Should the minimum insurance coverage requirements for motor carriers be increased? I was quoted in the April 28 issue of Transport Topics on this subject, and I wanted to expand on my comments.
I’ve been in the insurance industry serving motor carriers for almost 30 years, and the requirement has held constant during my entire career. There’s a case to be made for and against the increase — I’ll share both perspectives and let you be the judge.
The FMCSA stirred the pot on this issue a few weeks ago when it announced it will initiate a rulemaking to increase the current $750,000 insurance minimum for motor carriers. The requirement has remained unchanged since 1985 without adjustment for inflation, in spite of several proposals in Congress to do so.
It should be noted that while the minimum limit required is $750,000, the vast majority of for-hire motor carriers purchase limits of $1 million and higher. In fact, HNI offers liability insurance limits of $1 million and higher to our clients.
The facts are clear in the various reports that an extremely high percentage of claims settle within the current minimum limits. It is also undeniable that in some situations, the value of the loss far exceeds the minimum, leaving claimants undercompensated and motor carriers exposed to uninsured loss.
Back in 1985 when the current limit was put in place, truck verdicts and settlements in excess of a million dollars were rare. Today, this is common on catastrophic losses.
Increased limits incentivize insurance companies to offer greater safety training and supervision to the motor carriers they underwrite, which is good for the industry as a whole — especially for smaller carriers with less resources at their disposal.
Raising the minimum limits also mitigates broker liability for larger motor carriers engaging in freight brokerage, because higher limits would be available to claimants.
My concern with an increase in the requirement lies in the probability of raising the value of all claims simply because the pockets become deeper. With more money on the line, plaintiff attorneys can play hardball forcing insurance companies to settle rather than defend the value of the claim in front of an unpredictable jury. When claim costs increase, insurance rates go up and that's not good for the industry.
An increase in the limit hits smaller, less capitalized motor carriers harder. This in turn will also impact large motor carriers that have become more dependent on smaller motor carriers to handle their brokered freight. Nobody wins (in the trucking industry) if the requirement increase is beyond a reasonable level.
A final thought: Any increase in the limit should be approached in the context of broader reform. Limits to private passenger automobile damages and tort reform would add balance.
What is your take on the issue? Should the current insurance minimums be raised, or should they stay the same? What outcome do you expect of the FMCSA’s rulemaking? Sound off in comments!