National Accounting Finance Council Annual Convention Amelia Island, FL May 3 6, 2010

1. National Accounting & Finance CouncilAnnual ConventionAmelia Island, FL ~ May 3 � 6, 2010

3. Companies Surveyed Primary Liability/Cargo/Physical Damage Providers ACE Canal Carolina Casualty Chartis CNA Empire Fire & Marine Great West Casualty Liberty Mutual Northland Occidental RLI State National Union Standard Vanliner Wilshire Zurich Workers� Compensation / Occupational Accident Providers ACE AmeriSafe Chartis CNA Great West Casualty Liberty Mutual Missouri Employers Mutual One Beacon Vanliner Zurich

4. Companies Surveyed Transportation Defense Attorneys Baty, Holm & Numerick Dennis, Corry, Porter & Smith Dysart, Taylor, Lay, Cotter & McMonigle Scopelitis, Garvin, Light, Hanson & Feary TIDA Transportation Consultants Prelipp Consulting Rick Fuller Consulting Jim Mahoney, Consultant Excess Liability / Specialty Coverage Providers & Brokers ACE Chartis Colemont Gresham Lexington Insurance Med James RLI Transportation Staffing Premium Transportation Staffing TLC

5. Two areas where CSA 2010 will have an impact on motor carriers� insurance programs: The underwriting and pricing of your exposures A potential increase in your exposure to loss

6. Underwriting & Pricing Understanding Underwriters Underwriters are very determined to utilize all available information to decide whether to insure a risk and what the pricing should be. A new source of information is always of great interest and can be more heavily weighted than it should be in the selection and pricing of a risk. There is a shortage of knowledgeable, experienced underwriters in the industry. Result � CSA 2010 Data will receive intense scrutiny by underwriters and may play a disproportionately large role in the consideration and pricing of your risk.

7. Underwriting & Pricing Underwriting & Pricing Attitudes in Today�s Insurance Market Pricing is soft and continuing to soften further Underwriting results are generally positive Underwriters believe that most risks are underpriced Result � If an underwriter has to offer a lower price than he is comfortable with, he will be increasingly selective in the risks he writes. He will view the CSA 2010 information as a valuable tool to help him accomplish this. Positive CSA 2010 info can help justify low pricing Negative CSA 2010 info can make it very difficult for an underwriter to come up with the most competitive pricing.

8. Underwriting & Pricing Regulatory Change has had an impact on Truck Insurance Underwriting in the recent past. When SafeStat and the SAFER Snapshot became available, it gave insurance companies a quick and easy way to decide which motor carriers they would write. For certain insurance companies, any SEA score above a certain number (generally for small to mid-size trucking companies): Requires a satisfactory explanation, or Automatically triggers a declination

9. Underwriting & Pricing Other Considerations CSA 2010 data will initially have a more negative impact than SafeStat data has had. 600 Kansas companies were found unacceptable, most of which had acceptable SafeStat scores. Similarly, there will be negative CSA 2010 data on many drivers with acceptable MVR�s.

10. Underwriting & Pricing Other Considerations Underwriters� ability to access information Methods to access are yet to be determined Assume the information will be accessed and utilized The impact will be significant for all lines of coverage; liability, cargo, physical damage, workers� compensation and the coverage for independent contractors. The impact will be equally significant for both primary and excess underwriting and pricing.

11. Recommendations Understanding the workings of the CSA 2010 system and all the details that go into your rating will help you portray your company to underwriters in the most positive light. Take advantage of the new information to improve your driver force. Identify your problems that CSA 2010 will bring to light and put a plan in place to resolve them. It�s best to do this before the FMCSA tells you to. Constantly monitor your data and verify it�s accuracy. All the steps you are and will be taking to make your company safer and gain the �continue to operate� rating from CSA 2010 are the steps that underwriters will be looking for to gain their best pricing.

12. Recommendations Talk to your Insurance Agent or Broker about your specific Insurance Company and what they are doing about CSA 2010 data. Start your renewal negotiations early (especially if your numbers are good) to give yourself time to react to changes and explore options. If you have not done so already, get your CSA 2010 data and review it. ATA has endorsed Vigillo�s �CSA 2010 Scorecard.� Predictive Modeling will be more important as CSA 2010 is implemented. Consider using Predictive Modeling if you don�t already. If you are using Predictive Modeling consider the impact of CSA 2010 data on your model.

13. Recommendations Be aware that there may be changes in insurance policy wording that can materially impact your coverage. It�s going to be more important than ever to recognize that insurance policies are not all created equal and don�t always stay the same. CSA 2010 will cause more changes and more issues between a motor carrier and it�s underwriters. A long term relationship will be helpful in navigating through the changes. If you haven�t met your underwriters you should do so during your next renewal. Make sure your insurance, risk management and legal teams are made up of dedicated trucking specialists who are committed to keeping up with industry changes. Develop a PIN Number security program. Access to your site should be strictly controlled and monitored.

16. Uninsurable Drivers Current environment serves as �harbinger of things to come� No coverage for: Younger than 23 3 moving violations in 3 years DUI violation 2 preventable accidents 49 CFR 391.41 medical causes � e.g. obesity, which limits movement

17. Uninsurable Drivers CSA 2010 environment Marginal and unfit drivers may be uninsurable Peer group ranking/BASIC based uninsurability Fitness and fatigue Vehicle MTC and loading/security Unsafe driving and controlled substance/alcohol Intervention level based uninsurability [still an area of uncertainty]

18. Uninsurable Drivers CSA 2010 environment Driver based automatic disqualifying offense Refusal of drug or alcohol test Positive test drivers Invalid CDL drivers via suspension or revocation Failing/refusing to submit driver logs

19. Uninsurable Drivers Impact of uninsurable drivers Operational issues � freight movement and morale problems from driver terminations Recruiting issues causing increased cost Employment lawsuits Breach of contract lawsuits Unemployment benefit claims Insurance coverage gaps and claim denials Indemnification/reimbursement claims by insurers

20. Unpredictable Insurance Coverages & Renewals Current insurance codes could open the door for mid-term cancellations under CSA 2010 E.g., A policy in effect for over 60 or 90 days can be cancelled if: �The risk originally accepted has measurably increased.� Illinois Ins. Code � 143.16a(d) �There is a substantial change in the scale of risk covered by the policy.� Indiana Ins. Code � 27-1-31-2(a)(2)

21. Unpredictable Insurance Coverages & Renewals Current insurance codes could open the door for mid-term cancellations under CSA 2010 Case law could support mid-term cancellation �Thus, to establish an increase in hazard, there must be evidence of a change in the situation which substantially increases the probability that the event insured against will occur.� New England Insurance Co. v. Cummings

22. Unpredictable Insurance Coverages & Renewals Current insurance codes could open the door for mid-term cancellations under CSA 2010 CSA 2010 is designed to predict and change unsafe behavior which would lead to accidents versus SafeStat, which measures out-of-service and accident violations to prioritize inspections

23. Unpredictable Insurance Coverages & Renewals Current insurance codes could open the door for mid-term cancellations under CSA 2010 Current ISO policy �cancellation and non-renewal� endorsements incorporate �substantial change in risk � .� Language of statutes to further support possibility of mid-term cancellations.

24. Unpredictable Insurance Coverages & Renewals Threat of cancellation or non-renewal provides insurers economic leverage Premium adjustments by mutual agreement Negotiation over claims due to poorly ranked drivers � contribution from insured carriers Negotiation over law enforcement determination of improperly loaded or unsecured loads resulting in initial cargo claim denials

25. Unpredictable Insurance Coverages & Renewals Coverage concerns precipitated by CSA 2010 Claims caused by drivers in a category defined by insurer as �uninsurable drivers� NOTE: Under CSA 2010, even initially insurable drivers can become uninsurable in a few months Cargo deemed �improperly stowed� under such cargo policy exclusion due to police determination of loading or load securement problems � will there be a rebirth of the �improper stowage� exclusion from the 1980s? Physical damage claims denial due to high BASIC score in vehicle maintenance violation or high BASIC crash indicator

26. Unpredictable Insurance Coverages & Renewals Coverage concerns precipitated by CSA 2010 Losses may become worse as the plaintiffs bar begins to use CSA 2010 to support negligence obligations

27. Difficult Logistics Risk & Protection Currently one major insurer of broker liability insurance requires carrier selection criteria to include monitoring of motor carrier safety rating, SEA scores and ISS score CSA 2010 criteria provide many more levels of carrier selection criteria to monitor and for insurers to require in applications and underwriting restrictions for broker liability coverage

28. Difficult Logistics Risk & Protection Comparing the almost �static� SafeStat system to the almost real-time and �dynamic� CSA 2010 system means much more administration will need to be dedicated to carrier selection criteria for logistics companies � likely daily checks Insurers and shipper contracts might also require notice of CSA 2010 ranking changes

29. Difficult Logistics Risk & Protection Logistics companies tend to rely on the very small carriers and smaller carriers will likely present the biggest risk of �negligent entrustment� and greatest cost to monitor Smaller carriers less sophisticated on safety Smaller carriers less particular on hiring practices Smaller carriers are less likely to appeal erroneous law enforcement submissions

30. Difficult Logistics Risk & Protection Logistics companies tend to rely on the very small carriers and smaller carriers will likely present the biggest risk of �negligent entrustment� and greatest cost to monitor Despite peer groupings, smallest carriers may still be more dramatically affected by enforcement stops resulting in a more immediate change of ranking Unsafe driving and driver fatigue BASICS might be weighted more significantly than the other 5 BASICS so that positive scores in those 5 areas may not out-balance the 2 most sensitive BASICS

31. Difficult Logistics Risk & Protection Carriers using owner-operators must be certain owner-operators possess CSA 2010 knowledge but risk weakening independent contractor status through too much training Independent contractors with drivers should report driver rankings to motor carriers

32. 10 Risk Management Steps to Consider Initiate immediate and open lines of communications with your insurers on what coverage and underwriting changes they expect under CSA 2010 � use your knowledgeable brokers in this process Include a new notice in orientation manuals stating any driver that is deemed uninsurable will be terminated or canceled or his contract will be terminated �for cause�

33. Review cargo policy for �improper stowage� exclusion to evaluate potential for immediate coverage risk Begin initial draft of protocol to monitor and administer CSA 2010 rankings and include �insurer�s criteria� component Within logistics operations, review or implement carrier selection guidelines that include SEA score thresholds and routine monitoring to ease into CSA 2010 real-time environment 10 Risk Management Steps to Consider

34. Draft a provision into the owner-operator agreement requiring the owner-operator and/or its drivers to maintain an acceptable CSA 2010 driver ranking Draft a notice to owner-operators requiring them to be knowledgeable and familiar (�with proof upon request�) with CSA 2010 information � specifically including driver violations and rankings 10 Risk Management Steps to Consider

35. Review and revise broker/carrier agreements in your capacity as a logistics provider contracting with motor carriers to ensure indemnification for CSA 2010 compliance problems is specifically addressed Make certain your FMCSA-published data with regard to power units is currently accurate and file MCS-150 updates routinely 10 Risk Management Steps to Consider

36. Consider developing a detailed �Enforcement Stop Information Sheet� for drivers to complete that gathers key data on each enforcement stop. This data may be helpful to appeal erroneous enforcement stops 10 Risk Management Steps to Consider