What is a Nuclear Verdict? A Nuclear Verdict is a jury award of $10 million or more in any one case. They’re becoming more frequent in the world of trucking, and their current prevalence and scope could mean that companies specializing in transportation could have greater difficulty staying in business or certainly rising insurance costs.
Nuclear verdicts have been consistently increasing in trucking accident verdicts over the past several years. Additionally, there is mounting pressure on the truckers, already small profit margins from rising insurance premiums. Sadly, it appears there is no end in sight. This is despite the fact that the number of deaths and injuries from accidents involving large trucks have been declining.
Rising insurance premiums, nuclear verdicts, rising fuel prices are often cited in trucking company bankruptcies as the primary causes for shutting down. In addition, the growing trend of juries awarding nuclear verdicts have forced some insurance providers to exit the trucking insurance industry altogether. Leaving the trucking companies with little options in terms of premium options.
All this does not factor the psychological effect these verdicts may have on drivers, owner operators and trucking companies in general..
Rise of the Trucking Lawsuit Verdict
A recent report released by the American Transportation Research Institute revealed that the average trucking industry lawsuit verdict in the United States grew 967% from 2010-2018.
The trucking industry is not happy about the impact this has had on trucking, and this extends to the cost of insurance. These Nuclear Verdict payouts are contributing to the higher cost of truckers Auto Liability coverage. However it also extends to the reduction of access to Excess Liability coverage as well. The higher insurance premiums, along with fuel prices have already forced some large and small trucking companies to simply close down. Many in the industry are concerned that one bad turn is all it takes to negatively impact their entire business. Sadly, they may be right.
Industry experts have commented that companies without high enough insurance limits are at risk for losing the company because when a judgement arrives, they’ll have to pay “one way or another”. Also as industry consolidation occurs insurance becomes much less affordable than in the past.
Bigger Verdicts Likely Means Higher Limits Required or needed for Trucking Companies
In 2018, a trucking company was ordered by a jury to pay over $400 million to a motorcycle operator that was injured as the result of a multi-vehicle pileup. This may reportedly be the largest verdict ever to be handed out against what is referred to as a ‘single-company defendant’.
High payment amounts are not unusual. A verdict of nearly $300 million was awarded in 2016, in another multi vehicle incident. This has caused many insurance companies to either review their rate structures or simply leave this line business. This also leaves insurance companies with no choice but to become increasingly restrictive in their criteria for underwriting, as well as rates going up.
What Trucking Companies Can Expect in the Near Future
For now, trucking companies may see more nuclear verdicts in the future. Courts had been closed and / or did not handle as many cases when the pandemic started. Now that courts will be opening up more cases will be able to be addressed. Many believe there will be a “flood” of very high or nuclear verdicts.
Truckers Auto Liability Insurance and Excess Liability Insurance will both be the most impacted by these large verdicts. Primary auto liability helps cover property damage costs as well as third-party bodily injury when an accident occurs. Excess Liability Insurance works to provide limits that are above the standard policies. Large verdicts will most certainly impact the rates, and underwriting of both these types of coverage.
United States federal law dictates that truckers are required to carry at least $750,000 in a liability insurance policy. It’s common for insurance carriers to also issue limits of $1,000,000.
Many truckers already carry the $1 million amount, however that limit may not be what it used to be. Between inflation in health care, large jury awards, cost of litigation and other factors. A $2,000,000 limit maybe what truckers can expect as a minimum limit in the near future. This means that insurance prices will then increase further, and underwriting to be more restrictive.
Owner operators, and fleets generally also carry Physical Damage Insurance. This type of insurance protects the truck or trailer in an accident. It could end up being a huge help when it comes to the financial price tag of replacing or repairing the truck or trailer..
However, even these costs are rising significantly due to the expensive and high-tech sensors and electronics that are now standard equipment in the newer trucks, and trailers. Even the smallest of accidents can cause these types of claims to be significantly higher than in past years.
Many owner operators, and fleets carry Cargo Insurance. Cargo Insurance policies are purchased in order to cover damages to the goods while being hauled in transit. These claims are also rising mainly due to theft of equipment.
Shortage of Drivers, and Risk Management
There is a definite shortage of truck drivers. However, companies still must uphold a high standard for driver hires. A high standard for hiring drivers that are qualified and have experience is a must in order to keep losses at a minimum. Trucking companies, due to driver shortage, may be tempted to overlook requirements and parameters for experience in order to meet driver demand. The result could be an inexperienced driver on the road when that driver should not have been on the road in the first place. This can often lead to unnecessary accidents due to the drivers inexperience.
In order to mitigate the possibility of claims, owner operators and fleet risk managers should consider all the new technology that is now available for trucks and truck drivers. Technology such as telematics systems, crash warning systems, dash cams, and interior theft prevention cameras are now widely available and the cost of the hardware, software, and smartphone apps is falling significantly, making these items very affordable for both owner operators, and fleets. The purchase and installation of technology will likely be tax deductible, and may even be a consideration in reducing insurance costs.
An experienced truck insurance broker will likely be able to help both owner operators and fleets understand how they can meet the underwriter requirements in order to get the best possible price. Loss prevention technology may be a good way to do this.
Despite these verdicts, the future of the trucking industry looks quite good. While insurance, and fuel costs are rising, the industry can expect to earn higher rates on loads hauled, as well as earning fuel surcharges. Additionally, the recent increased demand in “last mile” delivery gives trucking companies many options in what they can haul, and the type of vehicles that can accommodate the freight. This will ultimately help diversify the vehicles in a fleet, as well as the revenue sources.