Auto Liability Limits: What's a Fair Minimum for Motor Carriers?

CHRIS TANKE
Transportation Practice Leader & Associate Vice President

The FMCSA recently started a push to increase the minimum auto liability limits as they apply to insurance for for-hire truck drivers.

The current minimum auto liability limits have been $750,000 since 1985. Depending on which measure of inflation you apply (had the insurance requirement kept up), the appropriate limit would today sit somewhere from $1.6 million to $3.2 million. Today, the reality is that even with a $750,000 minimum limit, most carriers carry a $1 million limit of auto liability.

If a trucking company has purchased high auto liability limits, this increase is probably welcome and overdue. For those carriers that have held off on purchasing higher limits, this coming increase could be a significant hike in a major expense.

What are the arguments for the increase in auto liability limits?

1.) Social responsibility

Let’s be honest — medical costs have escalated to the point where $1 million doesn’t go very far. If a serious crash happens and other parties are seriously injured or killed, $1 million may not be enough to cover the victims' expenses.

2.) Get rid of the bad guys

This increase will help weed out some of the companies that are fly-by-night operations that frequently neglect safety.

What are the arguments against the increase in auto liability limits?

1.) The reality

Only 1 percent of accidents exceed $750,000 in dollars paid.

2.) Everyone pays more

This will account for a large cost increase to trucking companies and eventually will be passed on and paid for by the consumer.

3.) Trial attorneys

Here's how trucking business leaders have viewed this issue: If I carry $1 million in limit, plaintiffs and their attorneys will sue me for $1 million. If I carry $2 million, I will get sued for $2 million for that same accident. Why carry the additional limit if all it is doing is giving trial attorneys a larger target to shoot at?

I don't know any motor carriers that are against fairly compensating victims who have been injured in an at-fault accident. What I hear from HNI clients is that they are worried trial attorneys will shoot for the moon in every accident if they carry a large limit of liability insurance.

If the main argument for the increase in minimum insurance coverage is that a higher limit will protect the motoring public, then I believe all parties in the process should participate in that public protection. That would include trial attorneys. With an attorney typically taking 33 percent of any award, that takes substantial dollars out of the injured victim’s pockets.

How about (along with an increase in minimum required insurance) a proposal that includes a rule whereby the trial attorney fees would be limited to 33 percent of the first $1 million of award regardless of total verdict? In a case where a $2 million verdict for the plaintiff was returned, it would net that victim another $333,000.

If trial attorneys are really in this thing to protect the victims of truck-related accidents, then let’s see them participate in the solution rather than giving them another large payday to shoot for. In the end, with all parties (motor carriers and trial attorneys) participating in protecting the victims of severe crashes, it will get more money into the hands of the people who need it most.

What do you think about this idea? How do you feel about increasing the minimum insurance coverage limit? Please sound off in comments.