FMCSA regulation 387.33

[ChristofferB]

I recently heard about the "FMCSA regulation 387.33" that states that a company needs a 1.5 M liability for transporting 15 passengers or less (http://www.fmcsa.dot.gov/rules-regulations/administration/fmcsr/fmcsrruletext.aspx?reg=387.33). Although I am not sure what this really means (law is not my strong side), how many of the storm chasing tour companies know about (and adhers to) this, you think? Is this something that is just a recommendation or what are the implications of this?

I interpret this as anyone who transports 15 or less passengers on interstates as a part of their business needs to have a financial asset of 1.5M in case something goes wrong, but which tour company would ever be able to have that?

There was really no relevant sub-forum to post this one but I think it is relevant for storm chasers. Moderator: please change if needed.

 

[Dan Robinson]

This is referring to the minimum liability insurance coverage allowed by law. That said, $1.5 million is just the minimum requirement and would not be enough in the event of a major accident where multiple passengers are seriously hurt (hospital stays, etc).

 

[Dan Robinson]

It should be noted that there is some semantic 'wiggle room' for chase tours being legally defined as commercial-for-hire operations, so it can be successfully argued that this law doesn't apply.

The real-world concern for a chase tour operator isn't compliance with government regulations, it is having the proper insurance coverage in case of an accident. An injury/death-causing accident in a tour vehicle, regardless of USDOT legal status, will financially destroy the life of the operator if they don't have the right insurance policy. In the event of a multimillion-dollar accident (severe injuries or deaths), the operator without the right insurance and/or without enough coverage will be in some serious trouble. You can bank on an insurance company fighting a large claim like that tooth and nail, and easy win for them if the coverage isn't proper and ironclad.

 

[Robert Edmonds]

It should be noted that there is some semantic 'wiggle room' for chase tours being legally defined as commercial-for-hire operations, so it can be successfully argued that this law doesn't apply.

There's some semantic wiggle room for whether storm chasing tours are for-hire for direct or indirect compensation of transportation, not whether storm chasing tours are just for-hire. Storm chasing tours yes are (typically, depending on how you set up the tour) for indirect compensation of transportation.

I brought FMCSA regulations up in the past on Stromtrack. I was wrong and right about some things. While yes indirect compensation does mean storm chasing tours are not subject to all the same rules as for-hire operators receiving direct compensation (for example some vehicle markings rules), it does not clear storm chasing tour operators of all rules. FMCSA regulation 387.33 does not specify whether the compensation needs to be direct or indirect, thus from my understanding applies to both cases of direct and indirect compensation. This is my understanding after talking with federal FMCSA regulators. It doesn't matter (for now) because while they agreed this regulation applied to storm chasing tours, off the record, I was told they will not enforce this regulation until there is an accident (mainly out of a sense of laziness). However, after an accident is a different story... and how quickly this stance on enforcement for all storm chasing tours may change is an unknown after an accident (that's what I would be worried about if I was a customer).

Some tours have (at least at some points) maintained the full amount of financial responsibility required. However, I have no idea how you truthfully obtain 1.5 million in insurance, because I have gone to insurance brokers in the past, and if you tell the truth about what you intend to do, you are flat out denied. Not say there isn't an insurance company out there that wittingly or unwittingly might insure a storm chasing tour.

Edit: Note, state regulations do not apply, nor do state regulators have the 'jurisdiction' over storm chasing tours since they are considered interstate tours and not intrastate tours. Yes I talked to state regulators about this too. Which brings up an interesting point why it sorta makes sense (as much as the law can) that insurance of this size would still be required for interstate tours. In NM you are required for intrastate "sight-seeing" tours to have 1 million in liability insurance. If we were to consider just a regular sightseeing tour, that would be one heck of a loop hole if all I had to do was to jump into AZ or TX for a few miles to make my tour an interstate tour, and no longer subject to these large insurance requirements.

 

[Stephen Levine]

Back in early 1996 when I organized my storm tour business for launch, I consulted an attorney to help draw up the legal waiver form and give other important advice. When I asked about insurance coverage, he flat out told me the risk was so high it would be completely cost prohibitive to get a policy and nobody would insure me except perhaps Lloyds of London.
I wonder if this has changed since then, and having discontinued my tour a few years ago due to burnout, it's not been a subject of investigation. However I would be curious how the insurance issue plays out nowadays.

 

[Dan Robinson]

I'm not a lawyer, but a Google search for "waiver" "still sue" (quotations included) reveals troubling information for the reliance on a liability waiver. This is an unfortunate product of our sue-happy society that I think is tragic, but is still a reality that would have me very concerned. A bad accident is going to be a real mess for anyone, even with good insurance. Without insurance, I can't even imagine.

 

[Warren Faidley]

I spoke to my own business insurance company in late June, after they called me about the May 31 event. I was given a "heads-up" that some underwriters / insurance providers will no longer insure "chase" tours or guides when the policies expire. The reason, or so I was told, is that underwriters now have "chaser fatalities" to factor into the "risk calculations," -- something they did not have until after El Reno -- no matter what the actual cause.

But who knows, by next season this may have settled down.

Warren

 

[Matt Tottle]

In most states a signed waiver is a legal document and will protect you from liability so long as it is written in a minimum 10 point font (no "fine print"), it has an "In Plain English" translation summary, and there was no gross negligence or wanton disregard for safety on the part of the organizer (and that exception is legally required to be in the waiver). I recently had to write one for an event, so the research is still pretty fresh in my mind.

The sticky points are what constitutes gross negligence and wanton disregard in the eyes of a jury.. I think it's a safe bet to assume that core punching would. Leaving paved roads might also...

 

[ChristofferB]

This is really interesting. So, basically a tour company doesn't need to have 1.5 M in a bank account but should have an insurance policy that would cover 1.5M (if there wasn't for the wiggle room)...but that hardly any tour operator can get an insurance but instead rely on the waivers.

So if I understand this correctly, if something happens (car crashes for example) and a tour guest needs medical attention, the guest have to rely on their own insurance. That's at least what I assume when I sign a waiver... Is it typically, in the US, the company that transports a person that will have to insure their guests for those events, for example a Greyhound bus?

I wonder what the insurance company would say if I come back with a 100k$ hospital bill and it turns out it comes from storm chasing. That is probably something I should look up...

Lastly, what do you think would happen with the storm chasing tours if (when?) an accident occurs. El Reno shows us that even the most careful may end up in a bad situation but even if the weather is discounted for, a regular car crash will happen at some point. How do you believe something like that would affect the storm chasing tours?

 

[Dan Robinson]

Again, I'm not a lawyer nor insurance expert, so you should check with your agent on what is covered (they will check directly with the underwriter). Every insurance company is different. A passenger/guest likely does not have much to worry about. It's the uninsured/underinsured operator that is really putting his neck on the line.

I do know that everything in insurance is based on risk. The more risk there is, the more the premiums are and/or the less likely a company will cover you. Unfortunately for chasers, risk is sometimes based on perceptions rather than reality. However, it's clear that the risk for a very costly claim is much higher when you have a van full of paying guests as opposed to just you alone in your personal vehicle. The risk from storms is still very, very low, though as Warren pointed out, the underwriters might evaluate risk based on what they see on TV and in the news rather than actual data. If I drove a tour vehicle, my primary risk concern would be an 'ordinary' car accident that could be just something like pulling out of the hotel parking lot in front of a semi truck or a rollover on the highway - those are much more likely to happen than a storm related accident.

I would *hope* that underwriters look at real data when it comes to the risk from storms. If they start denying policies based on El Reno, how does a whitewater rafting guide company or ski resort get a policy when dozens of deaths happen in those activities every year?

Insurance is a complex issue, and unfortunately the decisions that mean the difference from being covered to financial ruin in the event of an accident are ultimately up to the underwriter to decide, even if you do everything right to a T. That's why you have to 'lay it all out there' to your agent as to what you're doing. They will check with the underwriter and give you the answer in writing.

As for waivers, yes, an ironclad agreement helps. But in the USA, many states' laws don't allow people to sign away liability for negligence or intentional acts. A good lawyer can probably argue that just about anything was caused by negligence, particularly with chasing. You might win in court, but not without draining your bank account in the process. Again, that's only a concern for the tour operator, not the passenger.

 

[Matt Tottle]

This is really interesting. So, basically a tour company doesn't need to have 1.5 M in a bank account but should have an insurance policy that would cover 1.5M (if there wasn't for the wiggle room)...but that hardly any tour operator can get an insurance but instead rely on the waivers.

So if I understand this correctly, if something happens (car crashes for example) and a tour guest needs medical attention, the guest have to rely on their own insurance. That's at least what I assume when I sign a waiver... Is it typically, in the US, the company that transports a person that will have to insure their guests for those events, for example a Greyhound bus?

I wonder what the insurance company would say if I come back with a 100k$ hospital bill and it turns out it comes from storm chasing. That is probably something I should look up...

Lastly, what do you think would happen with the storm chasing tours if (when?) an accident occurs. El Reno shows us that even the most careful may end up in a bad situation but even if the weather is discounted for, a regular car crash will happen at some point. How do you believe something like that would affect the storm chasing tours?

Motor carriers like Greyhound carry policies that would cover any passenger injured in an accident involving one of its vehicles/drivers, regardless of who is at fault. If Greyhound turns out to be not at fault (ie: someone else ran a red light or something), then their insurer would go after the insurer of the at-fault party to recover the claim. This part does not involve the passengers at all.

I would think that "chase tour insurance" would work similarly in the case of a regular road accident. As has been mentioned, in reality that is a much more likely event than someone getting injured as a result of the storm itself - unless the tour operator does something really stupid, and then that would fall under the gross negligence/wanton disregard clause.

 

[Robert Edmonds]

Lastly, what do you think would happen with the storm chasing tours if (when?) an accident occurs. El Reno shows us that even the most careful may end up in a bad situation but even if the weather is discounted for, a regular car crash will happen at some point. How do you believe something like that would affect the storm chasing tours?

The FMCSA has the authority to order an interstate tour company closed. At the moment they look the other way with storm chasing tours not operating with the full insurance requirements of 1.5 million. However, if there is a big accident, perhaps they may quickly change this stance and start enforcing this insurance requirement (which they do agree applies to storm chasing tours see my previous post), and perhaps order other tours closed that either do not have or can not get the insurance. If your tour is scheduled for June and an accident happens with any other tour group company in say early May, I'm not sure you could say with certainty your tour would go forward, if your tour company doesn't have the full 1.5 million in insurance coverage. Either way, wouldn't want to be the operator of a tour after a big accident.

Sure it may seem the regulation wasn't written with storm chasing tours in mind, but this isn't the only tour 'industry' where it's difficult to obtain insurance. The insurance broker I spoke with said that it was a pain in the butt to find an insurer for a jeep tour company. Ultimately, they did find an insurer, and the company operates with the full insurance required. Sure, I too could go and start up some uninsured jeep tour company and use the excuse it's difficult to get insurance for jeep tours (and I might even be able provide cheaper tours than my legit competition because I don't have the insurance), and I might get away with it, and some regulator in a distant office might even look the other way because well it's just more work with some small obscure industry. However, the second there's an accident with my tours, or some other uninsured jeep tour group (especially if it becomes big news), I'd put money on that those regulators in some distant office might give the 'uninsured jeep tour industry' a second look. When you put money down with an uninsured van tour group you're sorta making a $2500-$3500+airfare bet that there will not be a tire blow out resulting in an overturned tour van, or any other kind of big accident, with any other storm chasing tour company before your tour starts.

Edit: Just wanted to comment on your quote in bold...

This is really interesting. So, basically a tour company doesn't need to have 1.5 M in a bank account but should have an insurance policy that would cover 1.5M (if there wasn't for the wiggle room)...but that hardly any tour operator can get an insurance but instead rely on the waivers.

Also there is not wiggle room, they're suppose to have 1.5 million in insurance... regulators at the moment just look the other way. This will change (at least with the specific operator) when there is an accident. Waivers do not clear them of the rules requiring 1.5 million in insurance.

There is only 'wiggle' room when concidering whether a storm chasing tour is for-hire receiving indirect or direct compensation for transportation. If tours were to be concidered for-hire receiving direct compensation transportation, they would have to follow even more rules. For example if they charged for fuel (i.e. gas not being included in the 'package' tour price), or do not end a tour where they start, then they would be recieving direct compensation for transportation. Including fuel in the price and terminating the tour where you start makes you for-hire but for indirect compensation of transportation. However, there are still rules for-hire operators recieving indirect compensation, like financial resposbility (i.e. insurance). These large insurance requirements do not apply if you don't operate the vehicle, or do ride sharing (i.e. a group of people joining up but not making money), or see all the excemptions listed by FMCSA regulation 387.27(b).

Again, just my understanding after talking with lots of different people including state regulators, federal regulators, insurers, companies that consult on transportation rule compliance, and a lawyer. I could be wrong though...

 

[JF Massicotte]

Regarding the personal liability, wouldn't registering the tour as an incorporated entity limit the owner's liability to his own investment in the company? Regulators could still close the tour but should an incident happen that should protect the stakeholders and only their investments in the company would be at risk. Being a canadian I'm not too aware of US legislations there. Of course, this would not protect against any criminal charges in case of criminal behaviour.

I would like to hear on that.

Very interesting subject by the way!

 

[Matt Tottle]

On paper, yes.. But it is not unheard of for the corporate veil to be pierced and liability be put on the member(s). Especially if there is any criminal negligence involved.

 

[Robert Edmonds]

I am not well versed in how incorporating or creating an LLC would protect you or not. Talking with another chaser about this subject I was told the protection of incorporation only protects you (and the employees) if you are not doing something illegal (note, FMCSA regulations are laws).

With regards to waivers, I do know that a lawyer simply said you'll only find out if the waiver "holds up" once in court.