Mark Solomon joined DC VELOCITY as senior editor in August 2008, and was promoted to his current position on January 1, 2015. He has spent more than 30 years in the transportation, logistics and supply chain management fields as a journalist and public relations professional. From 1989 to 1994, he worked in Washington as a reporter for the Journal of Commerce, covering the aviation and trucking industries, the Department of Transportation, Congress and the U.S. Supreme Court. Prior to that, he worked for Traffic World for seven years in a similar role. From 1994 to 2008, Mr. Solomon ran Media-Based Solutions, a public relations firm based in Atlanta. He graduated in 1978 with a B.A. in journalism from The American University in Washington, D.C.
Truckers and the companies that insure them have grown accustomed to increasingly adverse jury awards stemming from truck-related accidents. They are also well aware of the bulls-eye painted on their backs by the plaintiffs' bar. But even the most jaundiced legal eye couldn't have foreseen the bombshell dropped by a Harris County, Texas jury on May 17.
Jurors hit Werner Enterprises, Inc., a large truckload carrier and logistics provider, with an $89 million judgment for a fatal accident on Dec. 30, 2014, near Odessa, Texas, more than 500 miles from Houston, the core of Harris County. According to court records, a pick-up truck carrying a family and travelling on eastbound Interstate 20 lost control and spun across a grassy median onto the westbound side, where it collided with the oncoming Werner rig. A 7-year-old boy died and his 12-year-old sister suffered catastrophic brain injuries. A third child and the mother—who was not driving—were also hurt. The tractor-trailer driver, who was a student driver at the time, espaced injury. An instructor in the cab and the driver of the pick-up also avoided injuries.
According to Werner, the tractor-trailer had no chance to avoid the pick-up once it careened on to westbound I-20. Its driver was operating below the posted speed limit, did not lose control of the rig, and brought it to a complete stop after impact, Werner said. The driver did not receive a citation, nor did the investigating officers find the driver culpable, werner said.
Attorneys for the family saw it differently. They maintained the driver and instructor knew the weather conditions along that stretch of I-20 were bad and getting worse, and that they should have either slowed the rig to a crawl or pulled off the road. Instead, the driver's speed was clocked at 50.5 mph at the time of impact, well above what it should have been under such adverse conditions.
Werner executives, who were stunned by the verdict and the amount of the judgment, said in a government filing that its maximum out-of-pocket liability would be $10 million if the verdict and award are upheld. Its insurance providers would pick up the balance. The Omaha-based company said it would appeal the verdict, adding an ominous warning that "if an accident like this is the fault of the driver who was hit by the out of control vehicle, think about what that means for every motorist on the roads."
Insurance companies have also been thinking, and several have thought better of staying in a business where "nuclear" verdicts in the many millions of dollars have wreaked havoc with their claims-loss ratios. Insurers, on average, paid $111 in claims during 2017 for each $100 in premiums, an unsustainable loss ratio of 111, according to Fitch Ratings, a ratings agency. "Commercial auto insurance remains a chronic problem for underwriters despite numerous rounds of rate increases and underwriting actions," said James Auden, managing director at Fitch, in a May report. "Loss severity trends, rising litigation costs, shortages of experienced drivers, and continued reserve weakness may limit the potential for underwriting improvement in the near term." Ironically, the report was published the same day as the Werner verdict.
In 2015, Zurich and AIG unit Lexington, both key players in different segments of truck insurance, effectively exited those markets. Last November, Westfield Insurance, another big motor carrier underwriter, departed. Many who remain have changed their underwriting strategies. More insurers are raising their minimum driver insurability ages to 25 in response to the claims, according to Matthew Little, senior vice president at McGriff, Seibels and Williams, an insurance and risk management concern in Atlanta. Owner-operators, especially those new to the industry, are having challenges finding coverages they can afford.
Under federal law, every licensed motor carrier must carry at least $750,000 of coverage. The coverage requirement can be as high as $5 million for vehicles with more than a 10,001-pound gross vehicle weight (the combination of tractor, trailer and cargo) and hauling certain types of commodities. Many large fleets carry so-called excess insurance that can pay off as much as $30 million for an incident. Those coverages are often bought in $5 million increments, or "layers" in industry parlance.
The exit of Zurich, which was strong in the so-called "primary limit" market of the first $5 million of coverage, did not cause a major disruption because other carriers stepped in to write policies, said Todd Reiser, vice president of Lockton Companies Inc., a Kansas City, Mo.-based broker who helps underwrite coverage for large fleets. By contrast, Lexington's departure created a huge void in the excess market because it wrote the bulk of those policies, according to Reiser. Lexington's absence, combined with the excess market's huge exposure to "nuclear verdicts,"has substantially forced up premiums at that end, he said. "That has all calmed down to some degree, but the bad industry experience continues," Reiser said in an e-mail.
In general, coverage today is abundant and available, albeit with higher premiums and deductibles. Truckers try to mitigate the premiums increases by buying "corridor" policies where they absorb a higher deductible in the event of a pay-out.
In addition, underwriters have become savvy at understanding the role information technology plays in improving a carrier's safety and risk profiles, Reiser said. For example, a carrier sits in good stead with an underwriter if it can show that 90 percent of its fleet is equipped with technology that helps reduce accident risk by 78 percent, he said.
Collision-avoidance technology offers the biggest I.T. bang for the buck because it helps reduce the risk of rear-end incidents which compose most of the larger claims, Reiser said. Cameras are a valuable feature, but the cost of equipment, installation, and operation may be off-putting to some fleets, he said.
For fleets, understanding and, if necessary, improving their grades under the federal government's "CSA" carrier-benchmarking program is critical, experts say. Like the CSA process or not—and many fleets do not—underwriters use them as a key criterion to determine if they will offer coverage and on what terms.
Premiums are one of the ingredients baked into freight rates, which given today's sellers' market for freight, has made it easier for fleets to pass on. However, being a cyclical business, trucking demand will at some future point turn down. At that time, said Richard Malchow, an editor for consultancy and media firm J.J. Keller & Associates, Inc., "carriers will very much be affected by the high insurance premiums and deductibles." The leading carriers are reinvesting their increased revenues into their safety programs, which includes training resources, safety evaluations, and technology encompassing in-cab and back-office features to mitigate risk and control current and future insurance expense, Malchow said in an e-mail.
For some insurance companies, what was once a popular and profitable line of business is becoming an unsustainable one. But they can exit the line if they choose. Motor carriers that must have coverage aren't so lucky. For them, the pain of higher premiums and deductibles is a clear and present scenario.
The number of container ships waiting outside U.S. East and Gulf Coast ports has swelled from just three vessels on Sunday to 54 on Thursday as a dockworker strike has swiftly halted bustling container traffic at some of the nation’s business facilities, according to analysis by Everstream Analytics.
As of Thursday morning, the two ports with the biggest traffic jams are Savannah (15 ships) and New York (14), followed by single-digit numbers at Mobile, Charleston, Houston, Philadelphia, Norfolk, Baltimore, and Miami, Everstream said.
The impact of that clogged flow of goods will depend on how long the strike lasts, analysts with Moody’s said. The firm’s Moody’s Analytics division estimates the strike will cause a daily hit to the U.S. economy of at least $500 million in the coming days. But that impact will jump to $2 billion per day if the strike persists for several weeks.
The immediate cost of the strike can be seen in rising surcharges and rerouting delays, which can be absorbed by most enterprise-scale companies but hit small and medium-sized businesses particularly hard, a report from Container xChange says.
“The timing of this strike is especially challenging as we are in our traditional peak season. While many pulled forward shipments earlier this year to mitigate risks, stockpiled inventories will only cushion businesses for so long. If the strike continues for an extended period, we could see significant strain on container availability and shipping schedules,” Christian Roeloffs, cofounder and CEO of Container xChange, said in a release.
“For small and medium-sized container traders, this could result in skyrocketing logistics costs and delays, making it harder to secure containers. The longer the disruption lasts, the more difficult it will be for these businesses to keep pace with market demands,” Roeloffs said.
The British logistics robot vendor Dexory this week said it has raised $80 million in venture funding to support an expansion of its artificial intelligence (AI) powered features, grow its global team, and accelerate the deployment of its autonomous robots.
A “significant focus” continues to be on expanding across the U.S. market, where Dexory is live with customers in seven states and last month opened a U.S. headquarters in Nashville. The Series B will also enhance development and production facilities at its UK headquarters, the firm said.
The “series B” funding round was led by DTCP, with participation from Latitude Ventures, Wave-X and Bootstrap Europe, along with existing investors Atomico, Lakestar, Capnamic, and several angels from the logistics industry. With the close of the round, Dexory has now raised $120 million over the past three years.
Dexory says its product, DexoryView, provides real-time visibility across warehouses of any size through its autonomous mobile robots and AI. The rolling bots use sensor and image data and continuous data collection to perform rapid warehouse scans and create digital twins of warehouse spaces, allowing for optimized performance and future scenario simulations.
Originally announced in September, the move will allow Deutsche Bahn to “fully focus on restructuring the rail infrastructure in Germany and providing climate-friendly passenger and freight transport operations in Germany and Europe,” Werner Gatzer, Chairman of the DB Supervisory Board, said in a release.
For its purchase price, DSV gains an organization with around 72,700 employees at over 1,850 locations. The new owner says it plans to investment around one billion euros in coming years to promote additional growth in German operations. Together, DSV and Schenker will have a combined workforce of approximately 147,000 employees in more than 90 countries, earning pro forma revenue of approximately $43.3 billion (based on 2023 numbers), DSV said.
After removing that unit, Deutsche Bahn retains its core business called the “Systemverbund Bahn,” which includes passenger transport activities in Germany, rail freight activities, operational service units, and railroad infrastructure companies. The DB Group, headquartered in Berlin, employs around 340,000 people.
“We have set clear goals to structurally modernize Deutsche Bahn in the areas of infrastructure, operations and profitability and focus on the core business. The proceeds from the sale will significantly reduce DB’s debt and thus make an important contribution to the financial stability of the DB Group. At the same time, DB Schenker will gain a strong strategic owner in DSV,” Deutsche Bahn CEO Richard Lutz said in a release.
Transportation industry veteran Anne Reinke will become president & CEO of trade group the Intermodal Association of North America (IANA) at the end of the year, stepping into the position from her previous post leading third party logistics (3PL) trade group the Transportation Intermediaries Association (TIA), both organizations said today.
Meanwhile, TIA today announced that insider Christopher Burroughs would fill Reinke’s shoes as president & CEO. Burroughs has been with TIA for 13 years, most recently as its vice president of Government Affairs for the past six years, during which time he oversaw all legislative and regulatory efforts before Congress and the federal agencies.
Before her four years leading TIA, Reinke spent two years as Deputy Assistant Secretary with the U.S. Department of Transportation and 16 years with CSX Corporation.
As the hours tick down toward a “seemingly imminent” strike by East Coast and Gulf Coast dockworkers, experts are warning that the impacts of that move would mushroom well-beyond the actual strike locations, causing prevalent shipping delays, container ship congestion, port congestion on West coast ports, and stranded freight.
However, a strike now seems “nearly unavoidable,” as no bargaining sessions are scheduled prior to the September 30 contract expiration between the International Longshoremen’s Association (ILA) and the U.S. Maritime Alliance (USMX) in their negotiations over wages and automation, according to the transportation law firm Scopelitis, Garvin, Light, Hanson & Feary.
The facilities affected would include some 45,000 port workers at 36 locations, including high-volume U.S. ports from Boston, New York / New Jersey, and Norfolk, to Savannah and Charleston, and down to New Orleans and Houston. With such widespread geography, a strike would likely lead to congestion from diverted traffic, as well as knock-on effects include the potential risk of increased freight rates and costly charges such as demurrage, detention, per diem, and dwell time fees on containers that may be slowed due to the congestion, according to an analysis by another transportation and logistics sector law firm, Benesch.
The weight of those combined blows means that many companies are already planning ways to minimize damage and recover quickly from the event. According to Scopelitis’ advice, mitigation measures could include: preparing for congestion on West coast ports, taking advantage of intermodal ground transportation where possible, looking for alternatives including air transport when necessary for urgent delivery, delaying shipping from East and Gulf coast ports until after the strike, and budgeting for increased freight and container fees.
Additional advice on softening the blow of a potential coastwide strike came from John Donigian, senior director of supply chain strategy at Moody’s. In a statement, he named six supply chain strategies for companies to consider: expedite certain shipments, reallocate existing inventory strategically, lock in alternative capacity with trucking and rail providers , communicate transparently with stakeholders to set realistic expectations for delivery timelines, shift sourcing to regional suppliers if possible, and utilize drop shipping to maintain sales.