Commercial Trucking Insurance Rates Haven’t Increased Since 1980

by Ed Rebenack, Esq.

A report by the Truck Safety Coalition indicates that the $750,000 insurance requirement for commercial trucks carrying standard freight hasn’t increased in more than 40 years. A New Jersey truck crash lawyer who focuses on the trucking industry warns that this is problematic on a number of fronts. The level is woefully inadequate to cover the costs of the average trucking accident, and it also creates unfair competition.

Truck Safety Coalition

The TSC is a partnership between Citizens for Reliable and Safe Highways and Parents Against Tired Truckers. The CRASH Foundation is a grassroots effort to reduce the fatalities and injuries associated with commercial trucks and raise public awareness about those events. P.A.T.T. was founded in the wake of a devastating commercial trucking accident that killed four teenagers and seriously injured a fifth. Both organizations have similar overall goals, but P.A.T.T. does focus its resources on different specific projects, such as science-based hours of service rules and advancement of underride guards.

Background

Prior to 1980, the trucking industry in the United States was highly regulated by the federal government. While regulation certainly had its benefits, it made trucking less efficient and more expensive, as the success of the economy was becoming increasingly reliant on it. Deregulation allowed companies to move products more quickly and efficiently, which reduced costs for the consumer. It also lowered the barriers to entry for smaller trucking companies. That increased competition, which also benefitted the consumer since shipping charges were lowered organically.

Although deregulated, there would still be and still is federal oversight of the industry. Congress knew that overseeing all of these new companies would be a monumental task. One of the measures it took to alleviate this burden was to set minimum insurance levels. The goal here was to set the levels high enough that it would protect victims of commercial trucking accidents but also foster an insurance market that would incentivize carriers to operate in a safe manner. Congress determined that the appropriate levels for motor carriers was $750,000 for those transporting standard freight and $5 million for those transporting hazardous materials.

The Cost of Trucking Accidents

When the government foresaw the challenge of federal oversight, there were more than 27,000 trucking companies based in the U.S. As of this writing, there are now more than 500,000, and that doesn’t account for the many trucking companies that are based in Canada and Mexico but operate in the U.S. Even in 1980, many argued that the minimum levels were too low, and the situation has become exacerbated with time. One issue is that $750,000 simply isn’t worth as much in the 2020s as it was in the 1980s. However, even after accounting for inflation, the costs of trucking accidents have risen dramatically.

There are many reasons for this. Medical expenses and the cost of replacing property have, of course, increased. But perhaps the biggest difference is the disparity between commercial trucks and passenger vehicles. New regulations allowed commercial trucks to expand to 48 feet and then 53 feet. Freight weight limits were also increased, which means that modern trucks are much heavier. The cost of a common trucking accident involving a fatigued driver and multiple passenger vehicles can easily exceed $20 million, and many if not most trucking companies don’t have that level of coverage.

Interpleader Action

As previously mentioned, one of the goals with the minimum levels was to foster an insurance market that incentivizes carriers to operate in a safe manner. However, this hasn’t been the reality. What often happens when damages far exceed the insurance policy is that the insurance company interpleads the insurance limits. This means that they ask the court to distribute the available pool of insurance money among the victims. Interpleader actions have risen dramatically in recent years. The result is that victims are often not compensated fairly, and there’s also an additional burden on Social Security, Medicaid. and other government programs. It also means that the parties who should be held responsible, which are the trucking companies, often aren’t. Therefore, they’re not incentivized to operate differently.

Fostering an Unfair Competitive Environment

Another unintended consequence of the low minimum insurance levels is that it has fostered unfair competition. The large nationwide companies possess significant capital that they could lose in the event of a trucking accident. They therefore tend to have layered coverage that often exceeds $30 million, which typically is enough to compensate victims in the event of a devastating accident.

Many small trucking companies, on the other hand, have minimal assets. This incentivizes them to carry the minimum, which is often $1 million because even the insurance industry recognizes that $750,000 is absurdly low in the 2020s. The problem here is that in the event of an accident, the company simply goes out of business, and that $1 million or $750,000 is all that there is for the victims. This situation has given rise to what are known as chameleon carriers, or reincarnating carries. They simply reinvent themselves in order to continue operating while avoiding their financial responsibilities.

2014 FMCSA Report

In a 2014 report, the Federal Motor Carrier Safety Administration found that the cost for most commercial trucking accidents easily exceeded $1 million. It concluded that the limit should be raised to $3.2 million solely to compensate for medical care inflation. The FMCSA conceded that adjusting for the true costs of these accidents is difficult since insurance settlements often contain nondisclosure agreements.

Other Reports

There have been a number of other high-profile reports on minimum financial responsibility for commercial trucking companies. The Pacific Institute for Research and Evaluation recommended based on its research that the minimum level be set at $10 million. In its Review of Crash Settlements, the Trucking Alliance supported the FMCSA suggestion with the grim findings that 42% of all trucking accident victims have to pay for their medical expenses out of pocket or go bankrupt.

The Road Ahead

The trucking industry should have to incur the losses that it causes. Not only would it ensure that victims are appropriately compensated, but it would incentivize them to operate in a safer manner. While we may never eliminate trucking accidents, our society could certainly reverse the trend and substantially reduce the number of fatalities and injuries. At the very least, the government should adjust for inflation, which would put it at $2.2 million at a bare minimum and likely above the $3.2 million mark that the FMCSA recommended in 2014. That responsibility and authority lies with the Secretary of Transportation.

Do You Need Legal Representation?

If you or a loved one has been in an accident with a commercial truck, RAM Law would like to help. Our law firm focuses on commercial trucking accidents in New Jersey. We have extensive experience protecting victims’ rights, carrying out accident investigations, arbitrating, litigating, and going to trial. RAM Law has offices in New Brunswick and Somerville. If you’d like to meet with one of our personal injury lawyers to have your case reviewed at no cost to you, call us at (732) 394-1549 or contact us online.