Profit margins for trucking companies vary, but they aren’t low; estimates range from 2.5% to 8%. Capacity fluctuates rapidly in the trucking industry, which can cause actual margins to fluctuate, making working capital and cash flow very difficult to manage. Add to this the many and constantly changing local, state, and federal regulations, and you can see that truck fleets face a myriad of challenges.
One of the biggest challenges is the increasing cost of facing lawsuits that could result in adverse judgments against the company. At a recent NationaLease conference, Steve Bryan, CEO and co-founder of Bluewire, explained this particular issue: Bluewire is an online AI platform that uses complex datasets to assess the critical risks of hundreds of thousands of regulated motor carriers. Its goal is to help carriers understand gaps and vulnerabilities that could lead to huge settlements when an accident occurs.
Bryan spoke about the increasing severity of these verdicts, noting that there was an average 967% increase in jury verdicts between 2010 and 2018. During this period, the average verdict amount increased from $2.3 million in 2010 to a staggering $22.29 million in 2018. By 2023, that $22 million-plus has risen to an average of $27 million, with no signs of slowing down.
reference: Gaskins: How can claims costs be managed when faced with a nuclear verdict?
It doesn’t seem to matter who is at fault
One of the most frustrating issues is attribution of causation. In other words, according to a 2021 report from the American Trucking Associations, about 80% of accidents involving commercial trucks and passenger cars can be attributed to passenger vehicle driver error, not truck driver error. Regardless of whose fault it was, juries have noted that in accidents that result in death or injury, it is usually the driver and passengers in the vehicle who suffer the most… even if it was their fault. So juries make the “big guys” pay the price.
Understanding this, and knowing that litigation lawyers know this, it is important to ensure vehicle safety and safe driving habits for drivers to reduce the number of potential accidents. Brian told conference attendees that there are certain vulnerabilities that plaintiff lawyers have successfully exploited in litigation. He noted that braking issues, tires and lighting account for the highest number of violations, something that is well known from years of International Roadcheck events. These violations are then exploited by lawyers when taking their case to a jury. It is important for fleet management companies to be aware of these potential vulnerabilities and stay on top of them.
The higher the judgment, the higher the premiums.
It’s also true that as claims increase, so do fleet insurance costs: A FleetOwner article from last year noted that “in the past decade, per-mile insurance costs for commercial motor carriers have increased by nearly 50 percent.” This only adds to the challenges for the industry, even as freight rates fall and operating costs increase.
Accidents will continue to happen, but as trucks and roads become safer, they are expected to decrease. To remain safe and compliant, trucking companies need to be more vigilant than ever. Brian urged trucking companies to keep strict records of the maintenance of all vehicles to protect their business.
