A motor-carrier advocacy group views uninsured exposure as "significant"
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Are motor carriers— under federal law— under-insured?

Sept. 10, 2013
House bill would hike mandated insurance minimum substantially

Legislation that would up the federally required insurance minimum for motor carriers nearly six-fold—from the current $750,000 to $4,442,000— is wending its way through Congress.

Yet motor-carrier interests are not entirely aligned against the measure.  

Nicknamed the “Safe Haul Act,” the bill would also tie future insurance minimum requirements to the cost of medical care inflation. 

Introduced in the House by Rep. Matt Cartwright (D-PA) as the “Safe and Fair Environment on Highways Achieved through Underwriting Levels Act” (H.R. 2730) in July, the bill has eight co-sponsors, all Democrats, and has been referred to the House Subcommittee on Highways and Transit.

H.R. 2730 would specifically amend Title 49 of the United States Code “with respect to minimum levels of financial responsibility for the transportation of property, and for other purposes” to reflect the higher minimum coverage figure and would “adjust such amount annually for inflation relating to medical care” as defined by the Bureau of Statistics. The change would go into effect 180 days after the bill is enacted.

The current motor-carrier insurance minimum was set by Congress in 1980— and has not been raised since.

In present dollars, adjusted for the increase in the cost of medical care, it takes more than $4.4 million to provide for the equivalent of the $750,000 in the original law, according to a statement released by the Rep. Cartwright’s office.

The Congressman contends that the current minimum “fails to perform the basic functions that Congress intended: to promote safe operations by holding insurers responsible for inspecting trucking operations prior to underwriting policies…  

 “This is a matter of public safety,” said Cartwright. “Tragically, more than 100,000 people have been killed in commercial vehicle collisions since 1980.  This legislation is essential to protecting our nation’s highways and ensuring that victims receive the proper amount of compensation for their losses.”

Nonetheless, there is clear resistance to the Safe Haul Act by trucking’s chief lobby, the American Trucking Assns. (ATA).

Regarding the House bill, ATA spokesperson Sean McNally toldFleetOwner that “Good public policy is based on good data [and] ATA is not aware of any data that suggests the minimums need to be raised to remain faithful to the Congress’s intent when establishing the minimum insurance levels.”

The Owner-Operator Independent Drivers Assn. (OOIDA) is adamantly opposed to H.R. 2730l. “The legislation will not make highways safer and is completely unnecessary, as roughly fewer than 1% of truck-related accidents settle for more than $750,000 and most owner-operators have $1 million in coverage,” OOIDA spokesperson Norita Taylor told FleetOwner.   “… All this [bill] will succeed in doing is [to] increase costs for small business competitors in trucking and chum the water for personal-injury lawyers.”

Management consultant Lana Batts, partner of Transport Capital Partners, who is a former president of the Truckload Carriers Assn., contends flatly that H.R. 2730 “won’t pass” the House.

“[That] the bill was introduced by a plaintiffs' attorney [a reference to Rep. Cartwright’s profession outside politics] says it all,” Batts told FleetOwner. “It just means the awards are bigger, and the lawyer's cuts are larger. “

Making her point further that the bill is one-sided, she added that “if three out of four car/truck accidents are caused by the auto driver, where is the companion legislation on auto drivers?”

On the other hand, in furthering his case for the Safe Haul Act, Cartwright cited a recent study conducted by the Trucking Alliance (Alliance for Driver Safety & Security), a safety-focused coalition of motor carriers, that found “42% of the dollar settlements paid by trucking companies to motorists injured in accidents may exceed the federal government’s minimum insurance requirement for trucking companies.”

Carrier members of the Trucking Alliance— which include such industry heavyweights as J.B. Hunt Transport, Inc., Schneider National Corp.,  U.S. Xpress, Inc., Knight Transportation, and Maverick USA —  report they ran the survey to get their own sense of whether the insurance minimum  should be hiked.

The results were drawn from 8,692 accident settlements between 2005 and 2011 voluntarily tracked by Trucking Alliance members.

“The [42%] uninsured exposure is significant because a large percentage of the motor carrier population maintains insurance at or near the $750,000 minimum,” said Lane Kidd, president of the Arkansas Trucking Assn. and senior manager of the Trucking Alliance.

“This uninsured exposure means that trucking companies must pay out the additional dollars from within the business or, in the worst case, file bankruptcy to avoid paying,” he continued.

Kidd stressed that the statistics “clearly show that the current minimum insurance level creates too much exposure for the trucking industry and injured motorists.” 

The problem of under-insured carriers is “highlighted” when the accident settlements are reviewed on a “per occurrence” basis, according to Kidd.

“At first glance,” he explained, “only one percent of the dollar settlements exceeded $750,000 but to determine true risk, it is the per occurrence average that made all the difference.”

Per the Trucking Alliance, its data shows that if all the trucking companies in the study had maintained the minimum $750,000 insurance requirement, exactly 42% of their monetary exposure from these settlements would have exceeded their insurance coverage.

Conversely, the group also pointed out, “42% of the injury claims could have had no avenue for offsetting medical costs.”

In addition, the Trucking Alliance study revealed that “of the settlements that exceeded $750,000 of insurance, the uninsured liability exposure ranged from 37.5% at the $1-million insurance level down to 17.7% at $4 million of insurance coverage.”

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