‘Piggy banks with 18 wheels’: The explosion in trucking nuclear verdicts

September 26, 2024

‘Piggy banks with 18 wheels’: The explosion in trucking nuclear verdicts

(Source: FreightWavesTV)

On a recent episode of Loaded and Rolling, Matt Leffler, the Armchair Attorney, spoke about the explosion in nuclear verdicts impacting trucking. A nuclear verdict in trucking is one that awards over $10 million in damages. For the trucking industry, one problem is that the minimum amount of insurance required is $750,000, but an accident involving a tractor trailer resulting in death, maiming or dismemberment can vastly exceed that. One example is a jury slamming Schneider National with a $47 million verdict in a fatal crash.

When deciding whether to settle out of court or risk a nuclear verdict, game theory comes into play: Pay now and settle, or take it to trial and risk paying more. Leffler added that when a company decides to appeal following a nuclear verdict, more details of the incident become public and the verdict can have impacts across the country. Additionally, the added costs of protracted litigation can be avoided through a settlement involving a monetary amount backed by a nondisclosure agreement.

One example is Brown Trucking, which rejected an initial offer of $2 million to settle. The case, stemming from an accident, went to trial, and a Georgia court instead handed down a verdict of $16 million. In the case of Werner, whose appeal of a $100 million verdict is now being heard by the Texas Supreme Court, Leffler believes the carrier has no choice but to fight.

If a carrier doesn’t have enough insurance or assets to collect, plaintiff firms are going upstream and targeting the truck and trailer makers in an attempt to collect damages. This was a recurring theme that Leffler noted: The end game is to collect as much damages as possible. For OEM Daimler, this resulted in a $160 million verdict when a driver was left quadriplegic following a rollover in 2023 in a Western Star Truck. If the tractor maker can’t be sued, another strategy is to target the trailer maker. Wabash, for example, was hit with a $462 million verdict. This was from a fatal crash in 2019 when a car crashed into the rear of a trailer manufactured in 2004, and neither the driver nor the passenger was wearing a seat belt.

For the trucking industry, focusing on the impacts of nuclear verdicts may be hiding an uncomfortable truth – that fleets with razor-thin margins may be cutting corners on the basics like maintenance, creating more risk.

Leffler recalled a conversation with an administrator for the Federal Motor Carrier Safety Administration a few months back. Leffler noted, “21.6% of all commercial vehicles on average will not satisfy a DOT inspection. They will fail, so we have vehicles that are not maintained properly, underinsured, and we twist our hands saying, ‘Oh, these plaintiff attorneys are just destroying us.’”

CVSA International Roadcheck results

(Source: CVSA)

The Commercial Vehicle Safety Alliance recently released the results of this year’s International Roadcheck, which took place May 14-16. During that time, 48,761 inspections were conducted by commercial vehicle enforcement personnel in Canada, Mexico and the U.S., with 77% of commercial vehicles and 95.2% of commercial motor vehicle drivers having no out-of-service (OOS) violations.

The downside was inspectors found 13,567 vehicle, 2,714 driver and 163 hazardous materials/dangerous goods OOS violations, resulting in 9,345 CMV combinations and 2,290 drivers being placed OOS. Looking at this number as a percentage, the overall vehicle OOS rate was 23% while the driver OOS rate was 4.8%. If a driver or vehicle is placed out of service, that means an inspector found critical inspection item violations as outlined in the CVSA North American Standard Out-of-Service Criteria.

In the United States, braking systems and tires were three of the top five reasons for a vehicle being placed OOS. The first was defective service brakes at 26.5% total OOS, followed by tires at 22.1% and other brake violations at 16.4%. For drivers in the U.S., the two largest OOS violations included violation of hours of service at 32.3% total being placed OOS, followed by no CDL at 25.9%.

Regarding FMCSA’s Drug & Alcohol Clearinghouse, the release notes: “The driver emphasis area this year was on alcohol and controlled-substance possession. Inspectors issued 78 drug and 26 alcohol possession/use out-of-service violations throughout North America during International Roadcheck.”

One finding from this year’s Roadcheck is that more drivers stayed home compared to last year. FreightWaves’ John Kingston writes, “The CVSA has reported that during the three days of Roadcheck, May 14-16, it made 48,761 inspections across the U.S., Canada and Mexico. Last year, the total was 59,429 vehicles, also in a three-day period. That is a decline of almost 18%.”

FreightWaves SONAR spotlight: Spot rates find more opportunities to disappoint

(Source: FreightWaves SONAR)

Summary: In the past week, nationwide dry van spot market rates reached levels not observed since May amid an unabated decline in spot rates since the July Fourth holiday. The first days of fall may herald a change in foliage, but the glut of excess truckload capacity remains unchanged in the spot market space. The FreightWaves National Truckload Index 7-Day average fell 4 cents per mile all-in w/w from $2.24 on Sept. 16 to $2.20 per mile. The last time spot rates were at $2.20 per mile all-in was May 10. Year to date, the NTI is down 23 cents per mile following signs of a favorable fourth quarter and winter weather. Compared to this time last year, spot rates are 7 cents per mile lower from $2.27 on Sept. 24.

The dry van contract space saw improving signs from outbound tender rejection rate volatility but remains firmly rooted below 5%. VOTRI rose 15 bps w/w from 4.57% to 4.72%. Van contract rates appear to fare better, following stairstep declines through July before climbing slightly through August and into the first week of September. The initial reported average base rate per mile for dry van contract rates (VCRPM1) follows a 14-day lag, with Sept. 10’s most recent reading of $2.32 per mile an improvement over $2.25 per mile, which was the low-water mark for 2024.

Positive developments in the contract space do not signal at this time an imminent and sustained upswing in the freight market cycle. One development to watch will be the impacts of hurricane landfalls to determine whether the spot market has elasticity or if excess capacity from small fleets and owner-operators continues to create downward pressure on spot rates.