Author: Stephen Glazier
Employers with light fleets, non-owned fleets and fleets regulated by the Department of Transportation (DOT) all have commercial auto liability exposure. With the increase in large verdicts in recent years, companies may find it more difficult to secure fleet insurance. A robust arsenal of fleet safety controls can help companies secure insurance coverage and fight large verdicts.
Here are three questions we often hear from our clients about fleet liability, along with some common controls to mitigate fleet exposure.
Only trucking companies get hit with large verdicts, right?
It's no secret that the trucking industry has been hit with more large verdicts for several years but increasing liability verdict sizes and a rise in vehicle repair costs aren't isolated to trucking. While a large truck can certainly do more damage than a passenger car, and there are more laws related to their operation, large verdicts also occur in light fleets.
In 2012, a $21 million verdict was awarded in Texas which was an unusually high amount at the time. The case involved a company employee driving a passenger car while taking a business call via a Bluetooth device. This case didn't involve a large truck, and the employee on the phone was not breaking any laws. The plaintiff's attorneys attacked the company's policy on cell phone use as being ambiguous, and this drove the plaintiffs' arguments. The jury found that cell phone use, even via a hands-free device, was a known risk that the company allowed.
This case illustrates that a lack of controls, or what could be perceived as weak controls around any number of safety elements, can be attacked during court proceedings. It's also harmful to a defendant's case outcome to have policies that aren't followed or enforced, or if it's known that the company had or should have had information about the unsafe driving habits of employees but had not acted on that information. In other words, if an employer doesn't know about an employee's driving problems, but should, or if it does know and doesn't act, both can be used against the company after an accident occurs.
Why do I see so many trucking companies hit with large verdicts in the news?
What we know about large verdicts in DOT-regulated fleets is that the more rules the employer breaks or allows its drivers to break, the higher the verdict can go. The fact that these trucks can, by virtue of mass and momentum, cause so much damage and that many of the safety practices expected of trucking companies are actual laws, just makes it easier to pursue larger verdicts.
In the now-famous Florida billion-dollar verdict, both drivers were out of compliance with DOT regulations. DOT law violations as part of this verdict included noncompliance with hours of service (hours spent driving or on duty), distracted driving of an unknown type, distracted driving secondary to cell phone use during driving, failure to have a commercial driver's license (CDL), lack of DOT-mandated hiring practices and inability to read English.
While one verdict doesn't make a trend, the American Transportation Research Institute (ATRI) stated the following based on 600 case verdicts studied from the years 2006 to 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."
In the same article, ATRI stated: "In response to arguments that nuclear verdicts reflect real-world cost increases, the research documents that from 2010 to 2018, the size of verdict awards grew 51.7% annually at the same time that standard inflation grew 1.7% and healthcare costs grew 2.9%."
Whether your fleet is light or heavy, you could easily find yourself fighting a large verdict and trying to publicly defend the safety measures you did or did not have in place or were or were not enforced at the time of an accident.
What if we don't own the vehicle? Doesn't that protect us?
In recent years, many employers have moved toward non-owned fleets and have allowed their employees to drive their own or rented vehicles for business. In some cases, these employers also decided to pull back safety policies and processes, thinking they had sufficiently transferred liability risk. While it's true that in certain circumstances, you may be able to use the driver's insurance as primary coverage, this isn't as substantial a protection as some may think. Unless you also require a higher than legally required minimum coverage and ensure drivers don't have a business use exclusion on their personal policy, that layer of protection may feel small, or in the case of an exclusion or lapsed insurance, nonexistent, when a large claim occurs.
Given a $10 million verdict or more, a $50,000 to $100,000 personal policy limit may be of little comfort. In reviewing programs for clients taking this tack, I have noticed a tendency to do away with what might be considered even basic safety measures, such as:
- Annual motor vehicle record (MVR) pulls or monitoring
- An objective and enforced minimum MVR pass criteria
- A strong electronic device policy
- Requiring some level of defensive driving training
The absence of such prevention methods can compound a company's risk and even cause carriers to avoid writing its commercial auto insurance. An employer's expected level of diligence regarding who is driving for business is no different whether it owns a vehicle or just compensates the employee for driving their own vehicle.
For employers with light, non-owned business vehicle fleets, the best thing they can do is maintain a safety program as if they owned the vehicles.
Common controls to mitigate fleet exposure
In the current atmosphere, certain controls can apply to all kinds of fleets. Another way of thinking about controls is defense mechanisms and prevention tools.
Controls for a DOT fleet tend to be mandatory, and if not followed, can quickly and easily lead to large verdicts, the inability to conduct business due to the possible loss of a DOT number and government fines. Controls for light fleets, whether owned or non-owned, are expected and linked to liability — but they are largely voluntary. This can create a false sense of security.
The following is a list of controls an insurer, jury, or a carrier loss control person might expect to see in place for light fleets, even if the vehicles are owned by the employees who drive them.
Below are some basic light fleet controls to consider:
- Annual MVR checks or ongoing monitoring services
- An objective pass-fail criterion to compare MVR results
- A clear and enforced electronic device use policy. It pays to put time and research into this policy to ensure you are truly protecting yourself. Remember the public doesn't always regard hands-free as risk-free.
- A clear list of rules that must be followed, including items such as seat belt use, following the posted speed limit, not conducting business travel with others in the car unless they are part of the business being conducted, never driving while impaired or fatigued, etc.
- Periodic defensive driving training and reminders
