Do Trucking Companies Bear Some Responsibility for the Spike in Nuclear Verdicts?
Updated: Jul 21, 2020
The American Transportation Research Institute (ATRI) recently released a study highlighting a reality that everyone in the trucking industry already knows all too much about. Nuclear verdicts, those amounting to $10 million or more, are becoming more common, and are having a crippling effect on fleets’ ability to afford insurance coverage.
From 2010 till 2018, standard inflation grew 1.7% each year on average. Healthcare costs averaged an increase of 2.9% per year. Meanwhile, according to the ATRI, the average yearly increase in the size of verdicts against trucking companies went up by 51.7%.
Insurance costs for fleets have accordingly been adjusted upward. Since 2013, coverage per mile has gone up 17%, and that includes a spike of 12% from 2017 to 2018 alone. The pressure caused something like 795 trucking companies to shutter their doors in 2019. That’s not the end of the cascade, though, as higher costs per mile lead to higher shipping rates, which ultimately means higher prices for consumers.
Nuclear verdicts, though devastating, are relatively rare. Unfortunately, legal penalties that aren’t large enough to qualify are likewise becoming both more common and more expensive. The ATRI report found that, when accounting only for verdicts over $1 million, the average penalty went from $2,305,736 to $22,288,000, bringing them comfortably into the nuclear range, and representing an increase of 967%.
So, it’s not like insurance companies are price gouging. “Insurance is not the problem,” writes Brian Fielkow in an article for FreightWaves. “Insurance rates reflect the condition of the applicable market.” He goes on to say, “Blaming insurance companies is like blaming the mirror for the image it reflects.”
But if the insurance companies aren’t to blame, who is?
The Primary Suspect
One of the problems, according to Fielkow, is that “Plaintiffs’ attorneys have come to view trucking companies and their insurers as slot machines.” The ATRI report cites several lines of evidence leading to the same conclusion. For instance:
Some believe the root of the increase stems from the 1977 U.S. Supreme Court case that re-allowed litigation advertising, and there is much merit to that assumption. The median dollar value of trucking litigation awards from 1985 to 1989 was slightly more than $100,000. And in the next five years, the average award increased by 90 percent to $190,000.
There is also a theory that the initial ‘scalding coffee’ award of $2.7 million further raised the litigation bar in the minds of attorneys and juries, as both the number and size of verdict awards grew annually at double-digit rates.
Making matters worse is that outside interests invest in plaintiffs’ litigation against trucking companies. The verdicts in these cases are seen as a speculative commodity by these investors, who help plaintiffs acquire legal representation to set their suits in motion. In return, they take a cut of any verdict against the trucking company—helping to drive up the size of those verdicts.
There are plenty of anecdotes about unscrupulous lawyers preying on trucking companies. Fielkow cites cases where attorneys conspired with healthcare providers to inflate the cost of treatment for injuries. One doctor, it turned out, had testified in over 200 cases, helping the lawyer gain leverage for higher settlements.
Then there are cases like the one in New Orleans where a lawyer teamed up with a conman to recruit “witnesses” to a deliberately caused collision with a truck. These witnesses went on to give false testimony about what happened, assigning fault to the driver of the truck. The plan was to pay these conspirators a percentage of the settlement. Unfortunately for them, the whole incident was caught on the truck’s dash camera. It was also caught on a nearby security camera.
As the defense attorney in the case Doug Williams said, “Those cameras right there saved between $150,000 and $200,000 just by capturing the fraud and us not having to go and defend it.”
Not surprisingly, there are some who disagree with the ATRI’s conclusions. The organization is, after all, an advocacy group for the transportation industry. In response to the report, Michael Leizerman, co-founder of the Academy of Truck Accident Attorneys, wrote,
Good companies with good drivers rarely kill families, maim motorists, and destroy lives. When they do, they admit fault and settle. Nuclear verdicts are the result of nuclear injuries—paralysis, brain damage and death, when the truck company has acted extremely recklessly—sometimes with impunity—and refuse to be accountable. Verdicts aren’t strangling the trucking industry. Bad trucking companies are strangling the trucking industry.
While there are probably a few good lawyer jokes to be made from this rebuttal, there is some good evidence to back up Leizerman’s claim. Just as there are examples of unscrupulous—or outright fraudulent—lawyers working in cahoots with doctors and other conmen, there are also stories of woefully reckless practices by trucking companies resulting in nuclear verdicts.
One case involved a driver in New Mexico who’d only been behind the wheel of an 18-wheeler for four days when he lost control, crossed four lanes of traffic, crashed through a median, and killed a woman driving a Honda. The incident ended up costing the trucking company $40.5 million.
And the evidence goes beyond anecdotes. In the one year between 2017 and 2018, the number of trucks with a weight rating between 10,001 and 14,000 pounds that were involved in a fatal accident went up by 4.6%. Over the same period, trucks weighing over 26,000 pounds were involved in 1.6% more fatal accidents. The number of large truck drivers who were themselves killed in accidents meanwhile went up by 8% from 2016 to 2018.
What’s a Fleet Manager to Do?
From predatory litigators to trucking outfits cutting corners, it appears there’s plenty of blame to go around. We can hope that tort reform, like a bill that was recently passed in Louisiana, will catch up to the prior issue sooner rather than later. But, in the meantime, there are things fleets can do to protect themselves, both from the sleezy lawyers and from their own issues with drivers.
Writing about the insurance crisis, Keith Dunlap, senior vice president for global claims-services provider Gallagher Bassett, points out that
Of the top fleets in the United States, the majority have implemented some type of telematics. These motor carriers understand how collision-avoidance technology, auto braking systems, and video captures help reduce both the frequency and severity of loss. They also understand how implementing telematics helps protect against meritless claims by third-party attorneys. In my view, this is a key risk-management investment.
Remember those cameras that caught the two cars attempting to set up the truck driver in New Orleans? Well, if you want to avoid being hit with a nuclear verdict, installing cameras to catch incidents like this is the simplest way.
Aside from catching people in scams, cameras and telematics systems can also be used in both training and ongoing performance monitoring. One of the main factors behind the increasing number of trucking accidents is a severe shortage of drivers. This puts pressure on fleet managers to get more out their drivers, earlier in their careers. Insisting on strict recruiting and in-depth training may seem like a counterintuitive solution to a driver shortage, but the technology can make these strategies far simpler to execute.
Brian Feilkow emphasizes the importance of these technologies for any company dealing with the insurance crisis. “Outfit trucks with cameras,” he insists. “The return on camera investment is incredible. Avoiding one significant claim will pay for the equipment many times over. Cameras also allow trucking companies to identify and root out unsafe behaviors.”
To take a closer look at what this kind of driver training looks like, check out our post:
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