Governor Greg Abbott and the Texas Senate moved quickly to introduce laws that would help protect the trucking industry from nuclear verdicts. House Bill 19 moved swiftly through the lower chamber in April 2021. Senator Larry Taylor (R-Pearland) said that it would help make sure lawsuits against truckers and trucking companies remained fair.
It is no secret that the demand for supply chain management services has exploded. Particularly in recent years. What isn’t understood is that while trucking companies and owner-operators earn well for logistics services, there are tremendous expenses. Whether you are running one tractor and chassis, or a fleet of trucks and equipment.
The assumption that trucking companies are flush with extra cash, has led to attorneys in many states to pursue what is called a ‘nuclear verdict.’ Overly aggressive attorneys go for damages that can exceed normal injury liability by more than 10x. And because of the perceived affluence of owner-operators and carriers, sometimes these verdicts do award outrageous (and unprecedented) sums of money.
Why are there more nuclear verdicts against the trucking industry now, than ever before? And what protections does the new House Bill 19 provide for truckers and carriers? Let’s take a closer look at why this problem has emerged as one of the greatest threats to the American trucking industry right now.
What is a Nuclear Verdict?
Did you know that the average damages for a lawsuit against an owner-operator (trucker) or carrier increased 1,000% from 2010 to 2018? Imagine if the cost of operating your small or medium-sized business increased by that rate? You would be pretty alarmed too.
From 2010 to 2018, the cost of damages awarded to the plaintiff (against the trucker or carrier) increased from $2.3 million to $22.3 million? If something seems really off the scale with those numbers, you aren’t alone. Truckers and the American trucking industry have watched the value of damages awarded go up. Even while the industry nationwide has been working harder to introduce safety improvements including ELDs (electronic logging devices) and
Trucking isn’t a business where you can shift blame, or all the costs directly onto your commercial customer. As in-demand as logistics services are, there are competitive thresholds. No matter how great your services are, it comes down to dollars and cents. Businesses need to cut costs to be competitive. And trucking companies need to keep their rates competitive, in order to get the work.
The Trifecta of Supply Chain Threats to the American Trucking Industry
Remember when the only thing we had to worry about, was the trade squabble between the United States and China? A minor inconvenience for many Americans (and a nightmare for drop shippers and e-commerce FOB Amazon sellers) the trade war also hit the trucking industry hard.
When the containers stopped arriving at the normal TEUs that we were used to, revenues when down for trucking companies and owner-operators. And warehouses, railway drayage providers as well as cross-docking services were impacted. That was the first wave.
The second wave of course, was COVID-19. Because China was hit first as the place of origin for the pandemic virus, manufacturing slowed down to a halt. It was particularly bad for China because the virus began to spread exponentially during and after the Chinese New Year. A time of celebration and traveling home to see family. The migration of so many Chinese families during the New Year celebration inadvertently helped the virus spread.
Weakened by two anomalous and disruptive threats, and then recovering freight volumes combined with increased accident rates? The trucking industry was the perfect target for the last attack; from law firms specializing in trucking accident claims. Specifically, precedent-setting awards in the tens of millions.
Are Nuclear Verdicts to Blame for Increasing Trucking Company Bankruptcies?
One of the unfortunate side-effects of the rise in nuclear verdicts is trucking bankruptcies. To cope with the rising cost of insurance, some trucking companies scaled back on their fleet or individual vehicle insurance. It’s a strategy that works only if you don’t get into an accident.
Cutting back on insurance coverage put trucking companies at greater risk of financial ruin if they were to be involved in a nuclear verdict. Insurance companies do not pay the full amount. Sometimes insurers will cover only 50%. In a $20 million dollar verdict; could be enough to put a trucking company out of business for good.
Have Accident Rates Gone Up for Collisions Involving Trucks?
We know that trucks can ‘look like the bad guy’ when you line up a big rig beside a small non-commercial vehicle. It’s human nature to assume that in a collision, the ‘big guy’ is the one to blame. Or that somehow truckers are taking risks and bypassing safety requirements.
Statistics are funny things because sometimes they paint an incomplete picture about what is really going on. The National Safety Council reported that there were over 5,000 heavy trucks involved in fatal crashes in 2019. That year, it marked a 43% increase from 2010.
And the number of injuries caused by truck crashes also increased by 7% that same year, or 160,000 incidents of injury. The majority of the injuries were sustained by occupants of the non-commercial vehicle. But trucker fatalities also increased at an alarming rate.
Increasing Freight Volume Demand and Driver Shortages Puts Pressure on Trucking Industry
The statistics coincided with the rapid adoption of new safety regulations and technology. The trucking industry migrated to mandatory use of electronic logging devices (ELDs) and new strict HOS (hours of service) regulations. Drivers are now required to log mandatory rest breaks (to combat impaired driving from fatigue). And they are prohibited from clocking more hours than legally permitted under HOS regulations.
Increased freight volumes coincided with an explosion in e-commerce in 2019, where there was a 15.1% jump in online sales and goods shipping. In 2020, due in a large part to the pandemic, tripled to an increase of 44.0%. Goods arrive through the port, containers and pallets are loaded and unloaded for domestic freight. It represented the highest annual growth of eCommerce in the United States in over twenty years.
What Protections Are Provided for Texas Truckers in House Bill 19?
Texas has the nation’s largest and highest volume port. Right here in Houston. And the annual value of import and export management through Port of Houston is just over $260 billion per year. Or the trucking and drayage industry accounts for 35.3% of all of Texas’ international trade!
Carriers are provided new protections under the new legislature. But contrary to criticism about House Bill 19, it does not give the trucking industry immunity from suits where liability is evident. In other words, if a carrier or owner-operator is negligent, and it can be proven, they could still receive a high sum judgment in court.
All that the new legislation does, is put the burden of proof on the prosecution. Which is exactly where it should be anyhow. In Texas, it will not be the trucker’s job to prove they were not at fault. The burden goes to the plaintiff’s legal team to prove negligence. Which is how it is supposed to be.
The new HB19 legislation was supported by the Texans for Lawsuit Reform and the Keep Texas Trucking Coalition (KTTC), the Independent Insurance Agents of Texas, the American Property Casualty Insurance Association, and the Insurance Council of Texas.
House Bill 19 will take effect on September 1, 2021. And the protections for the Texas trucking industry were implemented in a noticeably brief period of time. The original legislation was only filed on February 1, 2021. HB 19 was signed by Gov. Abbott on June 16, 2021.