A battle is shaping up between insurers, truckers and plaintiff's lawyers over a dog that has been sleeping for a long while—minimum insurance requirements for cargo trucks.
The insurance minimum for cargo trucks has remained at $750,000 since 1980, when the industry was deregulated. The Federal Motor Carrier Safety Administration (FMCSA) has unilateral authority under the 1980 law to raise the standard.
While trial lawyers and large truckers are putting pressure on the FMSCA to raise the minimum, the insurance industry contends the marketplace should set the rates.
Insurers raising the minimum requirements would increase rates and force insurers to reallocate scarce capacity to this product.
"The free market does a very good job of determining the appropriate level of insurance and the appropriate rates, and does that regardless of the financial responsibility requirements that the government sets," says David Golden, senior director of commercial lines for the Property Casualty Insurers Association of America.
He says a vast majority of "zone-rated vehicles" have limits of at least $1 million, if not more.
The sleeping dog was awakened through a provision in a 2012 transportation law that the FMCSA conduct a study examining minimum insurance requirements for motor carriers, and report back to Congress.
Duane DeBruyne, FMCSA spokesman, says the final report is expected to be made publicly available later this year.
Meanwhile, lawyers and trucking trade groups are urging the FMCSA to act as soon as possible.
The current minimum insurance standard "allows companies and drivers to take risks that jeopardize public safety," said American Association for Justice president Mary Alice McLarty.
An AAJ study, "Truck Safety Alert: Rising Danger from Trucks and How to Stop It," details safety hazards in the trucking industry, including a compensation program that promotes fatigued driving and ignores safety risks, and inadequate insurance limits that shift the cost burden to taxpayers, medical insurance carriers, and Medicare.
The report contends that, artificially low insurance limits prevent unsafe trucking carriers from ever being held responsible for the full amount of damage they cause. A fatal truck crash costs approximately $4.3 million in direct costs, yet the insurance minimum for cargo trucks has remained at $750,000 since 1980.
"While [minimum insurance requirements] were set to protect the public and improve safety within the trucking industry, they have allowed irresponsible companies to operate by creating an environment of negligence and unfair competition," says a white paper drafted by the Trucking Alliance.
"In order for the minimum insurance requirements to perform as they were originally intended by Congress, the Secretary of Transportation should increase the levels to amounts that provide appropriate compensation to large truck crash victims and effectively function as a mechanism that incentivizes safe operations through underwriting," continues the Trucking Alliance.
Golden says he has seen reference the minimum should be doubled.
"This is something the marketplace should determine," he said. "Insurance capacity is finite There is only so much capacity out there."
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