A “nuclear verdict” is generally and most simplistically defined as a jury award in excess of $10 million. These types of verdicts are most often associated with trucking cases and are typically a combination award of punitive and compensatory damages. It is no secret nuclear verdicts have been on the rise, coast to coast. This trend, particularly when combined with the recent soft market, has resulted in an average insurance premium renewal rate increase of approximately 20 percent or more. The increased premium is not the only change to insurance for motor carriers. According to research, umbrella and excess options are shifting. For instance, the industry has historically seen multiple excess options with large levels of coverage. Now, there are fewer excess insurers or reinsurers (for captives) willing to accept excess risks. Where a carrier could once obtain, say, $50 million in coverage, only $25 million may available. Likewise, it may be more difficult to find excess coverage to attach to lower levels of primary coverage – the next layer may not attach to anything less than $5 million, where historically it may have attached at $1-2 million. Excess and umbrella coverages are more expensive, meaning the cost in premiums to obtain $10 million of coverage now may be what it once was to secure double that amount of coverage in years past. Additionally, where a motor carrier may have once had one or two layers of excess or umbrella coverage above their primary layer, the current trend is now multiple layers. How much coverage is enough? There is no magic answer, other than to ask another question – how much risk can the company afford to take? The Federal Motor Carrier Safety Regulations only require $750,000 minimum levels of financial responsibility for for-hire, interstate or foreign commerce carriers with a gross vehicle weight rating of 10,001 or more pounds. This amount increases depending on the commodity transported. States typically echo the federal rules. Virginia similarly requires a minimum of $750,000. Va. Code Ann. §46.2-2143.1. A company must weigh how much it can afford to pay in premiums with how much risk it can manage by comparing the amount of coverage with the possibility of a big-time verdict. Factors to consider may include five years’ worth of loss experience and loss-run data, revenues, fleet size, and industry benchmarks. It is also important to consider a company’s safety and hiring practices. One way to mitigate risks is by controlling those factors that are controllable, such as maintaining a quality and consistent safety program and hiring quality drivers. How is this done? Primarily by abiding by federal regulations and being mindful that frequency in claims breeds severity. More specifically, develop a good process to screen quality hires, such as reviewing PSP data, obtaining employment verifications, utilizing the Clearinghouse, conducting a through road test, and having a strong training and orientation program. Many insurance companies have sample hiring guidelines carriers can request for insight to assist with this process. JJ Keller and the FMCSA website additionally have good resources to help. Another impact of the shifting insurance structure is the multiple layers of excess or umbrella coverage. Currently, claims coming under this structure are not yet meeting their statutes of limitation and are not yet hitting their stride in the litigation forum. It will be interesting to see how this new structure affects the legal defense industry and impacts the decision to settle versus try cases. At the moment, generally, if a claim or lawsuit has the propensity to be valued at or above a certain level of insurance, the other levels of insurance must be notified and have the opportunity (subject to the terms of the particular policy) to get involved in the defense of the claim, as well as any settlement or trial. Often the upper levels of coverage hire defense counsel to at least monitor what is happening in the case development. In some states, the lower levels of insurance can settle and be indemnified by the upper levels, who can try the case if they decide not to be involved in the settlement. Sometimes, a global settlement is effected, requiring all layers to get on board. Most states have a version of the Unfair Claims Settlement Practices Act which requires a carrier to resolve a case within policy limits if a demand has been made within those limits and there is a possibility of an excess verdict. It will be interesting to see how these aspects of insurance law will shake out where many more insurance players will be present. For questions or comments regarding motor carrier coverage or defense questions, please contact Amy Tracy (atracy@setlifflaw.com) at 804-377-1264 or Steve Setliff (ssetliff@setlifflaw.com) at 804-377-1261.