Top 5 Reasons Why Increasing Federal Trucking Liability Limits is a Terrible Idea
During the past few years, there has been a push by some members of Congress to increase the federally required limits of liability for truckers from $750,000 to as high as $4 Million. Citing medical cost inflation as the primary reason, some industry groups including the plaintiffs’ bar, argue that $750,000 simply is not sufficient to cover injuries caused by trucking accidents.
As insurance professionals, we believe that our clients should protect their assets and future income from catastrophic claims. An excess auto liability or umbrella policy is an important piece of a risk management program. However, increasing the federal commercial truck insurance liability limits will have a devastating effect on the industry.
Here are five reasons why:
- Insurance rates are already a drag on the trucking industry. According to this WallStreet Journal article, the profitability for fleets of all sizes is eroding due to insurance costs.
- The insurance market capacity for increased limits may not exist. There is a very limited supply of capital to fund trucking umbrella liability coverage, resulting in skyrocketing costs in recent years. If the demand increases by a large multiple, it’s questionable if the insurance industry can even meet the demand.
- Smaller carriers will go out of business. Owner operators and small fleets already operate under razor-thin margins of 5% or less, and fewer than 10% carry excess liability coverage. Without the ability to pass the costs on to shippers, the economics simply do not work for smaller fleets.
- Shippers seem unwilling to share the costs. Many in the transportation industry believe truckers will need to add an insurance surcharge if federal limits increase, but historically, shippers have fought most types of surcharges.
- Consumers will bear the costs while plaintiffs’ attorneys reap the rewards. Shippers will ultimately need to move goods, and this will force significant cost sharing with consumers. 99.6% of trucking bodily injury claims are below the current $750,000 federal limits, so the real beneficiaries of increased limits will be the plaintiff’s bar. And consumers will ultimately pay.
The commercial truck insurance team at The Daniel & Henry Company has been advocating for the trucking industry for nearly 100 years. Contact us today to discuss how we can help you improve safety and decrease insurance costs.
Our trucking insurance professionals are here to help our clients grow safely and with insurance costs in mind. If you need help executing your plan for growth, please call us today at 1-877-406-5915 or email us at ClaytonD@danielandhenry.com