Are Truckers Underinsured?

July 24, 2013

When you pay your monthly insurance premiums, many truckers would say the answer to that question is "NO!" But at least seven members of congress don't agree. And there are some in the trucking industry that would agree that truck insurance rates are too low.

A bill introduced in Congress on July 19 would increase the current $750,000 minimum insurance rate for motor carriers by almost 500% to more than $4.4 million.

The sponsor of the bill, Rep. Matt Cartwright of Pennsylvania, says the increase is necessary because the current minimum of $750,000 hasn't been raised in more than 30 years.

In present dollars, he says, adjusted for the increase in the cost of medical care, it takes more than $4.4 million to provide for the equivalent of the $750,000 in the original law that was established in 1980.

"This is a matter of public safety. Tragically, more than 100,000 people have been killed in commercial vehicle collisions since 1980," said Cartwright. "This legislation is essential to protecting our nation's highways and ensuring that victims receive the proper amount of compensation for their losses."

The current minimum of $750,000 fails to perform the basic functions that Congress intended: to promote safe operations by holding insurers responsible for inspecting trucking operations prior to underwriting policies and to protect the public, according to Cartwright.

The congressman cites a recent study conducted by the Trucking Alliance that he says shows that 42% of the dollar settlements paid by trucking companies between 2005 and 2011 for motor vehicle accidents exceeded the minimum insurance requirement.

The study was conducted by the Alliance for Driver Safety and Security, Inc. (or the Trucking Alliance), a Washington, D.C. coalition of trucking companies. Member companies of the Trucking Alliance voluntarily tracked 8,692 accident settlements between 2005 and 2011.

The names of participating companies were deleted to ensure confidentiality before the data was submitted for analysis by Bickerstaff, Whatley, Ryan & Burkhalter, Inc., an actuarial consulting firm.

"The uninsured exposure is significant because a large percentage of the motor carrier population maintains insurance at or near the $750,000 minimum," said Lane Kidd, president of the Arkansas Trucking Association who also serves as senior manager of The Trucking Alliance. "This uninsured exposure means that trucking companies must pay out the additional dollars from within the business or in the worst case, file bankruptcy to avoid paying," said Kidd. "These statistics clearly show that the current minimum insurance level creates too much exposure for the trucking industry and injured motorists."

John Lannen, executive director of the Truck Safety Coalition, commended the Trucking Alliance member companies for initiating the study. Lannen stated that "the Trucking Alliance analysis clearly demonstrates that the current minimum of $750,000 per occurrence for a motor carrier fails to perform the basic functions that Congress intended: to promote safety operations and to protect the motoring public."

Lannen added that the current minimum insurance requirements are "allowing under-capitalized and under-insured motor carriers to offload the crash risk and costs onto the families impacted and taxpayers in general."

Kidd said the problem is highlighted when looking at the accident settlements on a 'per occurrence' basis. "At first glance, only one percent of the dollar settlements exceeded $750,000 but to determine true risk, it is the per occurrence average that made all the difference," said Kidd.

The data shows that if all the trucking companies in the study had maintained the minimum $750,000 insurance requirement, 42% of their monetary exposure from these settlements would have exceeded their insurance coverage. Conversely, 42% of the injury claims could have had no avenue for offsetting medical costs.

Additionally, the study showed that of the settlements that exceeded $750,000 of insurance, the uninsured liability exposure ranged from 37.5% at the $1 million insurance level down to 17.7% at $4 million of insurance coverage.

Not all trucking organizations concur with the study's findings, however. "It's pretty much just garbage," Todd Spencer, executive vice president of the Owner-Operator Independent Drivers Association told, pointing out only a small number of carriers participated in the survey and the Bickerstaff firm that conducted the survey said that the analysis is informal and not a statement of actuarial opinion.

However, still others agree that truckers are underinsured: "Outdated trucking insurance limits shift the burden of crash costs to injured motorists, taxpayers, medical insurance carriers, and Medicare. This legislation is long overdue," said Mary Alice McLarty, president of the American Association for Justice.

In addition to increasing the required insurance minimum for motor carriers from $750,000 to $4,422,000 the bill would also tie the future insurance minimum requirement to the cost of medical care inflation.

"This legislation protects the American public as well as trucking companies by ensuring sufficient coverage is available to cover the total costs of commercial vehicle accidents," Cartwright said.

The bill, called the Safe and Fair Environment on Highways Achieved through Underwriting Levels Act (H.R. 2730) or "A Safe Haul," has six co-sponsors Rep. Bruce Braley of Iowa, Rep. Chaka Fattah of Pennsylvania, Rep. John Lewis of Georgia, Rep. Grace Napolitano of California, Rep. Bobby Scott of Virginia and Rep. Albio Sires of New Jersey and has been referred to the House Committee on Transportation and Infrastructure where it is awaiting action.

The Federal Motor Carrier Safety Administration is working on its own analysis of the insurance standard, as required by the highway law Congress passed last year.

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