TPAs can minimize the impact of nuclear verdicts in the trucking industry
A nuclear verdict is typically defined as jury awards that exceed $10 million.
Over the past seven years, the commercial trucking industry has faced a significant increase in nuclear verdicts — typically defined as jury awards that exceed $10 million.
Prior to 2013, it was extremely rare to see a verdict of that magnitude in the trucking industry unless the incident involved severe catastrophic injuries like paraplegia, severe burns or death, typically coupled with aggravating liability involving drug and/or alcohol use, or willful conduct of the operator or motor carrier.
Since that time, however, we’ve seen at least 115 such verdicts, many of which were decided in state courts viewed as sympathetic to injured plaintiffs — sometimes referred to as “judicial hell holes.” We’ve not seen such a pattern of unpredictability in our federal courts.
That number may still seem small, given that approximately 4.5 million truck and personal auto accidents have occurred over the last 10 years, the majority of which have been resolved on more reasonable terms. But court awards for all of those other accidents — even verdicts related to minor soft tissue injury claims — are also being influenced by the highly publicized nuclear outcomes. We expect the size of nuclear verdicts to grow, both in numbers and in dollars, even more than medical malpractice and product liability verdicts.
Due to these unexpected and unpredictable verdicts, long-tenured primary insurers that understood the class have either exited the business or significantly increased their premiums. Reinsurance, particularly for excess layers from $5 million to $15 million, is much harder to find and very expensive when available. This has forced many fleet owners to assume more risk, with higher liability deductibles or higher self-insured retentions.
In this environment, the potential to lower liability loss costs and avoid a nuclear verdict is a much more attainable goal for fleet accounts compared to non-fleet business. Exceptionally well-run, experienced trucking companies with the following attributes are simply better-positioned to gain access to more insurers with better pricing than those that don’t stand out as best-in-class companies:
- Good loss control and safety departments;
- Dominant use of owned equipment;
- Lower driver turnover;
- Minimal loss activity;
- A commitment to a telematics investment/safety technologies, and;
- Impeccable or otherwise favorable CSA scores.
What is clear is that trucking companies should be prepared to respond to an accident long before it occurs. One way many truckers and their insurers are accomplishing this goal is by working with a third-party claims administrator (TPA) that specializes in the immediate investigation and resolution of accident claims asserted against the motor carrier industry, starting on the date of loss all the way up to and including litigation management and ultimately, final resolution of the claim.
Trucking through a litigious environment
The most effective litigation strategy is to avoid litigation altogether. The litigation discovery process generally does not improve the chances for a favorable outcome, and many times the final incurred defense costs exceed the monetary amount of the underlying controversy. A consistent comparison analysis between incurring defense costs and achieving a negotiated resolution is a process that a tenured claims professional excels at, finding those sweet-spot opportunities to resolve the case on fair terms for the trucker and their insurer at any point in the evolution of the case. This constant search for a fair and reasonable outcome is the primary reason to utilize a specialty TPA today, as opposed to a generalist administrator.
TPAs work with retailers, managing general agents, insurers, transportation defense attorneys, loss control specialists and telematics vendors to analyze risk and assist motor carriers with a variety of services, including driver selection/training, post-accident reconstruction, technical safety enhancements and much more. They can help boost a trucking company’s ability to weather this litigious environment and remain competitive, even when faced with higher insurance premiums.
TPAs can also assist motor carriers and their insurers in finding and vetting appropriate legal representation with firms that specialize in the defense of the transportation industry. By far, the most effective litigation management process is to engage only transportation-specific defense lawyers, firms that have an internal practice group dedicated to the defense of motor carriers — lawyers who live and breathe the issues the industry faces today.
Lastly, it is incumbent on the TPA and defense counsel to understand the common themes that are advanced against a trucking company today and to investigate which particular themes and allegations have the most potential for success. Frontline claim professionals need to “think like a plaintiff attorney,” understanding the vulnerabilities in the claim file.
The TPA needs to be continuously engaged during the entirety of the defense, constantly on the lookout to capitalize on opportunities for resolution, even via direct negotiations with opposing counsel. The need for resolution becomes especially acute when the TPA learns information not yet known by opposing counsel that is adverse to the trucker and could be potentially harmful to their defense.
A focused transportation TPA can detect claim volatility early, build internal investigative protocols and provide decisions around the common themes used today by experienced plaintiff’s firms against the transportation sector and their insurers.
In the current rate environment, it is highly unlikely for commercial truckers to significantly reduce their cost of insurance. Today more than ever, it’s imperative that risk-takers in high-risk specialty areas, like commercial trucking, invest in loss control efforts and ensure that their claims are managed by claim professionals with extensive industry experience.
It remains to be seen whether commercial trucking liability cases are being negotiated on fairer terms during the current pandemic. COVID-19 has shut down our courts, escalating the use of virtual mediations for selected cases. It remains unclear whether or not plaintiff attorneys will be more reluctant to pursue huge awards due to the state of the economy once courts eventually reopen.
What is clear is that truckers have been heroes long before the pandemic began, and it will be up to our defense attorney partners to continually re-emphasize their story, by reminding juries of the key role truckers perform in our society, not just during this current crisis but throughout modern history.
Keith Dunlap is the transportation practice leader at Gallagher Bassett. The views expressed here are the author’s own.
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