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Data helping insurers, government crack down on chameleon trucking companies

A few weeks ago, WOOD TV 8 in Michigan broadcast an investigative report into what it said was a “chameleon” trucking company that had actually been reborn several times, it alleged, to avoid unsatisfactory safety ratings.

That story generated local interest in so-called chameleon carriers, and produced enough discussion that lawyer Steven Gursten of Michigan Auto Law published a blog post on the topic.

“Lawyers who specialize in helping people injured in truck accidents have known about unsafe trucking companies known as ‘chameleon carriers’ for years,” he wrote. “These are truck companies and busing outfits that try to hide from their dismal safety records and often deadly crash history by shutting down and then re-opening under different carrier names. This allows them to game the system and hide safety records by obtaining a new name and a new USDOT number.

“Sadly, these unsafe trucking companies have caused an inordinate number of preventable wrecks, but until recently there has been very little that federal and state regulators could do to stop this dangerous practice,” he added.

Chameleon carriers have been around for a long time, as most in the industry know. Most are carriers that have been given out-of-service orders by FMCSA and the owner simply creates a new name, gets new insurance, and fills out the paperwork for the new company.

According to the WOOd TV report, FMCSA data shows that in 2005, about 1.5% of all new carrier authority applications had “chameleon traits,” meaning that may be a chameleon company. By 2010, that percent had increased slightly to 1.7%.

Put in perspective, in 2010, FMCSA received 65,631 applications, so about 1,100 carriers approved for authority may have been born out a company that had previously been placed out of service.

In 2012, the Government Accountability Office issued a report that urged FMCSA to expand efforts to identify freight carriers evading detection. It wrote:

“FMCSA does not determine the total number of chameleon carriers within the motor carrier industry. Such a determination would require FMCSA to investigate each of the tens of thousands of new applicants that register annually and then complete a legal process for some of these suspected chameleon carriers, an effort for which FMCSA does not have sufficient resources. Rather, FMCSA’s attempt to identify chameleon carriers among new applicants, referred to as the vetting program, is limited to bus companies (passenger carriers) and movers (household goods carriers). These two relatively small groups, representing only 2 percent of all new applicants in 2010, were selected because they present consumer protection and relatively high safety risks. Through the vetting program, FMCSA conducts electronic matching of applicant registration data against data on existing carriers and investigates each application from these two small groups, but does not determine whether all other new applicants, including freight carriers, may be attempting to assume a new identity.”

For truly safe trucking companies, chameleon carriers are a problem. While they may not directly impact an operation, a chameleon carrier that shouldn’t be on the road can lead to an impact on overall insurance premiums for all carriers as that risk and increased claim payouts are absorbed into the marketplace.

GAO found that chameleon carriers were responsible for 3,561 injuries and 217 deaths from 2005 to 2010.

Fortunately, data is providing both FMCSA and insurers the chance to root out these bad players before they ever return to the road.

“They are able to track even down to the VIN number of vehicles historically, allowing you to identify chameleon carriers,” Andrew Ladebauche, CEO of Reliance Partners, told FreightWaves in an earlier interview. “We’re able to track that all the way down to say that Company X that was shut down in 2015, now those trucks are being used by Carrier Y in 2017,” which allows an insurer to dig deeper and determine if that new carrier may pose a risk or is operating illegally.

FMCSA, which the GAO report found to only be checking bus companies and household goods movers, has taken steps in recent years to crack down. It’s issued two separate rules and worked with the Pipeline and Hazardous Materials Safety Administration to develop a data-and-web-based interface to help identify carriers. Known as the Hazmat Intelligence Portal (HIP), the program proved successful in identifying chameleon carriers during testing.

“The resulting prototype method was named ARCHI, for Application Review and CHameleon Investigation,” wrote Sid Nair, senior director of transport and compliance at Teletrac Navman in a company blog posting last summer. “Its process is to first compare each new carrier to older carriers for similarities in name, ownership, and other criteria. Each new carrier then gets a score based on how closely it matched older businesses. Those that score above a certain cut-off are then evaluated for motive—did the older company declare bankruptcy? Did it have outstanding safety violations or fines? Was it previously placed out of order or was it involved in a serious crash?”

The proliferation of data use in trucking is now making possible the opportunity for FMCSA and insurers to identify chameleon carriers, and that is leading to safer roads and lower premiums.

Brian Straight

Brian Straight leads FreightWaves' Modern Shipper brand as Managing Editor. A journalism graduate of the University of Rhode Island, he has covered everything from a presidential election, to professional sports and Little League baseball, and for more than 10 years has covered trucking and logistics. Before joining FreightWaves, he was previously responsible for the editorial quality and production of Fleet Owner magazine and Brian lives in Connecticut with his wife and two kids and spends his time coaching his son’s baseball team, golfing with his daughter, and pursuing his never-ending quest to become a professional bowler. You can reach him at [email protected]