When A CDL Gets Cancelled Your Truck Insurance Notices
A three judge panel in Washington argued the California non domiciled CDL case on September 11. The lesson for every small fleet is that a license can go invalid without you doing anything wrong.
A federal appeals court just spent a morning on cancelled CDLs
On Friday September 11 a three judge panel at the US Court of Appeals for the DC Circuit heard arguments in California DMV versus the US Department of Transportation, the fight over non domiciled commercial driver licenses. FreightWaves covered the hearing and Land Line reported from it the same day. The short version is that FMCSA audited California, said thousands of non domiciled CDLs were issued with expiration dates running well past the driver's work authorization, withheld roughly $160 million in highway money, and paused the state from issuing or renewing any more of them.
California's argument is that no federal rule ties a CDL expiration date to a legal presence document. The panel pushed back. One judge said, per Land Line's account of the hearing, that it is "kind of absurd" to hand out an eight year license on paperwork that expires in a week. A ruling will take months. A second case, Lujan versus FMCSA, gets argued in the same court the following week.
This is a licensing story and an insurance story at once
Most owner-operators read a headline like that and move on, because they do not run in California and they do not hire non domiciled drivers. Fair enough. The part that travels is the mechanism. A driver who was legally licensed on Monday can be sitting on a cancelled license by Friday because of an audit finding between a state agency and a federal one. The driver did nothing wrong. The carrier did nothing wrong. The license is still gone.
Your policy was priced on a set of drivers with valid licenses and clean enough motor vehicle records. When one of those licenses quietly stops being valid, the truck keeps rolling and the premium keeps getting paid, but the thing the underwriter counted on is no longer true. Nobody finds out on a good day. They find out after a loss.
Where an invalid license actually shows up
After a serious crash the other side's attorney asks for the driver qualification file before almost anything else, and your own adjuster wants the same file. If the license was cancelled, suspended, or expired on the date of loss, the argument writes itself, that the company put an unqualified driver behind the wheel of an 80,000 pound vehicle. That is a negligent entrustment claim, and negligent entrustment is how an ordinary accident turns into a number that outruns the policy. Our page on commercial auto liability lays out what that coverage is built to do.
Coverage itself gets complicated too. Carriers rate a policy around a named driver list and they ask about licensing on the application and again at renewal. A driver whose license status changed mid term is a change in the risk you were quoted on. That is a conversation to have with your agent before a claim, not in the middle of one.
The driver file is the cheap part of this
Pulling a motor vehicle record costs a few dollars. Losing a negligent entrustment argument costs the company. For a one truck operation this is a ten minute habit once a year. For a five or ten truck fleet it is a calendar item, and it is the easiest thing you can put in front of an underwriter when you want a better number at renewal. If you are still standing up a new operation, our guide to new trucking authority insurance requirements covers what has to be on file from day one.
What to actually do this week
Run a current MVR on every driver including yourself, and read the license status and the expiration date, not just the violations. Look hard at any driver whose right to work in the US carries an expiration, because that is the exact thread this court case is pulling. Put a reminder on every CDL and every medical card in the operation. And tell your agent the same day a driver's status changes, because the policy that pays is the one that matches reality. If you want to see how driver records move a premium, our breakdown of how much commercial truck insurance costs shows which factors carry the most weight.
Get your driver list checked
If you are not certain your driver files would hold up under a look from a plaintiff attorney, that is worth a short conversation. Get a truck insurance quote in under a minute and we will go through your driver list, your filings, and your limits together. Call or text 423-264-4255 and we will tell you straight where the gaps are.
Common questions
Can my truck insurance be denied if a driver's CDL was cancelled?
It depends on your policy language and the facts, but it is a real risk worth taking seriously. Most commercial auto policies are written around the drivers disclosed to the carrier, and an insurer can raise questions when a driver was not properly licensed at the time of loss. The bigger exposure is usually the liability side, where an unqualified driver feeds a negligent entrustment claim. Call or text 423-264-4255 and we will read your policy with you.
Does the California CDL case affect me if I run somewhere else?
Not directly. The case is about California non domiciled CDLs and a funding fight with FMCSA. What travels to every state is the lesson, that a license can be cancelled by an agency decision the carrier never sees coming, so you need your own habit of checking status rather than assuming a license stays good until its printed expiration date.
How often should I pull an MVR on my drivers?
At minimum once a year on every driver, which is what the federal annual review expects, plus any time a driver tells you about a ticket, a suspension, or a change in work authorization. Small fleets that run them twice a year catch problems earlier and usually present better at renewal.
What is negligent entrustment in a trucking claim?
It is the argument that the company should not have let that driver operate that truck, based on what the company knew or should have known from the driver file. It is aimed at the business rather than only at the driver, which is why it can push a claim past the limits you bought. Get a truck insurance quote and we will look at whether your limits match that exposure.
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