By Joel Black, Risk Management Consultant at Lockton
The transportation industry stands at a crossroads, facing unprecedented challenges that threaten its very foundation. With litigation costs soaring, especially in jurisdictions notorious for nuclear verdicts, trucking companies are finding themselves in a precarious position.
Meanwhile, railroads, known for their safety and efficiency, represent an untapped ally in this battle against rising costs and legal exposure. Imagine if railroads and trucking companies were to join forces and transform their competitive rivalry into a powerful partnership, enhancing safety, reducing costs, and ultimately benefitting shippers and consumers alike.
Litigation Challenges in the Trucking Industry
The trucking industry has seen a surge in litigation, with nuclear verdicts—awards exceeding 10 million USD—posing an existential threat to many companies. Judicial hellholes, such as certain jurisdictions in Texas and Louisiana, are notorious for their plaintiff-friendly environments, creating an uphill battle for defence strategies. Moreover, surface transportation companies are not alone in facing scrutiny; shippers like Tyson Foods have found themselves entangled in lawsuits as co-defendants when cargo is involved in trucking accidents.
These legal challenges have led to skyrocketing insurance premiums for trucking companies. Despite significant investments in advanced safety technologies—such as connected dash cameras and collision mitigation systems—the number of fatal accidents per mile driven has increased in recent years. This troubling trend exacerbates the industry’s vulnerability to litigation, placing further strain on already pressured companies.
Railroads Reduce Transportation Risks
Railroads, with their inherently safer operations and lower accident rates compared to trucking, offer a viable solution to mitigate some of these risks. By working more closely with surface transportation companies, railroads can help reduce the exposure of shippers and carriers to high-risk scenarios while also benefiting from increased freight volumes.
Enhancing Safety Through Modal Shifts: Strategic partnerships could involve shifting certain long-haul freight to railroads, which are less prone to accidents. Trucks could then focus on the first and last-mile segments, where they excel in flexibility and responsiveness. This hybrid approach not only reduces the overall risk of accidents but also minimizes the exposure of shippers to legal liabilities.
Shared Technology and Data for Safety/Efficiency Improvements: Trucking companies have led the charge in adopting safety technologies, such as connected dash cameras and telematics. Railroads could benefit from similar systems by leveraging data sharing to improve their safety protocols. Collaborative efforts between the two industries could create a standardized safety technology framework, enhancing efficiency and reducing accidents across the board.
Cost Sharing for Insurance and Risk Mitigation: By partnering with railroads, trucking companies can reduce their risk by eliminating potential accidents that could result in nuclear judgments. This collaboration could help stabilise insurance costs within the trucking industry.
Efficiency Gains and Shipper Benefits: Shippers stand to gain significantly from better integration of rail and trucking operations. Companies like Tyson Foods, which rely heavily on surface transportation, could reduce their legal exposure and improve supply chain efficiency by routing certain freight through rail. This approach not only mitigates litigation risks but also improves delivery timelines and lowers costs by optimizing the strengths of both modes of transportation.
From Competition to Collaboration
While railroads and trucking companies may traditionally view each other as competitors, the industry’s challenges demand a paradigm shift. Both sectors share a common goal: moving freight efficiently, safely, and cost-effectively. By embracing collaboration, railroads and trucking companies can help each other succeed in a competitive and litigation-heavy environment.
The transportation industry can no longer afford to operate in silos. With litigation risks climbing, safety concerns growing, and operational costs rising, railroads and trucking companies have a unique opportunity to work together. By aligning their strengths and addressing their shared vulnerabilities, these industries will not only survive but thrive in a challenging landscape.
Now is the time for decisive action! Let’s put competition aside and forge powerful partnerships that benefit shippers, carriers, and the public at large. Together, we can create a safer, more efficient transportation network that meets the demands of today and tomorrow.
