The U.S. trucking industry, the backbone of the economy, is grappling with skyrocketing insurance costs and staggering court verdicts.
At a recent NationaLease meeting, Richard Leibfried, president of RJL Insurance Services, identified this as one of the biggest challenges facing fleets. Particularly alarming are "nuclear verdicts," legal awards exceeding $10 million, threatening the financial stability of both large and small operators.
A legal landscape stacked against fleets
The federal insurance minimum for trucking companies is $750,000, which pales in comparison to the settlements often awarded in severe tractor-trailer accidents involving fatalities or serious injuries. These settlements can reach tens of millions of dollars, frequently leaving fleets in financial ruin. Alarmingly, trucking companies are often held liable for massive payouts, even when accidents are primarily caused by passenger vehicles.
In one recent case in Florida, a jury awarded $125 million in punitive damages for a 2020 accident involving a small fleet operator. Though there were no fatalities, there were severe injuries. However, this small fleet (which did have several legal issues) had already been out of business for the past two years. This example highlights the disproportionate financial burden placed on trucking companies.
More heavy verdicts lead to an increase in insurance premiums
The rise in insurance premiums is putting a strain on trucking companies' already thin profit margins. Over the past decade, insurance rates have surged as underwriters grapple with escalating risks, driven by a combination of nuclear verdicts, increased accident frequency, and higher repair costs for modern vehicles equipped with advanced technology. The financial burden is particularly severe for smaller operators, who often lack the economies of scale to absorb these increases. As a result, many trucking companies are forced to pass on costs to shippers, cut corners on maintenance, or limit fleet expansion, all of which weaken their competitiveness and threaten their long-term viability.
For an industry already operating on razor-thin margins, these challenges are existential. When combined with maintenance issues, insufficient insurance coverage, and a shortage of qualified drivers, the situation resembles a perfect storm. However, fleets can take proactive steps to mitigate these risks, including:
Prioritizing maintenance
Maintenance is critical, not just for operational efficiency but also for safety and legal defense. The 2023 CVSA International Roadcheck revealed troubling statistics: brake system violations accounted for 43% of all out-of-service violations, while tire issues contributed another 22%. These mechanical failures are often direct contributors to serious accidents.
To address this, fleets should adopt a dual strategy:
- Preventive maintenance: Routine checks to address wear and tear.
- Predictive maintenance: Advanced diagnostics to identify potential failures before they occur.
Failure to maintain vehicles properly doesn’t just increase accident risk; it also amplifies liability exposure.
Strengthening driver standards
Drivers remain the most crucial yet unpredictable element in fleet safety. Hours-of-service violations are the most common driver-related OOS issues, but even more concerning, over a quarter of drivers inspected during the CVSA Roadcheck lacked a commercial driver’s license.
Other red flags include substance abuse, with 78 drug-related and 26 alcohol-related violations recorded during inspections. As Liebfried noted in his presentation, addressing these issues requires:
- Rigorous hiring processes
- Comprehensive defensive driving training
- Ongoing coaching to reinforce safe driving habits
The driver shortage complicates this effort, forcing companies to balance high standards with operational demands.
See also: What are you doing to mitigate 'nuclear' risks to your fleet?
Leveraging technology
Advanced safety technology offers significant potential to reduce accidents and liability. Modern systems like automatic emergency braking, lane departure warnings, and collision mitigation tools can significantly enhance fleet safety.
According to a 2021 Bosch study, such technologies could reduce injury-related truck crashes by 23%. The Insurance Institute for Highway Safety also found that forward collision mitigation systems can cut front-end collisions by 44%.
While costly, investing in these technologies is a smart long-term strategy. In legal cases, evidence of a commitment to safety can make a substantial difference in outcomes.
The case for tort reform
Although operational improvements can mitigate risks, they won’t solve the underlying issue of disproportionate punitive damages. Tort reform is necessary to create a legal framework that aligns damages with actual harm rather than awarding outsized windfalls. While legislative changes will take time, fleets must act now by implementing stronger defenses and reducing accident risk through proactive measures.
The road ahead
The trucking industry is at a crossroads. The challenges are staggering, but so are the stakes. Insurance isn’t just a cost of doing business; it’s a lifeline that can mean the difference between survival and collapse.
By prioritizing maintenance, enforcing rigorous driver standards, and investing in technology, fleets can mitigate risks and push back against a challenging legal landscape. After all, the trucking industry is about more than moving freight; it’s about moving forward.
