Trucking companies are facing costlier crash settlements and verdicts, a trend that has pushed insurance providers away from the industry.
Large auto liability verdicts and settlements in the industry have caused "a decline in the number of carriers and underwriters that write insurance policies or that are willing to provide insurance for trucking companies,” USA Truck said in a securities filing on Aug. 8.
That comes at an already fragile moment as premiums and payouts have seen hefty increases in recent years, according to a report by the American Transportation Research Institute. Insurance premium costs increased 47% over the last decade, and incurred losses increased 50% from 2015 to 2019, the report said.
Industry groups are taking note of legal costs. Dale Porfilio, the chief insurance officer of the industry-funded Insurance Information Institute, said in a statement in March that the "exponential growth of personal injury attorney advertising, third-party litigation funding investments, and securities class actions" have all driven up the cost of insurance.
A push to settle cases out of court also tends to raise the cost of the ultimate payout, according to the ATRI. Earlier this year, Werner Enterprises reached a $150 million settlement after a truck struck a parked vehicle in May 2020 on Interstate 30 in Texas, killing two children. Noting the tragedy of the crash, the company also said that it chose to settle rather than go to trial given that "corporate defendants are facing 'nuclear verdicts,'" or jury awards that surpass $10 million, across the country.
Trucking companies have tried to adjust by reducing coverage levels or offsetting insurance costs by cutting compensation, according to the ATRI report. The institute surveyed companies and found over one in three companies cut salaries and bonuses in response to rising insurance costs.
With companies taking on more direct risk, insurance rates have seen some slight relief. ATRI said in its 2022 annual cost of trucking report that commercial auto premium costs per mile decreased one-tenth of a cent between 2020 and 2021.
Still, the institute predicted that insurance premiums per mile will likely increase over the next year.
“Concerns about rising crash severity nonetheless remain, especially amid the continued return to pre-pandemic traffic levels,” ATRI said.