Increasing Insurance Minimums
Why are insurance minimums a safety feature?
Higher insurance minimums provide truck companies critical financial incentive to promote overall safety.
The most recent federally mandated insurance limit was set in 1980, at $750,000 for commercial motor vehicles. Adjusted for medical inflation in 2019, this number should be $2.4 million, but has never been updated. 1 The original insurance limit legislation expected insurance companies to have financial incentive to provide safety features, and to screen truck company carriers and drivers. However, because the insurance limits have remained low, this incentive doesn’t exist. When at-fault trucking companies have insufficient insurance, taxpayers end up footing the bill for catastrophically injured victims.
Who benefits from increased insurance minimums?
Everybody on the Road
When people are injured or killed in a truck crash, the current insurance minimums are insufficient to pay for medical bills, home health care, wage replacement and many other needs. In 2014, the Federal Motor Carrier Safety Administration (FMCSA) released a report to Congress that examined the adequacy of the current financial responsibility requirements for motor carriers. 2 The conclusion was clear: today, the costs of injuries and fatalities arising from crashes far exceeds the minimum insurance levels interstate operators are required to carry.
The cost of serious injury are often in the form of the cost of medical care, which in the case of a catastrophic injury is shifted from the negligent wrongdoer to the taxpayer funded programs such as Medicare or Social Security Disability. Worse yet, when there is insufficient compensation, families, including truck drivers, are forced to declare bankruptcy or rely on government programs after being financially drained.
How Insurance Minimums Affect Owner-Operators
Increased insurance minimums protect true owner-operators. An owner-operator is someone who simply owns a tractor only. An Owner-Operator cannot hold himself or herself out as a for-hire motor carrier without motor carrier authority. It is the larger motor carrier that must provide the insurance when the leased-on owner-operator is hauling freight in either the motor carrier’s own trailers or a customer’s trailer. The Owner-Operator then benefits when he or she is leased-on to a motor carrier that has more than the minimum insurance. Not only is he or she protected, but his or her equipment is protected under the blanket of a larger insurance policy.
Increased insurance minimums protect small truck carriers, which are vulnerable to civil liability verdicts that exceed insurance minimums. These carriers include “Mom and Pop” type operations without deep pockets or significant assets. They typically do not have the ability to pay for catastrophic claims in the event that one of their drivers causes an underride crash, catastrophic injury, or fatality that exceeds minimum insurance. Increasing insurance minimums will further protect them from financial ruin.
1 Determined using the Department of Labor, Bureau of Labor Statistics “CPI Inflation Calculator” at https://data.bls.gov/cgi-bin/cpicalc.pl
2 “Examining the Appropriateness of the Current Financial Responsibility and Security Requirements for Motor
Carriers, Brokers, and Freight Forwarders – Report to Congress.” Federal Motor Carrier Safety Administration. April 2014. https://www.fmcsa.dot.gov/mission/policy/report-congress-examining-appropriateness-current-financial-responsibility-and