Nuclear Verdicts Are Disrupting SupplyChains

Nuclear Verdicts Are Disrupting SupplyChains

2020 has been the year of uncertainty, upending the logistics industry and causing many carriers to file for bankruptcy, including Celadon Group, Cold Carriers Logistics, and Sunco Trucking, to name a few. While it's easy to blame Coronavirus, it wouldn't be entirely accurate to do so. Before the stay-at-home orders and the massive disruptions to the global supply chain, fleet owners and carrier groups were already susceptible to bankruptcy; Coronavirus only accelerated the trend and caused additional stresses that put the nail in the proverbial coffin.

One major issue that plagued carrier companies long before the Coronavirus has been the issue of crash litigation. These lawsuits, awarding multi-million-dollar payouts, cripple carrier companies and make them valuable targets for personal injury lawyers. "Such 'nuclear verdicts,' a term made popular by the American Trucking Associations and some media outlets over the past year, have had a ripple effect throughout the trucking industry, forcing some carriers into bankruptcy and causing insurance rates to skyrocket. Nuclear verdicts generally refer to cases in which a jury returns a settlement of $10 million or more. That's well above the $750,000 in liability insurance required and the $1 million that most trucking companies hold, often leading to lawsuits against insurers and, sometimes, fleets liquidating assets to pay." – CCJdigital.com

The pandemic has compounded this issue. The FMCSA issued an Emergency Declaration, which provides "hours-of-service regulatory relief to commercial vehicle drivers transporting emergency relief in response to the nationwide coronavirus (COVID-19) outbreak," ultimately allowing drivers to stay on the road longer to perform their necessary duties. So, while the president and the nation see truck drivers as frontline heroes during this pandemic, insurance companies see truck drivers as a greater risk. That leads to higher premiums, which causes carriers to increase their prices or reduce the number of trucks they have on the road to reduce their costs. With layoffs and fewer trucks on the road, the supply chain breakdown only intensifies shippers' struggle to get product to the shelf. 

In addition to the upward pricing pressures due to previous nuclear verdicts and the increased risk of more of them, Shippers are trying to make up for the lost time in Q1-Q2. Demand has gone up dramatically, driving prices even higher. Working with a large, diversified transportation provider with a robust network of carriers is a reliable, cost-effective solution in this turbulent market. Daniel DuRussel, Pricing and Data Optimization Analyst at RPM, elaborates, "For shippers, Q3 and Q4 always prove to be challenging when it comes to managing the shipment of their products. Roughly, 25% of all contracted freight is being rejected, which pushes loads to a spot market setting and gives carriers control of the market. When carriers control the market, they can pick and choose when and where they want to go, leaving some shippers paying immense rates to non-major metropolitan areas. The only way shippers can help reduce costs is by giving ample lead time to the carriers to move the loads and plan ahead."

It's not clear when the fight by the American Truckers Association on these nuclear verdicts will conclude. However, if there is a silver lining, it's that shippers, carriers, and providers are all on the same side in this fight and all working together to ensure America's lifeblood to the economy keeps flowing.

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