Adverse loss ratio, high verdicts hindering trucking lines
From inflated verdicts to a shortage of experienced drivers, commercial trucking insurance is facing a range of challenges.
During the past few years, the commercial trucking industry has seen total cost of risk rise by double digits, while predicting outcomes has grown more difficult as the sector faces a slew of challenges ranging from a shortage of experienced drivers to large “runaway verdicts,” according to Keith Dunlap, Gallagher Bassett transportation practice leader.
“The overwhelming belief among fleets and their insurers/reinsurers today is that the commercial auto insurance market is not working,” he tells PropretyCasualty360.com “The nexus between high verdicts and insurance premiums cannot be emphasized enough.”
Motor carriers and their insurers face several issues that are leading to higher settlements and larger losses, including increased alignment between plaintiff’s bars and medical providers.
“Some providers’ inflated medical costs are being subsidized or guaranteed by private companies that offer a ‘letter of protection’ to both the medical providers and the injured plaintiff,” Dunlap says. “This is especially true even when an injured third party has health insurance, workers’ compensation or Medicare. In these cases, the injured third party refuses to utilize those recovery sources, so their lawyers can use the inflated medical costs to generate or drive a much larger economic damages outcome.”
He adds runaway verdicts are now commonplace in most states, even on incidents that do not result in severe injury.
Another factor leading to growing verdict amounts, according to Dunlap, include the use of generalist defense lawyers that are not familiar with the issues of today’s trucking industry and how to best defend these cases.
“Motor carrier operations are under assault by plaintiff’s bar,” he says. “Highly skilled plaintiff lawyers focus today on aggravating factors associated with an accident, allegations of spoliation of evidence, negligent hiring/training/supervision, vehicle maintenance, hours of service violations, poor compliance with the FMCSR’s safety regulations and poor CSA (compliance, safety, accountability) scoring.”
Lack of drivers compounding problems
In addition to all of the above, the trucking industry has been facing a talent gap as the next generation of drivers has failed to materialize in meaningful, necessary numbers, according to the American Trucking Association. Dunlap explains this is having a profound impact on insurance for commercial trucking.
“If you review the large runaway verdicts against the industry over the last eight years, you will see a clear pattern emerge that would give anyone in our business the distinct impression that plaintiff’s bar is focused on the marginally acceptable operator,” he says.
These marginally acceptable behaviors include the slightest blemish on driving records, such as a speeding violation that is five years old, a chargeable but non-consequential accident, or an hours-of-service violation, according to Dunlap.
“The plaintiff’s lawyers argue the motor carrier had no business hiring this operator. As a result, they argue negligent hiring against the motor carrier in an attempt to inflame a jury,” he says. “The trucking companies are competing for the best operators. Some may not be considered ‘the cream of the crop,’ but they qualify for their CDL and are exceptionally hardworking and committed to the industry.”
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