By Max Fisher, Vice President of Economics and Government Relations
The American Transportation Research Institute (ATRI) in June released a report, “Understanding the Impact of Nuclear Verdicts on the Trucking Industry,” that found large legal verdicts on the American trucking industry have negative affects throughout the supply chain.
This is a timely report given that the “Moving Forward Act” legislation introduced in the House contains a provision that, if allowed to become law, would require motor carriers to carry at least $2 million in liability insurance.
NGFA is supportive of current law that requires $750,000 in liability insurance for motor carriers. The average annual insurance premium to comply with the current $750,000 minimum financial responsibility requirement is about $5,000 for each truck. NGFA believes increases in the minimum financial responsibility requirement would increase this cost burden further and could lead to higher truck rates and fewer for-hire motor carriers, with no demonstrable improvement in motor carrier safety. NGFA maintains that factors other than financial requirements influence the safety of truck drivers on U.S. roadways, including such elements as the condition of roadway surfaces and the behavior of other drivers, including those not driving trucks.
Over several decades, the trucking industry has become a leading target for litigation, the ATRI report noted. ATRI said some believe the root cause of the increase stems from the 1977 U.S. Supreme Court case that re-allowed litigation advertising. ATRI’s analysis found there were only four award cases exceeding $1 million in 2006, and a total of 26 cases greater than $1 million from 2006 to 2010. But from 2010 to 2013, the number of awards exceeding $1 million increased by more than 900 percent. From 2010 to 2018, there were 299 cases involving more than $1 million.
The ATRI report further found that aside from the increased volume of cases, the size of verdict awards continued to increase. In 2011, one of the largest truck-involved verdicts, which involved two motorist fatalities, was $40 million for a truck driver that failed to yield for a stop sign. In 2012, a truck-involved case involving a single fatality generated the largest ever truck-involved award of $281 million, although it later was reduced to $105 million.
Insurance rates have increased at levels similar to litigation awards, the report noted. Over the last two to five years, commercial truck insurance premiums have increased annually between 35 and 40 percent for low- to average-risk carriers, according to the expert surveys.
The report also found litigation financing in the United States increased more than 745 percent between 2015 and 2019 – an alarming trend.
Pre-crash actions by motor carriers are critical, said ATRI, such as strictly adhering to federal motor carrier safety rules and company safety policies, as well as performing background checks and conducting drug testing.
The report observed that the existence and impact of large legal verdicts on the trucking industry is clear and expansive. All entities in the supply chain – far beyond those involved in a crash, are experiencing the negative financial consequences from verdicts and awards that dramatically exceed compensatory costs, the institute found.
The report concludes that any successful attempts to reign in what it termed extreme jury awards will require a comprehensive and multi-faceted program that addresses:
- Both state and federal litigation landscapes, including tort reform;
- Modified approaches to trial preparation and approaches;
- New safety compliance standards;
- Broader fraud investigations; and
- Expanded strategy and information-sharing among the defense bar.