Be Alert to O-licence O-versights Says Fleet Transport Broker

Commercial insurance broker, McCarron Coates, is highlighting the dangers of O-versights by those businesses reliant on having a Vehicle Operator Licence.  It also warns that the current economic and employment climate are creating new stresses and responses, which could potentially result in licence revocation.

Losing an Operator Licence is one of the major risks an operator of goods or public service vehicles over 3.5 tonnes can face.  However, many of the reasons for which a licence would be revoked would also be ones that create other risks, such as health and safety dangers and expensive investigations and legal cases.  How an Operator Licence is managed is of fundamental importance to an insurer.

The first oversight relates to not keeping licence details up to date.  This can frequently occur within a transport sector in which family-owned firms proliferate and which the business ‘entity’ can easily change from a sole trader, to a partnership or a Limited Company.  A new licence application will be required, should situations have changed.

The Operator Licence should always reflect the business’s legal status.  It should also detail the same directors as those appearing on the records of Companies House.  The Traffic Commissioner will not be impressed by any discrepancies, should the operator be called to an inquiry.

Checking that the licence permits the operator to run a fleet of the size currently owned is also imperative.

The second oversight is one that may be directly impacted by the current economic climate and squeezes on capital.  Late payments from customers, coupled with higher costs, particularly in terms of National Insurance contributions, are placing pressures on working capital.  That, in turn, can affect Financial Standing calculations.

Financial standing is one of the cornerstones of the right to hold an Operator Licence and there are strict rules about how much capital an operator needs to be able to  immediately or easily access.  It is imperative operators keep this under review and ensure working capital is sufficient to comply with the terms of the licence.  The regulator is less likely to consider loan facilities sufficient ‘capital’ within the calculations nowadays, so it is essential to review, with expert help, what is allowable within a financial standing calculation, and what is not.

Financial Standing requirements are for the operator to have £8000 in working capital for their first goods or public service vehicle and £4500 per vehicle thereafter, if they are holders of a Standard licence.

The third oversight is maintenance, with the temptation being to cut costs by scaling back the maintenance programme. Operators must continue to carry out all of the maintenance duties expected of them and use the DVSA’s Guide to Maintaining Roadworthiness as their maintenance reference.

Operators tempted to compensate for National Insurance hikes by taking drivers off the payroll as employees face a major risk of licence revocation.  It is not compliant to use Ltd drivers, employed by their own Limited Company, as you cannot devolve the authority of an O-licence on to others.  

Vehicles could be impounded if Ltd drivers are used, as the law would require each one to have their own O-licence. Similarly, any agency agreements should only be made with reputable agencies, supplying drivers to multiple operators, be honest in their intention and not long-term.  

Operators must not flout tachograph rules by distributing more driver hours across fewer drivers, managing the workload by breaking the law.  This will have serious consequences when discovered. It could also result in accidents and potential fatalities, if driver fatigue impacts on driving performance.

If cost pressures have led an operator to relocate to new premises, it is essential these have been verified as being suitable and meeting the required standard, as well as not posing a nuisance or safety risk, in the eyes of the regulator.  The new details need to be provided, as they are a key material fact that needs to be disclosed.

Ensuring that ‘repute’, another pillar of the right to hold an Operator’s Licence, remains intact can be difficult in times of economic distress.  Systems and controls can slip, creating legal loopholes. This is why McCarron Coates has partnered with transport specialists, JMW Solicitors,  to launch Accelerate - a unique road transport protection policy offering pro-active, upfront legal advice, to try to prevent operators being called before the Traffic Commissioner.

It will also protect in the event of any such hearing or an investigation or case mounted by authorities such as the Health & Safety Executive (HSE), the Driver and Vehicle Standard’s Agency (DVSA); Trading Standards, the Police and the Environment Agency.  It covers both employment tribunals and criminal matters relating to the use of the operator’s commercial vehicles and compensates for both legal feels and settlements up to £50,000. It also offers a free initial consultation, for both the insured and any of their employees, for any other type of legal matter

McCarron Coates director, Ian McCarron, says, “How an Operator’s Licence is protected through good practice and control measures is a reliable indicator of how the overall insurance risk is managed, so the two go hand in hand.  Many operators see the requirement for business interruption insurance, should an unexpected incident force the closure of their premises, but forget that the biggest business interruption they could possibly face would be having the Traffic Commissioner revoke the licence that gives them the right to operate.  

“This is why we have partnered with JMW Solicitors to launch a comprehensive legal protection product that will offer upfront support and legal consultancy and provide the best advice, should an inquiry be faced, or regulator action signal that this could become a possibility.  Prevention is better than cure and that is the ethos of Accelerate, which aims to embed compliance before any issues can arise.”

Call McCarron Coates (www.mccarroncoates.com) on 0113 298 3489  for more information. 

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Editors notes

McCarron Coates is an award-winning insurance broker, based in Morley, Leeds, which is a specialist in fleet transport insurance and other niche areas such as roofing, scaffolding and woodworking insurance. It also supplies many other types of commercial insurance policies and risk management services, to clients nationwide and is highly respected as an industry thought-leader, within its individual spheres of influence.