Vetting Liability

Vetting a Limo Company

Proper vetting of limo companies can seem like a daunting task. This quick guide will cover the how and the why of proper limo vetting.

If you think you’re already doing so, then I challenge you to walk through this guide with your existing partners. It may surprise you.

While this guide can’t cover every possible scenario and exception, it covers the most common.

Why Should you Care about Vetting?

Liability. Failure to properly vet your partners opens you up to the potential for lawsuits involving vicarious liability, negligence, and punitive damages.

Imagine a scenario where Company A (Big Limo) is a $10,000,000 a year legal operator. Properly licensed and insured with $5m policy. Company B (Small Limo) is an independent operator using an SUV with a $1m policy. Big Limo sends Small Limo your typical airport transfer, picking up John “the CEO” Jones, but unfortunately a catastrophic accident occurs on the trip.

Of course like most such cases, this one goes to court. Mrs. Jones then gets called to the stand where she testifies that they’ve used Big Limo for years because it’s a safe company with a good track record. Now, Mr. Jones is dead, and she just found out that they used Small Limo who isn’t even properly licensed or insured. An expert witness confirms these facts. Big Limo’s negligence is what killed Mr. Jones and they deserve to be punished.

The jury leaves for deliberations and returns with a $50m punitive judgement against Big Limo in addition to actual damages.

What Should You Do?

Vetting your partners and documenting it is a must. Simply getting a recommendation from Facebook and a certificate of insurance is not enough. With the wealth of readily available information, it’s up to you to convince a jury that you did due diligence in selecting your partners.

Vetting a Limo Company

Federal

  • Ask for their USDOT Number – Almost all operators need one, even sedans and SUVs. Read our article here to learn more: https://lbcfleet.com/2019/07/dot-compliance-basics/
  • Lookup their number at safer.fmcsa.dot.gov.
    Assuming they do airport work: Operating Status should state “Authorized for Passenger,” there should be a number listed under MC/MX/FF Number(s), Operation Classification should say “Auth. for Hire,” Carrier Operation should state “Interstate,” Cargo should include “Passengers.” Scroll to the bottom and you can can see their DOT Rating. The top rating is Satisfactory. Conditional means serious safety defects were noted in their last review and Unsatisfactory means they will no longer be allowed to operate in interstate commerce.
  • Verify insurance via Licensing and Insurance at the top right and you can view roadside inspections and any history of fines using SMS Results and clicking Complete SMS Profile.

State

  • State regulations vary greatly by state. Many require state specific registration, while others may not. If the operator is not providing any work to or from airport, seaports, train stations or bus stations, and does not do out of state runs, they will be subject to state regulations but generally not federal.

Airport & Local

  • Cities and airports often have their own regulations regarding limo companies. Some locations have easy to use online searches while others require a call or email to the licensing jurisdiction to verify your new partner is in good standing.

Insurance

  • Always request a certificate of insurance with your company listed as “Additional Insured.”
  • Learn to read an insurance accord and look for coverages. In the case of Limo vetting, we are generally talking about the Automobile Liability section.
  • Required coverage
    • Operator who does not provide pre-arranged airport, seaport, train station or out of state work. Based on state limits.
    • Operator who provides pre-arranged airport, seaport, train station or out of state work and operates ANY vehicle up to 15 passengers (including driver).
      $1.5 million required coverage.
    • Operator who provides pre-arrange airport, seaport, train station or out of state work and operates vehicles over 15 passengers (including driver).
      $5 million required coverage.
  • Require a vehicle schedule – this is a list of vehicles covered by the policy. Use this to help reduce double farm-outs. If a company doesn’t have motor coaches listed and you need one, conduct your own vetting with a local motor coach company to ensure they’re operating legally. This is a best practice, even if you choose to have your primary partner manage the whole group. DON’T assume they do the same vetting you do.
  • Ask about Worker’s Compensation Insurance – depending on your relationship with the other company, state regulations and regulatory interpretation they may be able to make claims against yours if they do not have their own.

Additional Vetting Best Practices

  • Require an affiliate agreement – this helps establish a legal relationship between the companies and eliminates any confusion about expectations.
  • Check review sites – search by company name and address. Many companies reincarnate due to bad reviews.
  • Review Facebook Limo groups – get real world feedback from fellow operators.
  • Do a search on the owner(s) – a quick search may reveal someone you don’t want to be doing business with.

Vetting Summary

  • Using legal limo companies helps reduce your liability
  • Review federal, state and local compliance
  • Ensure all partners, even your IO’s, are properly licensed and insured
  • Never allow a double farm-out to a company you haven’t vetted
  • Document your process so you can show due diligence following an incident

Categories: Informational