authorized carrier using equipment you do not own, there must be "a written lease granting the use of the equipment," a receipt when you take possession, and records kept with your transportation records (49 CFR 376.11).

The lease itself must include specific terms (49 CFR 376.12). The ones that touch insurance:

• Exclusive possession and control (c)(1). The carrier "shall have exclusive possession, control, and use of the equipment for the duration of the lease" and "shall assume complete responsibility for the operation of the equipment."
• Not a ruling on employment status (c)(4). That control language is not "intended to affect whether the lessor or driver provided by the lessor is an independent contractor or an employee."
• Charge-backs (h). The lease must list items the carrier pays and deducts from the owner-operator's pay, and how each is computed.
• Insurance (j). The lease must state "the legal obligation of the authorized carrier to maintain insurance coverage for the protection of the public," must state "who is responsible for providing any other insurance coverage for the operation of the leased equipment," and if the carrier charges the owner-operator for insurance, must "specify the amount which will be charged-back."

In other words: public liability is yours. Everything else is negotiated, but it has to be written down.

The exact split depends on your lease and your policies. This is the common arrangement.

Your primary auto liability

Under federal rules, the carrier must have the required financial responsibility in effect before operating (49 CFR 387.7), and the lease must state your obligation to insure for the public. That usually means the leased tractor is covered under your truck liability policy while it is operating for you. See who insures a leased owner-operator.

Non-trucking liability (NTL)

Covers the owner-operator's liability when the truck is not being used in your business. It is not cargo, not physical damage, and not a substitute for your primary. See non-trucking liability and bobtail vs non-trucking liability.

Physical damage

Damage to the owner-operator's own truck. Lenders require it. Some carriers offer it through a program and charge it back, which the lease must spell out. See truck physical damage.

Occupational accident and workers comp

Texas lets most private employers choose whether to carry workers comp. But Texas intrastate carriers whose primary business is hauling for hire between municipalities must protect their employees with workers comp or approved accident coverage of at least $300,000 medical for 104 weeks, $100,000 accidental death and dismemberment, 70 percent of pre-injury income for 104 weeks, and a $500 maximum weekly benefit (Tex. Transp. Code §643.106). Whether an owner-operator is your employee is a legal question. See occupational accident insurance, occupational accident vs workers comp and trucking workers comp in Texas.

If your auto liability is written on a schedule of autos, a leased tractor that never gets added is not a covered auto under the policy. The MCS-90 endorsement still protects the public. It applies "regardless of whether or not each motor vehicle is specifically described in the policy," but it is a suretyship, "not insurance" (Wesco v. Rich, 5th Cir. 2023).

The consequence lands on the carrier. In a Fifth Circuit case, a tractor was leased to a carrier and driven by one of its employees. The insurer concluded the tractor was not covered because it had not been reported within the time the policy required. It paid the injured parties as the MCS-90 required, then won reimbursement of the settlement from the carrier. The endorsement's own words say the insured "agrees to reimburse the company" for payments it "would not have been obligated to make under the provisions of the policy" (T.H.E. v. Larsen, 5th Cir. 2001).

The fix is administrative: a written onboarding step that adds the unit to your policy (or confirms your policy covers it automatically) before the first dispatch, and removes it when the lease ends. See scheduled auto vs any auto and what is MCS-90.

1. Have an attorney review your lease against 49 CFR 376.12, including insurance, charge-backs and the independent contractor language.
2. Write the insurance section clearly: who carries NTL, physical damage, occupational accident or workers comp, and exactly what is charged back.
3. Collect certificates from the owner-operator for NTL, physical damage and occupational accident, and keep them current. Ask for endorsements naming you where the lease requires it.
4. Add the unit to your auto policy before dispatch if your policy is scheduled, and confirm whether trailers need trailer interchange.
5. Run the driver through your underwriter's approval process. Many trucking policies require drivers to be approved or meet stated guidelines.
6. Calendar lease terminations so units come off the policy and the owner-operator removes your identification when the lease ends.

Send us your lease and policy for a review and we will flag where they do not match.