Trucking Leads Growth in Nuclear Verdicts
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The trucking industry has seen a spike in nuclear verdict judgments across the economy.
“We are seeing a reopening of the courts post-COVID, and it’s resulting in a lot of activity from the plaintiffs’ bar coming after the transportation industry,” said Todd Reiser, senior vice president at insurance brokerage provider Lockton Cos. “The plaintiffs’ bar is a well-funded, well-organized, aggressive force out there right now. They’re absolutely coming after transportation, and coming after what they view as a deep pocket.”
Marathon Strategies found in a report April 4 that judgments in excess of $10 million against corporations are on the rise, going from $4.9 billion in 2020 to $18.3 billion in 2022. Trucking found itself at the top of the list with the total sum awarded by juries increasing from $10.3 million in 2020 to $65.4 million in 2022. That came after a slight slowdown with courts closing in response to the pandemic. Even then, the total spiked to $1.82 billion in 2021.
“It’s hard to say what drives a particular industry,” Marathon Strategies CEO Phil Singer said. “When it comes to trucking, for example, you’ve got situations where the individual driver is not necessarily the one who is accountable for paying the damages. It can be a corporation.
“And certainly, despite various safety initiatives … that the industry has put into place, whether it be time limits for drivers and whatnot, it’s still just by its definition going to be more prone to accidents given just the nature of driving.”
Singer believes the increase generally is being driven by corporate mistrust among younger adults who serve on juries, a lack of tort reform in many states and an increase in negative media directed toward corporations. He also pointed out that in some cases the massive payouts may be deserved, for instance when a company did something particularly egregious.
“The other factors are some of the trial tactics that are being used,” Singer said. “So, there’s something called the reptile theory, where the plaintiff’s lawyers focus on emotional triggers to make their cases to juries as opposed to doing a very black-and-white analysis of the specific laws in question. There’s another tactic called anchoring, where they initially throw out a huge number so that it becomes anchored in the juror’s mind.”
Reiser believes that the big verdicts and settlements involving transportation companies are a consequence of the aggressive plaintiffs’ bar. He noted, too, that this has the potential for a widespread impact as the resulting increase in transportation costs could be passed down the supply chain.
“It’s certainly having an impact on especially the larger motor carriers, who are viewed as having those deep pockets and having a lot of financial resources and a lot of insurance,” Reiser said. “I do think that there was a lull during COVID, when the courts were closed, and we’ve seen that wall certainly evaporate.”
Reiser noted that the increase in these verdicts has prompted some insurers to significantly limit their participation in transportation and in some cases pulling out of the market. But he also pointed out that industry groups and other stakeholders have helped lead a charge toward tort reform on the state level.
“The shippers that are contracting with these transportation companies have just decided to make contractual liability really onerous on the transportation providers,” said Lisa Paul, chief strategy officer for transportation at insurance brokerage Hub International. “So not only is it the nuclear verdict, but it’s the expansion of contractual liability.”
Paul noted these shipper agreements often set jurisdictions around states that haven’t enacted reforms that protect carriers. This is because lawsuits have been more aggressive in pursuing as many potential parties as possible as the approach has shifted from vicarious liability to negligent contracting.
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“I think right now the balance is more in favor of the shipper than the transportation company,” Paul said. “As [lawsuits] continue to increase, we’re continuing to see increasing demand by shippers to raise the limit for which the transportation provider would be responsible for contractually, and it continues to be an issue.”
Paul added transportation companies don’t feel like they can refuse those obligations and send the contract back with a more favorable state jurisdiction. Florida, for instance, passed a law that provides sweeping reforms to its legal framework with the aim of curtailing frivolous lawsuits against trucking.
“The shippers are just trying to push all of that liability down to the transportation provider,” Paul said. “That squeezes the transportation company in between the nuclear verdict and then ultimately defending the shipper even beyond their public liability limit imposed upon them by the [Federal Motor Carrier Safety Administration]. So that’s where the squeeze comes in.”
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