Not that he likes it, but Harold Lewis has grown accustomed to his insurance climbing 5-10% annually in recent years. But the motorcoach operator wasn’t prepared for this year. The least expensive policy he could find for his fleet of eight coaches pushed his premiums up 61%.
His company, Lewis Coaches Inc., couldn’t afford to renew with its current carrier of nearly five years, which wanted to double his rates, despite not filing any claim with the company.
“That was a low blow, in my opinion, and especially during this time,” said Lewis, who like all operators has had his business nearly come to a halt since the global pandemic-related closures and cancellations began in March.
“If it had been during a regular time, I would have had the opportunity to adjust some expenses and do some magic, like we’ve been doing all these years. But with no income, it’s kind of hard to adjust anything.”
‘Brutal’ in Louisiana
The company’s longtime insurance agent sent out a quote request to seven companies, but only two came back. Five declined to give him a quote because he’s a small operator and his business is located in Louisiana.
Motorcoach industry underwriting has not been profitable for 10 years in general, but Louisiana is considered one of the worst states for commercial insurers, according to Michael McDaniels of Shriver Transportation Insurance. He shared this insight during a Sept. 24 United Motorcoach Association Town Hall session as part of a panel discussing ways operators can address climbing premiums.
“Louisiana is an absolutely brutal area to conduct business, from an insurance standpoint,” McDaniels said. “There are not many carriers that want to underwrite down there unless you have a certain size fleet, or take a minimum of $10,000 or $20,000 liability deductible.”
‘We got hammered’
One indication of why Louisiana is such a difficult state for insurers is the FBI’s arrest of 28 people this year. They were part of a ring that staged accidents in the New Orleans area with 18-wheelers and then filed bogus lawsuits to defraud trucking and insurance companies. Another is the constant barrage of ads to attract clients involved in accidents with trucks.
“The level of premiums are already through the roof, compared to where they were just a few short years ago,” said Louis Sanders, co-owner of Louisiana Motor Coach.
He knows of operators paying $2,000 a month per bus. He’s been able to keep his company’s base insurance premiums in check because his policy has a $25,000 deductible. But that hasn’t been the case when including additional coverage required for the company’s bigger clients to give them an extra level of protection.
“That’s where we got hammered,” Sanders said. “They require us to have $10 million in auto, so we have our primary $5 million and we have an extra $5 million that we have had in place. When the pandemic hit, we canceled it because we saw our tour business go away.”
Although he has never filed a claim on that bigger policy, the premium continues to go up at every renewal.
Louisiana, a ‘Judicial Hellhole’
Louisiana is considered by many businesses and insurers to be simply a judicial nightmare, due to the costly combination of former plaintiffs’ attorney and current Gov. John Bel Edwards’ aggressive litigation agenda, the plaintiff-friendly legislature and inescapable advertising practices by the plaintiffs’ bar, according to Ken Presley, UMA Vice President, Legislative & Regulatory Affairs & Industry Relations/COO.
Lawsuits drain the state’s economy — nearly $7 billion in expenses related to tort litigation in 2016, representing more than $4,000 for every Louisiana household. Currently, the Louisiana economy ranks among the top five states in the nation, with litigation costs equaling almost 3% of the state’s Gross Domestic Product (GDP).
The total current impact of excessive tort costs on the Louisiana economy amounts to estimated losses of:
- $1.1 billion in annual direct costs
- $1.5 billion in output (gross product) annually
- More than 15,500 jobs are lost when dynamic effects are considered.
- All major industry groups are negatively impacted, with retail trade, business services, health services and other service industries showing the greatest losses.
- As of 2018, the yearly fiscal losses are estimated at $76.4 million in state revenues and $64.3 million to local governments.
In its 2019 Judicial Hellholes Report, the American Tort Reform Association ranks Louisiana at No. 4, behind New York City, California, and Philadelphia.
The legal system of civil law is unique because it’s based on French, German, and Spanish legal codes and ultimately Roman law, as opposed to English common law, Presley said.
A big issue
Insurance has been a big issue for Louisiana Motor Coach for several years. In 2017, the company filed a claim on a coach after its dash caught fire and destroyed the vehicle, resulting in a total loss.
“We got paid for what we owed on the bus. Our subsequent renewal went up 50%. So, in two renewal cycles, they would have had their money back. We fired them and spent an extra $70,000 to go with a new company mid-policy — not very smart, money-wise. We were sending a message,” Sanders said.
To reduce its insurance exposure, the company has invested in GPS tracking on the buses, camera systems with live video feed live and seat belts.
‘Nothing he can do’
Because Sanders’ company is Louisiana’s largest family-owned motorcoach operation, state Insurance Commissioner Jim Donelon agreed to talk about the issue with the company in January.
“He and one of his aides came and sat around with our agent here. He actually gave us the time of day, but basically shrugged his shoulders and said there’s nothing he can do about it,” Sanders said.
Over the summer, Louisiana lawmakers took the first step aimed at reducing “nuclear” jury verdicts for motor carriers sued in traffic accidents that occur in one of the nation’s most litigious states.
Lobbied for by the trucking industry, the state law passed June 30 aims to change this legal climate by limiting medical costs and cutting down on a practice allowing plaintiffs attorneys to “judge-shop.” In the long run, it could even help reduce insurance premiums, reported Transport Topics.
Sanders’ son, Ryan, spearheaded an organization called the Louisiana Bus and Limousine Coalition, a loose alliance of 15 operators across the state. The group is working to raise support for the CERTS Act, but Ryan also sees an opportunity to tackle the insurance issue.
Loyalty not reciprocated
Meanwhile, Lewis Coach’s new insurance carrier is letting the company park some of its buses as a way to reduce coverage.
In the spring, when other operators were negotiating with their carriers to work out deals to reduce coverage on coaches sitting in parking lots, the company decided to work in good faith since they had paid their fees for the year. Lewis regrets that decision, since his loyalty wasn’t reciprocated by the insurer.
The saving grace for the company is that it was busy with hurricane evacuation work in September that kept a few buses rolling.
“We’re operating about 30% now with the hurricane evacuation work,” Lewis said.
“We’ve never had a liability incident involving somebody making a claim against us in the 30 years my parents have run the business. We run a pretty safe operation, train our drivers to be safe, but there’s no reward for it at this point.”