Trucking Industry Still Facing Soaring Insurance Costs
Rate Increases Are Being Fueled by Nuclear Verdicts Against Carriers, Though 1 Recent Legal Win Gives Hope
Key Takeaways:
- The Texas Supreme Court overturned a $100 million verdict against Werner Enterprises, offering the trucking industry a rare legal win amid rising litigation pressures.
- Despite fewer claims since 2020, escalating verdicts and settlements are driving insurance costs higher for fleets of all sizes, with rates climbing for five straight years.
- Insurers and carriers expect further increases as nuclear verdict risks persist, prompting larger fleets to adopt higher deductibles and technology while smaller operators struggle with affordability.
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The recent reversal of a $100 million verdict against Werner Enterprises by the Texas Supreme Court gave the trucking industry a big win in a legal environment that is often stacked against it — and where “nuclear” verdicts along with smaller settlements are raising insurance rates ever higher.
In that decision, the court reversed a verdict that had been upheld on appeal after a fatal crash in 2014 when a pickup truck lost control in icy interstate conditions, crossed the median and collided with a Werner truck that was traveling below the speed limit and braked before impact.
The original verdict is an example of a plaintiff’s attorney persuading a jury to decide on emotion and ignore the facts, said Jay Starrett, a partner with the Scopelitis law firm that represents truckers, adding that trucking clients know they might need to appeal to a higher court for a just result.
Pam Bracher, deputy general counsel at , said the reversal could set a precedent in Texas and create boundaries on “proximate causation,” meaning the determination that the defendant caused the event. The court said the Werner driver couldn’t be blamed for being in the wrong place at the wrong time.
The frequency of court claims has decreased since 2020, yet the severity of claims has risen, Bracher said. The potential for a nuclear verdict is leading defendants to settle at rising amounts.
“We splash these headlines of these large verdicts, and nobody ever talks about all the defense wins, and there’s a lot out there,” she said. “But this sort of threat of this large verdict creates a fear that drives up settlement values.”
Trucking companies are being targeted by personal injury lawyers, said Starrett and fellow Scopelitis partner Andrew Marquis. Truckers presumably have money and insurance, both said, adding that juries may not hear about the millions of dollars they spend on safety. Studies have shown that most accidents between a trucker and passenger car driver are caused by the latter. Nevertheless, truckers often are presumed to be at fault.
We splash these headlines of these large verdicts, and nobody ever talks about all the defense wins, and there’s a lot out there. But this sort of threat of this large verdict creates a fear that drives up settlement values.
Pam Bracher, deputy general counsel, American Trucking Associations
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Noting that technology is a helpful tool for carriers, Starrett said he knows if a client is in legal trouble quickly based on dash cam video evidence. Marquis said he might send a favorable video to the plaintiff’s attorney and ask if they want to take a flawed case. Sometimes they don’t. The passenger car can provide speed and hard-braking data.
Plaintiff’s attorneys often employ a legal strategy known as the “reptile theory” in which they tell jurors they are guarding the community against unsafe truckers. ATA’s Bracher said they often will use a carrier’s forward-facing documents, social media postings and website against it. Trucking companies must know what their documents and postings say and must consistently adhere to their protocols. Smaller companies that don’t have an in-house claims or legal staff should partner with their insurance carriers.
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Starrett of Scopelitis said the industry has an obligation to stand up for itself despite the costs and risks.
“There is a trend where if you have the right facts and if you’re willing to try the case, the defense bar is having success in defending the industry,” he said.
Jerry Gillikin, executive vice president for Hub Transportation insurance, said the Werner reversal “gives us all hope” that the legal climate can improve.
Nevertheless, Gillikin, whose company insures many midrange companies, called the situation “desperate.” Insurers spread the costs of nuclear verdicts throughout the industry. With rates having increased for the fifth year in a row, he noted, the situation is hitting new ventures hardest.
While nuclear verdicts are a major factor in rate increases, so are the many smaller judgments and settlements. Gillikin said one of his clients was recently hit with a million-dollar claim.
“[Claims] that used to be a hundred thousand are now a million dollars,” he said. “How many of those can you pay?”
Nick Saeger, assistant vice president of pricing and products for transportation specialties at Sentry, compared the insurance industry’s preparation for a nuclear verdict to the sense that a tornado might happen somewhere generally, but nobody knows where and when.
“We know that they’re going to happen across the industry,” he said. “We don’t know which companies are going to have them happen. So you have to sort of price for it across the broader industry, and the prices just have to increase for everyone, whether you’ve had that bad claim or not.”
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Taylor Walker, chief insurance officer at Loadsure, a transportation insurance company that primarily focuses on cargo insurance, agreed that increases are driven by not just severity but also additional losses through regular claims.
“The big claims — that’s what’s going to make markets pull out,” he said. “The small claims are going to be what drives the price up.”
That combination creates a “perfect storm where the market will all of a sudden really get hard,” Walker explained.
Some insurers are reducing their exposure by offering $1 million primary limits after giving as much as $10 million eight to nine years ago, said Dan Cook, principal and transportation practice leader at insurance firm TrueNorth. Likewise, excess insurance providers have reduced their coverage limits per contract. Many will no longer attach coverage at lower levels, forcing motor carriers to decline coverage, accept more risk or absorb more cost.
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Matthew Payne, U.S. transportation practice leader for Lockton, which focuses primarily on insuring large fleets, said the rate environment has “calmed down to a degree this year,” noting that rate increases are significant but not as severe as they have been. More large fleets are taking increased deductibles and potentially starting their own captives. They can get a quicker return investing in safety than they can by waiting for insurance prices to fall, Payne added.
However, he said the current situation is not sustainable. The number of insurance carriers willing to play in the industry and provide excess coverage is falling, and prices are rising. Larger fleets are finding it more difficult to obtain insurance. The costs make it difficult for midsize fleets to turn a profit.
“Even if you’re operating perfectly, you’re going to have increasing insurance rates. … It’s punishing everybody because the insurance carriers spread the risk across all their insureds,” he said.
Smaller companies with as few as one truck are facing the same challenges as larger ones, including the threat of a nuclear verdict, said Sentry’s Saeger. Sentry insures many owner-operators and other small operations.
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“All of that stuff is impacting both fleets and smaller fleets/owner-operators alike,” he said, “Nobody’s really immune to it.”
Saeger said that while larger and midsize fleets are purchasing policies with higher deductibles, the practice is less common for smaller ones that would struggle to cover a $5,000 claim.
Alan Riels, president of Arkansas-based Dedicated Logistics, an 80-truck carrier, simply stated that truck insurance prices are just too high.
Scott Richardson, the fleet’s safety manager, noted that one cause of the high insurance rates is the low minimum liability insurance rates required of passenger car drivers in many states. Last September, a passenger car driver suffered a heart attack, drove across two lanes of traffic and a middle turning lane, and struck a Dedicated Logistics truck head on. The passenger car driver’s $25,000 policy didn’t come close to paying for replacing the burned-out truck and repairing the damaged trailer, the $45,000 bill for cleaning up the diesel spill, or the $20,000-plus tow bill. Dedicated Logistics’ insurance covered most of the rest, but the costs ultimately will be passed down to the trucker in the form of higher premiums.
The carrier avoided a lawsuit in that accident, but it hasn’t always been so fortunate. Several years ago, its truck was struck by a drunken driver who tried to pass on an exit ramp shoulder. Police arrested the woman for driving under the influence. Nevertheless, a billboard lawyer sued the firm. Ultimately, the insurer settled for a low amount in a court-ordered mediation “to get them to go away,” Richardson said.
Scott Richardson, Dedicated Logistics' fleet safety manager, said one cause of the high insurance rates is the low minimum liability insurance rates required of passenger car drivers in many states. (Dedicated Logistics)
Gillikin said Hub is trying to help its motor carriers deal with the rising costs. It’s putting its best clients in a group captive or large retention policy with a large deductible. It is helping others take on more risk.
Lockton’s Payne said the first key for motor carriers in this environment is hiring the right driver. The second is having technology, including collision avoidance, lane departure warnings and cameras that alert a driver who is getting distracted or drowsy. Payne described it as “the price of poker.”
“To get insurers interested, you need to have strong driver hiring guidelines, strong driver qualification process, training, and then, again, have your fleet equipped with the most up-to-date technology,” he said.
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Sentry’s Saeger said fleets that invest in cameras and other technology will “definitely” see better rates than those that don’t.
“Insurance is a bit of a show-me type industry, so just to have the technology doesn’t necessarily mean that you’ll have less claims,” he said. “A lot of times it does work that way. But as you apply it, and it leads to less claims, you will see, we’ll call it ‘better rates relative to your peers.’ Not necessarily lower rates because again, until we stop having nuclear verdicts, I don’t see a horizon where rates will be decreasing.”
If they do have an accident, they should report all claims quickly to their insurance company, Saeger said. The sooner the insurer can get in front of both their own drivers and others affected by the accident, the more likely they will at least think twice about getting an attorney.
“If we can make them understand that we’re there to help them and pay them, help them get back to where they were before and pay them fairly, the better off I think all parties will be,” he said.
Cook with TrueNorth said trucking companies that invest in safety, quality driver hiring practices and collision avoidance systems enjoy a clear return. That return is growing in relation to nuclear events.
“As simplistic as it sounds,” he said, “the best option is still not to have the claim in the first place.”
