{"id":2660,"date":"2021-04-10T18:41:34","date_gmt":"2021-04-10T18:41:34","guid":{"rendered":"https:\/\/quicktransportsolutions.com\/blog\/?p=2660"},"modified":"2021-04-10T18:41:36","modified_gmt":"2021-04-10T18:41:36","slug":"navigating-the-insurance-landscape-part-i-nuclear-verdicts","status":"publish","type":"post","link":"https:\/\/quicktransportsolutions.com\/blog\/navigating-the-insurance-landscape-part-i-nuclear-verdicts\/","title":{"rendered":"Navigating the Insurance Landscape \u2013 Part I: Nuclear Verdicts"},"content":{"rendered":"\n

Today, we want to begin a two-Part series examining rising insurance costs and what trucking companies can do to mitigate those costs. Consider that you don\u2019t have to have a crash or injury on your books to still have to pay insurance fees. You still must ensure you are getting the lowest reasonable costs for your needs and not at risk of going out of business just to cover insurance costs. <\/p>\n\n\n\n

[wp_ad_camp_2] <\/p>\n\n\n\n

<\/p>\n\n\n\n

The problem is that obtaining affordable commercial\ninsurance coverage is becoming more difficult by the day. As new trucking\ncompanies hit the scene, they are finding it a tall order to find insurance\nthat doesn\u2019t break the bank. Even worse, there aren\u2019t enough routes out there\nnow to help motor carriers pay for exorbitant premiums. <\/p>\n\n\n\n

As premiums continue to climb, the reasons are\nmulti-faceted. There are numerous \u201crisk factors\u201d that insurance underwriters\nlook at and the one that is weighing heavily on the entire industry is that of\nnuclear verdicts. These are litigation verdicts that could put a trucking\ncompany out of business and have ripple effects across the industry. <\/p>\n\n\n\n

Yet nuclear verdicts are not the only issue. Trucking companies have a lot on their mind when it comes to insurance and costs related to it. Let\u2019s take a deeper dive into the issues facing trucking companies<\/a> and their insurers. <\/p>\n\n\n\n

Insurance a Top Issue<\/strong><\/p>\n\n\n\n

With the COVID-19 pandemic upending\nthe supply chain<\/a>, trucking companies have enough to worry about without\ninsurance premiums causing a headache. And yet, that is exactly what they do. The\nCOVID pandemic has also resulted in an increase in liability lawsuits and\nincreased workers\u2019 compensation costs. Trucking companies must content with a\nwealth of liability issues in the age of COVID, and they know it. <\/p>\n\n\n\n

According to the American Transportation Research\nInstitute\u2019s (ATRI) 2020 survey of top issues fleet managers dealt with in 2020,\nthe cost and availability of insurance ranked in 5th<\/sup> place. With so\nmany issues laid at the feet of fleet managers nationwide, it is not\ninsignificant that insurance ranked in 5th<\/sup> place. <\/p>\n\n\n\n

In its latest annual Operational\nCosts of Trucking report<\/a>, ATRI also found that fleets have been incurring\nsubstantial insurance costs over the last several years, and that we may have\nreached a ceiling in what fleets can afford. After all, trucking companies can\nonly afford annual double-digit increases in insurance premiums for so many\nyears. <\/p>\n\n\n\n

The data also shows that insurance premiums for trucking\ncompanies typically had been on the rise for over 25 years until 2012. It was\nnot until 2012 that the trucking industry recorded its first appreciable drop\nin insurance premiums. Since then, they have fluctuated, but took their biggest\ndip from 2018 to 2019, when they dropped from 8.4 cents per mile to 6.8 cents\nper mile. But why?<\/p>\n\n\n\n

Well, don\u2019t think the insurance companies took a haircut. A\nlot of that comes through restructured products. Trucking companies are now\nassuming much higher levels of risk through higher deductibles and lower levels\nof excess liability coverage. <\/p>\n\n\n\n

Many industry analysts expect insurance costs to continue\ntheir rise, but that the rate of rise will slow. A lot of the slowdown in rate\nincreases is causally related to fleets adopting safety-first strategies,\nadopting safety systems, and adjusting policies to increase safe driving. <\/p>\n\n\n\n

Nuclear Verdicts Take Center Stage<\/strong><\/p>\n\n\n\n

Fleets will need to take all the help they can get through\nthe application of safety technologies, because nuclear verdicts are upending\ninsurance pricing. Nuclear verdicts are defined as huge settlements awarded to\nplaintiffs after an accident-related trial. For better or worse, the sizes and\namounts of awards in truck-related accident trials has been rising\nprecipitously for some time. <\/p>\n\n\n\n

The good news is in tort reform efforts in states like Iowa, where discussion of a party\u2019s insurance coverage is left out of punitive damage discussions. Many state legislatures across the country are taking a closer look at tort reform where trucking companies are concerned. Advocacy organizations like the American Trucking Associations (ATA) and the Owner-Operator Independent Owners Association<\/a> (OOIDA) have been pushing for insurance-related tort reform for a long time. <\/p>\n\n\n\n

Still, it is important to note that the most important party\nto insurance premiums are trucking companies themselves. Because if you are\nallowing things like poor vehicle maintenance or substandard training programs\nto linger in your organization, it may very well end up being your fault if\nyour insurance premiums rise. <\/p>\n\n\n\n

And consider the damage you do to more than yourself if lax\nsafety and maintenance standards cause an accident on your watch. When you are\nsubject to litigation and giant awards, it increases insurance rates for\ntrucking companies across the board. That is why nuclear verdicts are so\nconcerning, and not just for the trucking companies who are subject to them. <\/p>\n\n\n\n

Insurance costs are also heavily influenced by market availability\nand the shrinking pool of experienced truck drivers. With costs on the rise\nfrom distracted driving, expect it to be more difficult than ever before to\nfind the right people while keeping insurance costs low. <\/p>\n\n\n\n

What is the Popular Sentiment?<\/strong><\/p>\n\n\n\n

The popular sentiment among trucking companies is that the commercial auto insurance market is broken. Simply put, the nexus between high verdicts and insurance premiums is way out of whack. In the past five years especially, the total cost of risk has risen by double digits. Ten to twenty years ago, runaway verdicts were not commonplace. In some cases, we have seen runaway verdicts in cases where there was no serious injury. <\/p>\n\n\n\n

[wp_ad_camp_2] <\/p>\n\n\n\n

<\/p>\n\n\n\n

Unfortunately, many fleets today cannot afford a straight\nguaranteed-cost program that transfers all the risk to the insurer. Policies\nlike that are increasingly rare in today\u2019s market, but they are exactly what\ntrucking companies need. Premiums are simply not reasonable enough for small to\nmedium size trucking companies to afford. <\/p>\n\n\n\n

The question is, what is causing this drastic rise in\nnuclear verdicts? You must start with the attorneys litigating them. Put\nsimply, the techniques plaintiff\u2019s attorneys are using to drive huge verdicts\nand settlements is not being matched by the techniques used by defense\nattorneys. It could be we are seeing real, live litigious warfare playing out\nin the transportation sector. <\/p>\n\n\n\n

This approach basically involved plaintiff\u2019s attorneys appealing\nto the feelings of the jury by picking apart the trucking company, in many\ncases completely leaving out the facts of the case. There is also something\nmany have not heard of called \u201clitigation financing.\u201d In these cases, a\nthird-party may be aware of a high-level of insurance coverage and finance the\nattorney to push for ever larger awards. You can expect that in many of these\ncases, the jury likely has no idea that there is an outside third-party\nfinancing the attorneys. <\/p>\n\n\n\n

Focus on Safety<\/strong><\/p>\n\n\n\n

The best way to stay out of the crosshairs of clever\nplaintiff\u2019s attorneys is to ensure you are running a smooth and safe operation.\nThe best strategy to combat rising insurance prices is to develop a strong\nculture of safety understanding and crash prevention. <\/p>\n\n\n\n

If you implement and follow a detailed safety program, you\nwill be on the right side of your insurance premiums. You must make sure you\nadopt policies that cover hiring, training, drug testing, firing, and so much\nmore. You need to make sure your truck drivers follow the rules and keep a\nculture of safety strong within your organization. Without buy-in from your\nfrontline workers, you are setting yourself up for failure. <\/p>\n\n\n\n

Another problem lies with underqualified truck drivers. When\nunderqualified truck drivers are hired just to fill seats, accidents can become\nfar more frequent. Failure to follow strict hiring standards can lead to\ndisaster. Fortunately, running newer rigs can help to mitigate that risk. But\nrunning newer rigs is not the ultimate answer. Fleet managers must employee a\ncomprehensive strategy to keep risk low and, as a result, insurance premiums\nlow. <\/p>\n\n\n\n

Also, while running newer rigs reduced risk, they are not\nwithout their own costs. And in the event a newer rig is in a crash, it will\ncost you even more to repair it. This doesn\u2019t mean you should avoid expensive\nrigs with lots of safety tech. There is no question that safety technologies\nreduce crashes. Even more, insurance companies give you credit if you utilize\nadvanced safety technologies. <\/p>\n\n\n\n

Insurance companies like it when trucking companies use\nthings like:<\/p>\n\n\n\n