Managing the Impact of Increasing Volatility in Automobile Liability Claims | woodruff sawyer

  1. What does the latest big case data tell us about trends in commercial auto liability claims over $15 million in total costs?
  2. What should risk managers consider when designing their insurance programs?

To find the answers to these questions, Woodruff Sawyer’s business intelligence team analyzed approximately 48,000 auto liability claims and observed a few concerning developments.

Large annual auto claims on the rise

A useful way to analyze data on liability cases is to organize claims by disposition year, the year in which cases are resolved either by settlement with plaintiffs or by a court verdict. The decision year takes into account both the time it takes for plaintiffs to sue and the time it takes for cases to be litigated and settled.

Since 2008, there has been a clear upward trend in the number of resolutions of large automobile claims. Companies allegedly at fault for auto accidents solved 18 major auto cases in 2021, up from just two in 2008. Breaking that down into four-year periods, we see an even more definitive increase in the frequency of major auto fault cases. . During each four-year window, the number of significant automobile cases increased significantly, from 16 in 2008-2011 to 52 in 2012-2015, and then to 71 in 2016-2019.

The number of resolved cases soared in 2019, before dropping in 2020 to 5 when courts were generally closed due to the COVID-19 pandemic. A key question is whether 2019 was an aberration or represents the “new normal environment” for auto liability litigation.

What does the trend look like when sorting by accident year?

Examining major loss trends by accident year – the year in which the accident that led to the litigation occurred – is also useful in understanding the trend in the number of accidents themselves. However, recent periods of accident year analysis are immature and will appear underestimated due to the delay in the filing of lawsuits by claimants and the processing of cases by the courts.

Table of the number of important cases in automobile civil liability by year of accident

At first glance, the long-term trend appears benign. The same number of major automobile accidents occurred in 2008 as in 2017, and the number of cases in 2018 and 2019 decreased significantly. However, it is essential to remember that it is almost certain that a significant number of significant automotive cases have occurred in the last years of the period (2017-2019) and have not yet resulted in prosecutions. legal cases resolved in or out of court.

As claimants and companies resolve these cases, which are currently missing from Advisen’s data, the number of large claims for immature years will increase in line with decision year trends.

Average case size is volatile

In terms of the average size of large automobile accident settlements, it is difficult to discern a clear trend. While the annual averages jumped in 2020 and 2021, those years were skewed by massive outlier claims.

What is clear from the analysis is a huge increase in the variability of large loss severity, indicating that motor vehicle liability risk continues to become more unpredictable.

Average Settlement Amount of Large Automobile Liability Cases by Year of Disposition

The Top 10 Big Cases of the Past Decade Solved Over $100 Million

Of the top 10 major cases since 2011, seven cases were filed and settled in 2015 or years later. Only four of these cases involved for-hire trucking operations. Three of the remaining six cases involved owned or leased vehicle fleets. Common allegations in cases involving truck fleets were:

  • Negligence in vehicle maintenance
  • Distracted or careless driving
  • Lack of driver training

As expected, all 10 cases involved bodily injury: six resulting in death and four resulting in serious injury. All cases have considered the more complex financial implications of the injuries on the lives of the injured or loved ones of the deceased and have been resolved north of $100 million.

Managing a Challenging Automotive Liability Outlook Through Strategic Insurance Program Design

The difficult litigation trend for large automotive cases requires careful planning of Umbrella and Excess Liability renewals. The first step in approaching the excess accident market is to perform a thorough analysis of the gaps in risk controls intended to minimize the potential for significant automobile losses.

To improve their risk profiles and ensure compliance with Department of Transportation (DOT) regulations, companies should consider conducting a simulated DOT audit and gap analysis by location by working with a third-party vendor, their auto liability carrier, or even a state trucking association. . But even companies without DOT-level fleets can provide proof to their auto liability insurer that they are limiting their auto liability exposure.

In addition to these tips, we recommend companies renew their focus on driver safety and accident prevention strategies.

Safety should be a top management priority. Companies must develop, maintain and document a safety and training process that includes ongoing coaching in the use of new technology in vehicles.

Reducing distracted driving is an essential preventive measure. A survey by UFG Insurance found that 72% of commercial drivers admit to being distracted while driving and 47% say they have texted while driving. The Federal Motor Carrier Safety Administration reports that the risk of a vehicle crash or near-miss (such as unintentional lane change) is 23 times greater for commercial drivers who text while driving.

Fatigue that can lead to falling asleep at the wheel is also a growing threat to driver safety. Companies must put in place strict rules regarding cell phone use, enforce breaks and limit night driving. Better communication about these rules will demonstrate management’s commitment to the safety of its drivers.