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Clark: Nuclear verdicts increase the cost of doing business

June 24, 2024
Accidents will continue to happen, but fleets will need to be more vigilant than ever to stay safe and compliant.

Profit margins for carriers vary according to the individual entity; however, the margins have never been high. Estimates vary between 2.5% and 8%. The industry is in an ebb and flow when it comes to capacity, so the actual dollar amount of profit margin fluctuates as well, making  working capital and cash flow extremely difficult to manage. Add to this the wide array and constantly changing nature of local, state, and federal regulations, and you can see that truck fleets face numerous challenges.

One of the greatest challenges is the increasing cost of facing litigation that may result in a nuclear verdict against the company. At a recent NationaLease meeting, Steve Bryan, CEO and co-founder of Bluewire, addressed this specific issue. Bluewire is an online AI platform that uses complex data sets to assess severity risk for hundreds of thousands of regulated motor carriers. The purpose is to let carriers understand the gaps and vulnerabilities that can result in massive settlements when accidents occur.

Bryan spoke to the rise in severity of these verdicts, noting that there was a 967% average increase in jury verdicts between 2010 and 2018. During that time period, the average verdict increased from $2.3 million in 2010 to an eye-popping $22.29 million in 2018. In 2023, that $22-plus million is now up to an average of $27 million and doesn’t really show any sign of slowing down.

See also: Gaskins: How can fleets control insurance premium costs in the face of nuclear verdicts?

Who’s at fault doesn’t seem to matter

One of the most frustrating issues is causation attribution. In other words, according to a 2021 report from the American Trucking Associations, about 80% of accidents involving a commercial truck and a car can be linked to the car driver’s mistakes rather than those of the truck driver. Regardless of whose fault it is, juries note that in accidents resulting in death or injury, it’s usually the driver and occupants of the car who suffer most … even if it was their fault. So, juries make the “big guy” pay the price.

Knowing this and understanding that litigant attorneys also know this, it’s vital that you ensure the safety of your vehicles and the safe driving habits of your drivers to lower the number of accidents that may occur. Bryan told meeting attendees that there are specific vulnerabilities that plaintiff attorneys have successfully used in their cases. He pointed out that brake issues, tires, and lighting comprise the largest number of violations, something we are familiar with from the International Roadcheck events over the years, and these violations are exploited by attorneys when making their case to juries. It’s vital for fleets to recognize these potential vulnerabilities and stay on top of them.

Higher verdicts mean higher insurance rates

What is also true is that higher claims also increase the cost of insurance for fleets. A FleetOwner article last year noted that “over the last decade, per-mile insurance premium costs for commercial motor carriers have increased by almost 50%.” This is while freight rates decline and operating costs increase, only adding to the industry’s challenges.

Accidents will continue to happen, though hopefully mitigated as new truck technology continues to make trucks and the road safer. Fleets must be more vigilant than ever to stay safe and compliant. Bryan urged fleets to keep rigorous documentation on the maintenance of every vehicle to protect the business.

About the Author

Jane Clark | Senior VP of Operations

Jane Clark is Senior Vice President, Operations for NationaLease. Prior to joining NationaLease, Jane served as Area Vice President for Randstad, one of the nation’s largest recruitment agencies, and before that, she served in management posts with QPS Companies, Pro Staff, and Manpower, Inc.

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