Implications of the economic crisis for trucking and insurance
As a trucking accident trial lawyer in Atlanta, I’m watching the news and wondering what will be the implications in the trucking and insurance sectors.
High fuel prices, dependence on foreign oil, hurricanes, the subprime mortgage meltdown, the economic rise of China and India, the ongoing cost of war in Iraq and Afghanistan, and deferred spending on infrastructure combine to affect both trucking and insurance.
Prices of oil and other commodities have risen over the past few years due in large part to the increased world demand accompanying the economic development of China and India. Prices are moderated by any economic slowdown that decreases demand. However, even with such fluctuations, fuel prices remain several times greater than a decade ago.
Hurricanes, which some folks say have increased in intensity due to global warming, temporarily impact fuel prices when they hit production, refinery and port capacity in Louisiana and Texas. At the same time, payment of hurricane losses impacts an insurance industry that has already been impacted by investments turned sour.
In trucking, high fuel costs have both direct and indirect impacts. The direct impact of high fuel prices on truckers is obvious. Moreover, I keep getting anecdotal reports that motor carriers collect fuel surcharges and too often fail to pass it on to independent owner operators who actually purchase the fuel. The indirect impact is on demand, as shippers shift more long-haul business from trucks to rail. Any slowdown in the economy further depresses demand for shipping.
As more shipping shifts from long-haul trucks to multimodal freight logistics systems involving both long-haul rail and short-haul trucking, we are likely to see more freight containers bolted to poorly maintained trailer chassis. There will be a shift in the technical, regulatory and insurance issues involved in trucking accidents that result. Unfortunately, judges who have poor understanding of trucking regulations and case law will not comprehend what is going on and render simplistic judgments with devastating impacts on innocent victims.
Under economic pressure, we can expect many trucking companies to cut corners on all aspects of safety. Those companies that carry more insurance than the law requires will be tempted to bet the company that, despite compromises on safety, they won’t face catastrophic injury claims.
Another result of the economic conditions is a shakeout in the industry. I keep hearing reports of owner operators just walking away from rigs they can’t pay for any more. I expect we will see a trend toward reduction of capacity and consolidation in the trucking industry.
At the same time, the financial crisis that began with the meltdown in subprime mortgage-backed securities has reached beyond investment banking to the insurance giant AIG. Laying aside any feelings of schadenfreude (joy about another’s misfortune) due to the arrogant corporate culture of AIG under the leadership of former CEO Hank Greenberg, we have to recognize the large role of AIG in the insurance industry. As the implications of its downfall ripple through the insurance industry, I expect to share the pain.
While AIG is the teetering giant in the news today, we will soon find that the impact of the financial crisis is widespread in the insurance industry, affecting both the insurance companies that are familiar to the public and the reinsurers that loom in the background. If reinsurers begin to fail, watch out.
The insurance industry has a long history of blaming injury victims and trial lawyers for its own investment losses. Every time there is a financial crisis in which investments turned sour affect the insurance industry, it is soon followed by a new round of premium increases coupled with demands for "tort reform" as insurers blame injury victims and trial lawyers for their problems. But more often than not, the crisis is to due investment losses rather than underwriting losses.
Due to the financial meltdown, we are likely to see increasing insurance premiums for everyone, including truckers. For truckers who are already struggling, some may be put out of business by inability to purchase coverage at any price.
Some of the implications for public safety on the highways are obvious, as trucking companies struggle to make profits under these economic conditions, too many will cut corners on safety.
The end result will be that more people will be killed or injured. Lawyers like me will represent the victims. Insurance and trucking companies will fight even harder to avoid paying claims. Stubborn refusals to pay legitimate claims will result in more trials of cases they should settle, and more large jury verdicts.
So much for the macroeconomics. On the microeconomics side, families that are devastated when trucking companies operate in an unsafe manner need to understand that the insurance companies send "rapid response" teams to scenes of serious accidents, and will try to lull them into complacency while crucial evicence is "lost" or destroyed. Time is of the essence as it is essential to take early action to preserve evidence. We are prepared to fight the good fight against trucking and companies that are determined to avoid and delay payment of legitimate claims.
Ken Shigley served as chair of the Southeastern Motor Carrier Litigation Institute, co-sponsored by the Georgia, Alabama, Tennessee and North Carolina Trial Lawyers Associations. He is on the National Advisory Board for the Association of Interstate Trucking Lawyers of America, and is actively involved in the Interstate Trucking Litigation Group of the American Association for Justice. He has won multi-million dollar jury verdicts in trucking cases and lectures on trucking and insurance topics at national continuing legal education programs. A Certified Civil Trial Advocate of the National Board of Trial Advocacy, he is also a Master of the Lamar Inn of Court at Emory Law School, a faculty member for ten years at the Emory University Law School Trial Techniques Program, and was recently elected Secretary of the 39,000 member State Bar of Georgia.