Motorists driving to work, school, and to handle the daily errands expect to travel on roads and highways that are safe and free from unnecessary risks and hazards. For the vast majority of commuters and trips, this expectation can hold true. However, even a single reckless driver or unsafe vehicle can significantly increase the likelihood of a severe or catastrophic truck accident. Sometimes this driver can be a fatigued commercial driver who cannot react appropriately to roadway hazards. In other instances improperly secured cargo may shift while the vehicle is in motion leading to a severe crash. In any case, the large size of commercial trucks makes a severe injury or potential wrongful death more likely.
When an individual suffers a severe injury through no fault of their own – injuries like broken bones, a traumatic brain injury, burns, or a neck or back injury – they expect that their medical costs and other losses will be covered and compensated by the responsible party. Many times the immense medical costs and years of financial consequences can only be successfully borne by an adequate insurance policy. Unfortunately, the currently defined statutory minimums may no longer provide adequate coverage in the event of a catastrophic commercial motor vehicle accident. Furthermore, the minimums also fail to provide an adequate incentive to spur commercial trucking companies to adopt and deploy optional safety measures that could further improve highway safety.
When Were Levels For Financial Responsibility Initially Set? What Are The Current Levels?
The first considerations of minimum levels of financial responsibility for the motor carrier were set forth by the Motor Carrier Act of 1935. The law read, “no certificate or permit shall be issued to a motor carrier or remain in force unless such carrier complies with such reasonable rules and regulations as the [Interstate Commerce] Commission shall prescribe governing security for the protection of the public.” The 1935 regulatory regime received a major update in the 1980s where the substance of the law and levels of minimum coverage were updated. Both the Motor Carrier Act of 1980 and the Bus Regulatory Reform Act of 1982 were implemented in 1985. And despite clear statement of Congressional intent indicating that the insurance minimums should be updated regularly to reflect increased medical costs and inflation, the insurance minimums have not been updated once. They remain at the 1985 levels at which they were originally established.
What are the Current Levels Of Minimum Financial Responsibility For Freight Carriers?
The current minimum level of required insurance for the transport of property only is $750,000. When certain hazardous materials are being transported, the minimum insurance level is $5 million. The carrying of other hazardous materials requires $1 million in coverage. Different insurance standards apply for passenger carrying motor vehicles. For vehicles that can carry 16 or more passengers a minimum insurance level of $5 million applies. However for vehicles carrying 15 or fewer passengers the minimum level of insurance is only $1.5 million. Brokers and freight forwarders must adhere to a $75,000 minimum level of insurance.
How Much Can a Serious Commercial Trucking Crash Cost?
While the numbers cited in the previous paragraph seem to be rather large sums of money, understanding the current costs of a catastrophic commercial trucking accident can provide the context in which to interpret these numbers. Consider, for example, that the Brain Injury Association of America estimates that the average cost for hospital-based rehabilitation for a traumatic brain injury (TBI) is approximately $8,000 a day. Seeking further treatment and physical therapy is not uncommon following a moderate to severe brain injury and this treatment can cost up to $1000 per day. The Pacific Institute for Research and Evaluation calculated that an accident producing 1 death or severe injury can create a lifetime medical liability of $6 to $9 million. When lost wages, reduced quality of life, and other costs of the injury are considered the cost of the accident is even greater. Furthermore, A US Department of Transportation study found the Value of Statistical Life (VSL) — the victim’s expected earnings not accounting for any medical expenses – to be $9.1 million.
Further exacerbating the problem is that the above numbers consider only accidents involving 2 vehicles and a single injury. Multi-vehicle crashes and crashes that produce numerous injuries in a single vehicle will lead to even more significant damages. Furthermore, the insurance coverage must be split among multiple parties.
Current Insurance Minimums No Longer Cover The Costs Of Catastrophic Crashes
Inflation and increased medical costs have caused the real value of minimum levels of insurance coverage to fall since their establishment in the 1980s. Both the rate of the medical consumer price index (CPI) and the rate of the core consumer price index have outpaced the flat levels of required minimum insurance coverage. Medical CPI has increased at an average rate of 4.9% while core CIP has increased at a rate of 2.8 percent over the past 30 years. If minimum insurance levels had remained consistent with inflation, coverage levels would be much higher today. For instance, if the $750,000 general freight insurance had been pegged to core CPI, today’s minimum limit would be approximately $1.7 million. If the coverage had been linked to medical CPI, the minimum insurance coverage level would be approximately $3.2 million – more than 4 times the current level of coverage.
Other Industry Studies Agree that Limits are Too Low
Other industry studies agree that minimum insurance coverage levels have eroded to levels that are insufficient to cover catastrophic accidents or encourage the widespread adoption of proven safety measures. In one study members of the Trucking Alliance tracked nearly 9,000 accidents between 2005 and 2011. From this data, Trucking Alliance determined that having only minimum coverage levels would have been insufficient in 42% of accidents. Stated differently, 42% of commercial trucking accident victims would have no recourse for the full cost of their catastrophic injuries.
Increase Trucking Insurance Minimums To Adequately Cover Motorist Injuries
The current levels of minimum insurance coverage were established nearly 30 years ago. Since their establishment in 1985, their real value has been eroded by inflation including significantly increased medical costs. In many ways the current coverage levels no longer permit the insurance regime to accomplish its stated goals of providing coverage to injured individuals while providing incentives for trucking companies to improve the safety of their operations. Trucking insurance minimums have not increased in nearly 30 years. Had minimums increased with inflation, as Congress intended, today’s levels of coverage would be significantly greater. In general, if the core CPI was used coverage levels would be close to double today’s. if medical CPI was used, coverage levels would more than quadruple the minimums set in 1985.
While the FMCSA has determined that current levels are inadequate, it is still only studying appropriate levels. In the meantime, more and more hardworking Americans are being catastrophically injured in commercial trucking accidents. At least some of these individuals are likely to find themselves unable to cover the medical expenses created by their serious injuries. However swift action by the FMCSA to increase minimum coverage levels can ensure that more injured Americans have the possibility of holding the companies responsible for their injuries fully liable.