The American Transportation Research Institute (ATRI) released comprehensive research that confirms that large verdicts against trucking fleets are increasing dramatically, both in number and in size of awards. ATRI’s research is partially based on a newly created trucking litigation database that provides detailed information on 600 cases between 2006 and 2019. In the first five years of the data, there were 26 cases over $1 million, and in the last five years of the data, there were nearly 300 cases.
The average verdict among all 451 observations across the 15 years covered by the ALD was $3,162,571. However, the average size of the verdict from 2010 to 2018 increased from $2,305,736 to $22,288,000 – an increase of a mind-boggling 967%. This large increase is indicative of a rise in the size of verdicts from 2005 to 2019. Furthermore, the increasing average verdict award, as compared to average medical costs and inflation, indicates that the non-economic damages associated with a lawsuit are increasing. More large verdicts are being filed, and the disparities between cases is increasing, with damage ceilings now reaching well above $90 million.
So, what are some factors for this? The two main ones are crash and litigation. Crash factors include important aspects of the crash, such as injuries sustained, number of cars involved in the crash, type of collision, the number of deaths involved, and the age of victims. Litigation factors include the presence of expert witnesses.
Table 2. Percent of Cases that Yielded a Plaintiff Verdict by the Issues Brought Against the Defendant in Court
While running through a thorough quantitative analysis ATRI determined:
- The size of the verdicts has increased over time by a relatively large amount, regardless of the factors of the crash.
- Traumatic Brain Injuries increase the size of the verdict when controlling for other factors.
- The time between the crash date and the verdict date increases the size of the verdict.
- The number of children either injured or killed in a crash is the single largest factor in verdict size, with a $27 million increase on average.
- The presence of a defense expert witness decreases the size of verdicts considerably.
Most people are familiar with the term “ambulance chaser”, these are attorneys who aggressively seek out crashes to increase their client base, caseloads, and financial gain. This combined with the amount of litigation advertising that now takes place in certain states is part of unfavorable practices that are increasing the number of lawsuits. However, a new type of business model is seen as a factor in the jump in the nuclear verdict. That is litigation investors/financers. This business model for upfront financing of certain legal cases with the goal of recovering a profitable percentage of a future verdict award or settlement. A litigation financing investor will cover some or all of litigation research expenses, lawyers’ fees, medical bills, among other expenses. New York is considered to be one of the most attractive states to invest in litigation.
What impact do nuclear verdicts have on safety? Certainly, carrier scrutiny of existing safety policies and programs has increased. Whether additional resources available to carriers has commensurately increased is unclear. Though, to offset this increased risk and fearing nuclear verdicts, motor carriers have generally increased their focus on safety and hiring practices. This goes hand in hand with the fact that insurance companies are more selective in who they insure. As a result, motor carriers have fewer options for purchasing full coverage to protect their balance sheets. Consequently, fleets continue to accrue increased risk (e.g. higher deductibles, less coverage) to mitigate costs.
It must be noted that these increased costs do trickle down to the consumer. With increased costs, companies have two options, either passing along coasts, or squeezing their operating margins. The latter strategy can generate unintended consequences in that a lack of capital and liquidity can negatively impact driver retention and safety. Hence, why costs are generally passed along.
Relative to a decade ago, jury awards are large, and cases are increasing. Other general findings include:
- The average dollar amount of awards in the ALD was $3.16 million, with a large standard deviation of $7.19 million.
- The average size of verdicts increased by 483 percent from 2017 to 2018.
- From 2010 on, the size of verdicts has far exceeded both standard inflations as well as healthcare cost increases. From 2010 to 2018, mean verdict awards increased 51.7 percent per year, in contrast to inflation and healthcare costs, which on average grew 1.7 and 2.9 percent per year, respectively.
- Corroborated with the time-trend regression, as time length between crash date and verdict date increased by one percent, the size of the verdict increased by approximately $3 million. With a mean value of 1,319 days between crash and verdict, an increase in 13 days in the length of time resulted in an award increase of $3 million, controlling for other factors.
ATRI completed an extremely well-researched document analyzing why the litigation landscape has changed, recommendations for modifying pre-trial preparations, litigation strategies, and mediation approaches, and how large verdict awards impact both safety and insurance. We barely scratched the surface of summarizing it and highly recommend all trucking companies as well as industry service providers take the time to fully read it.