Deadly bus crash puts spotlight on insurance minimums

Deadly bus crash puts spotlight on insurance minimums
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A horrific bus wreck in California is raising questions about the over 30-year-old insurance requirements for buses and trucks that are supposed to guarantee compensation for victims in a crash.

Federal records show that the small company involved in the collision, which left 13 people dead and 31 others injured, had the minimum liability insurance of $5 million.

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“It’s obviously not enough money,” said Peter Pantuso, president and CEO of the American Bus Association (ABA), which the California company did not belong to. “The $5 million is not going to cover one life, let alone 13 and all the injuries that go with it.”

Congress has raised the issue in the past two surface transportation bills, directing the Department of Transportation (DOT) in 2012 to evaluate the federally required bus and truck insurance minimums.

Two years later, the Federal Motor Carrier Safety Administration (FMCSA) signaled it was considering a rule to update the requirements so that they better reflect inflation and rising medical costs.

But the safety agency’s efforts apparently stalled amid fierce industry protest.

“FCMSA wanted to go directly into an increase, but due to some politics and lobbying, they are doing more of a study now,” said Lawrence Simon, an attorney and member of the American Association for Justice’s Board of Governors.

The company involved in the California crash only had one bus and was owned by the driver, who died in the accident. The tour bus slammed into the back of a tractor-trailer on a highway in the early hours on Sunday morning, on the way back from a casino.

Federal investigators plan to examine the driver’s background, the history of the vehicle and road conditions before issuing a report and offering recommendations. But officials said the 1996-model bus was not equipped with seatbelts and did not appear to brake before colliding with the big rig.

High-profile and catastrophic crashes, like the one involving a Wal-Mart truck that critically injured comedian Tracy Morgan, have intensified concerns about safety regulations, hours-of-service rules and insurance requirements for trucks and buses. 

The federal government has long required motor carriers to maintain certain levels of insurance in the event of a crash.

In the 1980s, Congress passed a series of laws that set the minimum insurance level at $5 million for buses and $750,000 for trucks. 

“When they made the limits, it was a lot of money back then,” Simon said.

But the requirements have never been updated. FMCSA estimated in a 2014 report that the $5 million minimum would be equal to about $21 million today, if adjusted for inflation and soaring medical costs.

The report also found that while catastrophic motor carrier crashes are rare, the costs for severe and critical injuries can “easily” exceed $1 million. 

“The legislative history of minimum insurance requirements for commercial motor vehicles indicates that Congress recognized that crash costs would change over time and that DOT would periodically examine the levels and make adjustments as necessary,” the agency said. “FMCSA has determined that the current financial responsibility minimums are due for re-evaluation.” 

The agency issued an advanced notice of proposed rulemaking in November 2014 but ended up shelving the proposal by moving it from the “prerule stage” to “long-term actions.”

Officials have grappled with how much to increase the minimums by and whether to do so gradually or all at once.

Opponents of changing the requirements argue that most liability claims fall below the $5 million minimum and say that raising the threshold could cripple small and independent businesses. 

Although insurance rates vary greatly by location and other circumstances, the current average annual cost of bus insurance in New York ranges from $30,000 to $40,000 per vehicle, while in D.C. it ranges from $8,000 to $12,000.

“You would lose a lot of companies in the industry that would make the decision, ‘I can’t afford to pay it’” if the minimums are raised, said Pantuso of ABA. “There are a lot of people in the industry that would suggest that it’s good business practice to have a higher level than $5 million, but they believe it should be up to the company.” 

Even though claims typically fall below the insurance minimum, supporters argue that determining risk is not about what usually occurs but about preparing for the worst-case scenario. 

They maintain that the current minimums are inadequate to protect the public, drivers or a company's assets.

“The industry is underinsured, but we have a moral responsibility to preserve the public’s trust,” said Lane Kidd, managing director of the Trucking Alliance, a group that supports raising the minimums. “It’s apparent that these victims of these accidents are not in a position to be compensated. We wouldn’t allow the airline industry to do this.” 

The FMCSA will soon have the opportunity to weigh in on the issue again.

In the most recent highway bill, Congress required the agency to submit a report analyzing whether the current minimum insurance levels for trucks are adequate by the beginning of next year.

But lawmakers may have thrown up an additional roadblock for the safety agency by requiring the FMCSA to complete an additional study before raising the minimum insurance levels for buses, as well as consider the impact on the industry, insurance marketplace and safety before changing the requirements for trucks.

“Life is priceless, but the only way that our courts are able to compensate is through money,” Simon said.