Trucking industry

Published on: September 16, 2008

Trucking accidents and insurance – longer term implications of the current credit crisis

As a truck accident trial lawyer, I’m neither an economist nor an investment guru. However, I have ridden through a few economic cycles during my career.

Earlier I wrote about some of the short term implications of the current Wall Street debacles on trucking and insurance. I expect to see more corner cutting on trucking safety as companies deal with high fuel costs, more truckers failing to renew insurance policies above the minimum required by law, more small trucking companies failing, more consolidation in the trucking industry, and more insurance companies blaming trial lawyers and claimants for premium increases that really result from their investment losses.

As a result, we will probably see more bad truck accidents, more liability claims, more lawsuits, and as insurers try to avoid paying claims that they should settle, more substantial jury verdicts.

Some marginal insurers and self-insured trucking companies may go under, leaving claimants without recourse, as happened in the notorious Builders Transport bankruptcy a number in the early nineties. We lawyers who handle trucking cases will need to evaluate solvency of insurers more closely, as well as liability and damages, in screening cases.

That’s the short term — the next 3 to 5 years. But what will be the long-term effect over the next 8 to 10 years?

Consolidation of the trucking industry may result in more systematic safety management. While there are exceptions, larger trucking companies are able to have more professional management, screen their drivers, and supervise their fleets more competently with trained safety and risk managers, better technology, and satellite communications systems to monitor and manage drivers. That’s not to say they are angels. They also have greater capacity for sophisticated mischief. Smaller trucking companies often lack sophisticated management, are more likely to hire marginal drivers, and are more prone to purchase minimum limits of insurance from shadier than average insurance companies.

Insurance coverage amounts may go up. Larger trucking companies have more to lose, and therefore typically carry more insurance than smaller trucking companies. Maybe it’s mere wishful thinking, but perhaps there could even be an increase in the required minimum amounts of coverage to keep up with inflation and a tightening of criteria for self-insurance in the trucking industry.

Consolidation of inter-modal freight companies, combining rail and truck transport of containerized freight, will expand. They may maintain the appearance of separate entities to shield against liability.

There will be increased use of tandem trailers. Longer and heavier tractor-trailer combinations will almost certainly have adverse effects on highway safety.

The shortage of qualified truck drivers as Boomers reach retirement age will lead to hiring of more immigrant truck drivers and further relaxing of English language competency requirements. That has negative safety implications. Also look for revival of the proposal to open the US to Mexican trucking companies.

The defense of trucking accident cases will become even tougher. All large trucking companies deploy “rapid response teams” immediately after serious accidents, often arriving before the debris is cleared. Their skill in securing favorable evidence and “losing” bad evidence is amazing. With consolidation of the industry, I expect their ability to control evidence while victims are still in the emergency room will become even more pronounced.
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Published on: September 16, 2008

Impact of the Wall Street crisis on trucking and insurance

By Ken Shigley

As a truck accident trial lawyer in Atlanta, I’m puzzling over how the falling dominoes in the current crisis on Wall Street will impact the trucking and insurance industries.

High fuel prices, hurricanes, dependence on foreign oil, the subprime mortgage mess, the economic rise of China and India, the cost of war in Iraq and Afghanistan, and deferred spending on American infrastructure combine to affect both trucking and insurance.

Oil prices have risen due in large part to the increased world demand accompanying the economic development of China and India, while we are dependent upon Arabs, Russians, etc. for our supply. On the other hand, oil prices are moderated by any economic slowdown that decreases demand.

Hurricanes, which may be increasing in intensity due to global warming, temporarily impact fuel prices as they hamper production, refinery and port capacity on the Gulf coast. Payment of hurricane losses impacts the insurance industry that has already been impacted by the financial mess.

In trucking, high fuel costs have both direct and indirect effects. The direct impact of high fuel prices on truckers is obvious. Moreover, I have heard from truckers that motor carriers collect fuel surcharges and too often fail to pass it on to independent owner operators who actually purchase the fuel. The indirect impact is on demand, as shippers shift more long-haul business from trucks to rail. Any slowdown in the economy further depresses demand for shipping.

As more shipping shifts from long-haul trucks to multimodal freight logistics systems involving both long-haul rail and short-haul trucking, we are likely to see more freight containers bolted to poorly maintained trailer chassis. We will see a shift in the technical, regulatory and insurance issues involved in trucking accidents that result. Unfortunately, some judges who have poor understanding of trucking regulations and case law will not comprehend what is going on and render simplistic judgments with devastating impacts on innocent victims. The challenge for lawyers will be to ferret out the details of business relationships in order to overcome the multiple layers of defenses.

Under economic pressure, we can expect many trucking companies to cut corners on all aspects of safety. Those companies that carry more insurance than the law requires will be tempted to bet the company that, despite compromises on safety, they won’t face catastrophic injury claims.

There is already an ongoing shakeout in the trucking industry. That will continue. I keep hearing reports of owner operators just walking away from rigs they can’t pay for any more Some of those used trucks will wind up being exported to other countries. I expect we will see a trend toward reduction of trucking industry capacity and consolidation in the trucking industry.

At the same time, the financial crisis that began with the meltdown in subprime mortgage-backed securities has reached beyond investment banking to the insurance giant AIG. Laying aside any feelings of schadenfreude (joy about another’s misfortune) due to the arrogant corporate culture of AIG under the leadership of former CEO Hank Greenberg, we have to recognize the prominent role of AIG in the insurance industry. As the implications of its downfall ripple through the insurance industry, I expect to share the pain.

While AIG is the teetering giant in the news today, we will soon find that the impact of the financial crisis is widespread in the insurance industry, affecting both the insurance companies that are familiar to the public and the reinsurers that insure the insurance companies. If reinsurers begin to fail, the shock waves will reverberate throughout the insurance industry.

The insurance industry has a long history of blaming injury victims and trial lawyers for its own investment losses. It seems that every financial crisis affecting insurers’ investments is soon followed by a new round of premium increases. Unwilling to accept responsibility for investment losses, insurers blame the little guys and campaign for a new round of “tort reform.”

Due to the financial meltdown related to securitization of subprime mortgages, we will likely see increasing insurance premiums for everyone, including truckers. Many truckers who are already struggling will be put out of business by increases in fuel and insurance costs unrelated to anything they did wrong.

As the truckers cut costs, safety management will be one of the first things cut. The end result will be that more people will be killed or injured. Lawyers like me will represent the victims. Insurance and trucking companies will fight even harder to avoid paying claims. Stubborn refusals to pay legitimate claims will result in more trials of cases they should settle, and more large jury verdicts.

In this environment more than ever, families that are devastated when trucking companies operate in an unsafe manner need to understand that the insurance companies send “rapid response” teams to scenes of serious accidents, and will try to lull them into complacency while crucial evidence is “lost” or destroyed. Time is of the essence as it is essential to take early action to preserve evidence. We are prepared to fight the good fight against trucking and companies that are determined to avoid and delay payment of legitimate claims.
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Published on: June 19, 2008

In trucking accidents, consider a claim against a freight broker or logistics company

By Ken Shigley

As a Georgia trucking attorney, I sometimes see motor carriers create a shell game in which they claim after a tragic accident happens, to have been acting as a broker or logistics company, rather than as a motor carrier. Of course, when you dig into their marketing materials, they usually represented to shipping customers they were pretty much a “one stop shop” that covered everything from pickup to delivery.

49 C.F.R. § 371.7(b) provides, “A broker shall not, directly or indirectly, represent its operations to be that of a carrier.” A broker may be treated as a carrier if it does not delineate the broker role. See, e.g., KLS Air Express, Inc. v. Cheetah Transp. LLC, 2007 WL 2428294 (E.D.Cal.,2007).
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Published on: June 19, 2008

Truck safety implications of rising fuel prices

By Ken Shigley

As a trucking accident trial lawyer representing both occupants of passenger cars and truck drivers who are badly injured in trucking collisions, I have been thinking a lot lately about the implications of rising oil prices on the trucking industry in general, and trucking safety in particular.

If truckers are in financial distress, many will be even more tempted to cut corners on hours of service, maintenance, etc., with a foreseeable effects on safety.

The same economic distress will lead some to skip or delay payments on insurance premiums and cut out coverage above the minimum required. As long as there is an MCS-90 endorsement in place, we can recover damages up to the amount of the endorsement, typically one million dollars. However, if truckers can’t maintain insurance coverage, they can’t continue to legally operate.

One possible outcome is that the demise of small truckers may lead to trucking industry consolidation. Some larger carriers really do a better job in managing safety and reducing bad incidents. But it seems that some merely do a better job of cheating, making it harder to uncover unsafe practices.
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