Lawsuit Abuse: A Hidden Component Driving Inflation

BY RICK VERSACE

As the president of the Florida Limousine Association (FLA), and treasurer of the National Limousine Association (NLA), I am painfully aware of the insurance crisis facing our industry.

One of the most pressing issues is the surge in nuclear verdicts, where jury awards exceed $10 million following accidents. These astronomical payouts have far-reaching consequences, not just for the transportation sector, but for the entire economy. For the 2025 legislative session, the FLA must prioritize addressing lawsuit abuse and advocating for tort reform. By joining forces with the American Trucking Association (ATA), the U.S. Chamber of Commerce, the United Motorcoach Association (UMA), and the NLA, we can tackle the escalating costs of commercial automobile insurance and help mitigate inflationary pressures on the economy.

The Impact of Nuclear Verdicts The surge in nuclear verdicts is staggering. A 2023 study by the U.S. Chamber of Commerce Institute for Legal Reform examined 154 trucking litigation verdicts and settlements from June 2020 to April 2023, revealing a statistical mean plaintiffs’ award of $27.5 million and a statistical mean settlement of $759,875. Similar to medical lawsuits, these excessive awards create a domino effect that significantly impacts the economy.

David Bauer, vice president of state and tax policy at the ATA, underscores the skewed judicial environment that has become increasingly unfavorable to the industry. These nuclear verdicts not only devastate individual companies but also contribute to broader economic instability. When insurance companies face massive payouts, they increase premiums to cover potential future losses. Higher premiums are then passed onto transportation companies, which in turn pass the costs onto consumers through higher prices for goods and services.

Fueling Inflation: The Ripple Effect on the Economy One of the most immediate and tangible impacts of nuclear verdicts is the surge in commercial automobile insurance costs. When insurers are forced to pay out exorbitant sums, they respond by raising premiums to unsustainable levels or exiting the market altogether. This creates a financial burden for transportation companies, including those in our industry, leading to higher operating costs.

What’s more, billboards and TV commercials liken winning a lawsuit to hitting the jackpot. The litigious nature that exists in Florida, for example, is fueled in great part by the extensive advertising programs by plaintiffs’ attorneys. This has created an atmosphere where insurance companies do not want to write policies in the state, and when they do, the premiums are outrageous. The costs are borne by everyone, not just transportation companies, but also consumers in the form of higher insurance rates and higher prices for everyday goods.

The increased transportation cost (limo, taxi, TNCs, car rental, and trucking) inevitably leads to steeper prices for goods and services across the economy. This contributes to inflation, which erodes purchasing power and impacts every consumer. As transportation costs rise, so do the prices of groceries, electronics, clothing, and other essential items. In essence, nuclear verdicts are a hidden driver of inflation, affecting the general economy far beyond the courtroom.

Successful Reform Efforts on the State Level Several states have successfully enacted tort reform, providing a roadmap that Florida and other states can follow. For instance, Indiana ended the “seatbelt gag rule,” which had prevented jurors from knowing whether an injured party was wearing a seatbelt at the time of an accident. This reform, achieved after three legislative sessions, highlights the power of persistence and coalition-building among stakeholders.

Iowa implemented a $5 million cap on noneconomic damages through a grassroots approach, leveraging the involvement of trucking association members in every legislative district. Iowa Motor Truck Association President and CEO Brenda Neville emphasized the importance of volunteer leaders and members in educating lawmakers over three years. This long-term, consistent effort paid off, demonstrating that tort reform is achievable with the right strategy and dedication.

In Florida, landmark legislation was passed in March 2023 to protect consumers and businesses from trial lawyer tactics. These reforms included measures to increase transparency in civil proceedings and reduce the introduction of fictitious and inflated medical bills at trial. Alix Miller, president and CEO of the Florida Trucking Association, who was instrumental in getting these changes, noted that these reforms were almost 20 years in the making, highlighting the importance of strategic communication and education.

The Role of the Florida Limousine Association The FLA must take a proactive stance in advocating for tort reform. By aligning with other state associations, as well as the UMA, ATA, the U.S. Chamber of Commerce, and NLA, we can amplify our collective voice and drive meaningful change. Here are the key steps we need to take:

1. Building a Coalition: Forming alliances with other associations and stakeholders is crucial. We need to develop a coalition of impacted parties, including small business owners, consumers, and industry leaders, to present a united front to legislators.

2. Educating Lawmakers: Persistent and informed communication with legislators is essential. We must educate them on the real-world impacts of lawsuit abuse on the limousine industry and the broader economy. Sharing stories from our members who have been directly affected by nuclear verdicts can humanize the issue and garner legislative support.

3. Strategic Communication: Launching a strategic communication plan to raise public awareness about the essential nature of our industry and the negative impacts of lawsuit abuse. This includes engaging with media outlets, hosting public forums, and leveraging social media to spread our message.

4. Grassroots Mobilization: Encouraging our members to get involved at the grassroots level. This means contacting their local representatives, participating in legislative sessions, and becoming advocates for tort reform within their communities.

5. Highlighting Success Stories: Showcasing successful tort reform efforts from other states can provide a roadmap for Florida. By highlighting the positive outcomes in states like Indiana, Iowa, and others, we can inspire confidence in our lawmakers that similar reforms can be achieved here.

The Human Impact Ultimately, it is important to focus on the impact of lawsuit abuse on small businesses and the individuals who run them. The vast majority of luxury ground transportation companies operate with fewer than 20 vehicles. For these small operators, one significant lawsuit can be catastrophic, potentially driving them out of business. This isn’t just about protecting large corporations; it’s about defending the livelihoods of small business owners and their employees.

The Broader Economic Implications When transportation companies face skyrocketing insurance costs, the ripple effects are felt throughout the economy. Higher transportation costs lead to increased prices for goods and services, affecting everyone from manufacturers to consumers. By advocating for tort reform, we are not just protecting our industry; we are safeguarding the economic well-being of our state.

Moving Forward The fight against lawsuit abuse will be a hard-fought battle. The Trial Lawyers Association (TLA) and the American Association for Justice (AAJ) are working very hard to advance their liability-expanding agenda. However, we cannot afford to be discouraged. We must remain steadfast in our efforts to reform the judicial process and ensure a fair, balanced system for all.

The FLA is committed to leading this charge. By working together with our industry partners, engaging with lawmakers, and educating the public, we can make a compelling case for tort reform. This is not just about reducing insurance costs; it’s about ensuring the long-term sustainability of our industry and the broader economy. The time for action is now. Let us work together to restore balance and fairness to our judicial system, ensuring a prosperous future for our industry and the communities we serve.

Join us Tuesday, October 15, at 4:15 p.m. during the CD/NLA Show for the Association Summit: Managing the Insurance Crisis, where we’ll discuss these issues in depth.   [CD1024]