New Jersey has enacted new liability insurance minimums for heavy commercial trucks (those over 26,001 lbs.). This has doubled the liability requirement from $750,000 to $1.5 million. The new law became effective July 1, 2024.
Most states follow the Federal Motor Carrier Safety Administration’s (FMCSA’s) liability minimum for interstate carriers. The FMCSA has required minimum coverage of $750,000 since 1985. However, there has been pressure to raise liability limits in recent years. As bodily injury and property damage costs from accidents have soared, plaintiff attorneys have targeted the trucking industry for expensive lawsuits.
It remains to be seen whether other states will follow New Jersey’s lead and raise their minimum requirements. At the federal level, U.S. Rep. Jesus “Chuy” Garcia, D-IL, introduced a bill, H.R. 6884, in the U.S. House in December 2023 to increase the minimum to $5 million for interstate motor carriers. It is currently pending.
The Impact on Truckers of liability insurance
If you own a heavy commercial truck or fleet of trucks and operate in New Jersey, you could be affected by the new law. Ask your insurance agent or broker to review your coverage and adjust your liability limits if necessary. According to the New Jersey Motor Truck Association, many fleet owners in the state already carry an average of $2 million in liability coverage. However, owner-operators and small fleet owners will most likely need to purchase additional coverage.
The new law allows truckers to meet the higher liability requirement through a commercial automobile, fleet, umbrella or excess liability insurance policy, a similar type of policy, or a combination of policies. It affects both new and renewal coverage.
Because some commercial auto policies aren’t rated to go as high as $1.5 million, you may need to buy umbrella or excess insurance coverage to reach the higher limit.
What’s not clear is whether the new law covers out-of-state carriers who operate in New Jersey. The law applies to owners and registered owners of trucks registered or principally garaged in the state. Some interstate truck operators have license plates issued in New Jersey under what’s called the International Registration Plan. Trucking organizations are awaiting clarification from the New Jersey Insurance Department as to the new law’s scope.
While states can impose their own insurance requirements, the FMCSA issues the permits that trucking businesses need to operate. Without proof of liability coverage and cargo insurance for household goods, the FMCSA won’t authorize a freight truck owner to operate. Cargo insurance covers property in transit. An liability insurance professional can help you secure this coverage if you need it.
You should also ask about:
- Property insurance for any buildings or terminals you rent or own
- Workers’ compensation insurance if you have employees
- Business income insurance to replace lost revenue from a disaster or fire
- Cyber insurance to cover losses from data breaches and cyberattacks
Small Operators Are Affected the Most
Needless to say, the new law will impact smaller operators the hardest. Doubling liability coverage will lead to premium hikes at a time when truckers are already reeling from higher fuel, operating, and financing costs. In addition, freight rates have fallen over the past several years, leaving truckers with lower-paying loads that may not cover all their expenses.
Trucking groups have opposed any increase in the FMCSA liability minimum, whether at the federal or state level. They argue that the current minimum of $750,000 is sufficient to cover the costs of all but a small percentage of accidents. They say the plaintiff bar is the primary force driving proposed increases to achieve ever-higher verdicts and settlements.
The FMCSA has considered increases in its financial responsibility requirements over the years. But in a 2022 report to Congress, it concluded that an increase couldn’t be justified since it didn’t have access to the comprehensive claims data it needed to make a determination.
The industry says increasing minimum liability levels will cause premiums to rise for all truckers. Tracy Denora, executive director of the New Jersey Warehouse and Movers Association, told Transport Topic News in February 2024 that her state’s new law will cost truckers $20,000 to $40,000 or more annually.
One fear is that these additional costs will drive even more small owners from the industry, which is suffering from a shortage of drivers. Truckers say there could be more accidents as experienced operators are replaced by less experienced drivers.
The Impact on the Insurance Industry
It’s hard to dispute the fact that truck accident lawsuit verdicts have increased significantly in recent years. A 2020 American Transportation Research Institute (ATRI) study found the average size of trucking verdicts grew from $2.3 million in 2010 to $22.3 million in 2018. While not every accident leads to a lawsuit, ATRI found that verdicts far exceeded standard inflation and health care cost increases.
The ATRI study also said that liability insurance rates have tended to rise at the same pace as litigation awards. Over a recent two- to five-year period, commercial truck liability insurance premiums have increased by 35% to 40% every year for low- to average-risk carriers.
The report also stated that insurers have responded to large verdicts by:
- Increasing premiums across all fleets, even if they have exemplary safety ratings
- Being more selective about who they insure
- Exiting the market altogether
As a consequence, ATRI says truckers have fewer options for full coverage and face higher deductibles, increasing their costs and risks.
One positive sign is that truckers are focusing more on safety, training, and hiring practices to prevent accidents. For example, fleet owners are using telematics and dash cams to reduce speeding, tailgating, excessive lane changes, and driver distractions. Advanced driver assistance systems can also alert drivers to potential hazards in real time so they can make corrections.
For now, industry groups are waiting to see what impact New Jersey’s new law will have on the motor carrier insurance market. If you’re a truck owner operating in the state, be prepared for rates to increase. Also, take steps to improve driver safety. And talk to your agent about how to get the most out of your premiums.
Price and Cost Considerations for Truckers
The increase in liability minimums will inevitably raise liability insurance premiums, especially for small operators. On average, truckers in New Jersey may face additional annual costs ranging from $9,500 to $17,000 to meet the new $1.5 million liability limit. These price hikes come at a time when fuel prices, maintenance costs, and financing expenses are already squeezing profit margins.
For many, standard commercial auto policies might not cover the new limits, leading to additional purchases of umbrella or excess insurance policies, further increasing expenses. Additionally, factors such as fleet size, claims history, and driver safety records will influence how much each operator pays.
Truckers should proactively consult with their liability insurance agents to explore ways to manage these rising costs — such as choosing higher deductibles, implementing robust safety measures, and regularly reviewing coverage to avoid over-insuring or under-insuring their assets.
Partner with Alvix Insurance Group
Navigating the complexities of commercial truck insurance can be challenging, especially with new liability requirements. Alvix Insurance Group specializes in helping truckers and fleet owners secure comprehensive and cost-effective coverage. Our experienced agents will work with you to tailor policies that meet your needs, including liability, property, and cyber insurance.
Contact Alvix Insurance Group today for a free consultation and ensure your business stays protected in an evolving regulatory landscape.
