Commercial fleet insurance rates have ramped up at alarming rates in recent years, forcing many carriers to scramble to keep up with double-digit annual increases. A major factor driving up company fleet insurance is the growth in both the number and the size of so-called “nuclear verdicts” – litigation awards that are $1 million or higher per case, according to a major study recently released by the American Transportation Research Institute (ATRI).
Nuclear verdicts have grown both in number and in size over the past 15 years, according to the analysis, which examined 451 cases with verdicts larger than $1 million listed in the ATRI Litigation Database.
The number of nuclear verdicts more than tripled from 79 between 2005 and 2011, to 265 between 2012 and 2019.
More startlingly, the average size of these verdicts has increased dramatically from $2.3 million on average per verdict in 2010 to $22.3 million in 2018 – an increase of 967 percent, or nearly tenfold. (U.S. dollar Inflation, by comparison, was 15.2% in the same timeframe,)
The largest initial verdict ever recorded reached $281.6 million, awarded in 2012 when the drive shaft of a commercial truck broke off and hit the windshield of a passenger car.
How nuclear verdicts affect fleet insurance premiums
The effect on fleet insurance policies has been severe, with annual premium rate increases of 20 percent to 40 percent becoming increasingly commonplace. ATRI’s study surveyed stakeholders, including fleet owners and insurance analysts, on the effect of nuclear verdicts on insurance costs
“While all fleets now pay more, premiums definitively scale based on safety records,” the study found “One respondent specified that ‘low risk’ motor carriers are experiencing eight to 10 percent increases in [annual] insurance costs, while new ventures and average-to-marginal carriers are experiencing a 35 percent to 40 percent annual increase – a trend that has occurred for three consecutive years.”
Insurance experts say fleet operators have the ability to influence their rates. In an interview with FleetOwner magazine, Chris Mikolay, vice president of national accounts at National Interstate Insurance, said underwriters examine such things as mileage, on-board safety technologies, and driver profiles, as well as the fleet’s track record and safety culture in setting rates.
Technology can help fleets improve safety and avoid nuclear verdicts
“Technology is … expected to have an even bigger impact moving forward,” according to the FleetOwner article. “Trucking companies properly leveraging telematics data and those who have implemented driver cameras and other safety technologies will have an upper hand when it comes to avoiding losses and adjudicating claims.”
Many fleets have turned to video telematics and dot compliance technologies to help build their safety programs, reduce collisions, improve their CSA scores, and adhere to other dot regulations. These technologies often involve machine vision and artificial intelligence capabilities that can detect risky driving behavior, such as distracted and drowsy driving or following too closely, and prompt the driver to be safe.