The Unintended Consequences of Georgia’s Commercial Auto Law on Insurance

For decades, Georgia’s insurance industry has sought to eliminate the longstanding provision that allows truck accident plaintiffs to sue insurance companies directly. This was the most important issue the industry wanted to see addressed by MPs. Now, with the passage of Senate Bill 426 earlier this year, insurers appear to have achieved their goal.

However, the implications of this legislation are more nuanced than they first appear, and the full effects of the bill are yet to be determined.

Historically, plaintiffs could sue an insurance company without naming the insured carrier or driver as a defendant. This gave injured parties a way to seek fair and speedy compensation when a trucking company tried to avoid liability.

SB 426 now restricts these types of lawsuits, allowing plaintiffs to sue an insurance company only when the trucking company is bankrupt or insolvent, or when it is impossible to serve the driver or carrier itself. This sets a significantly higher bar for victims to strive to overcome.

Lawmakers sold this bill to the general public by claiming it would lower insurance rates for small trucking operations by lowering jury awards, a claim that is debatable. While SB 426 could result in reduced verdicts in a small subset of cases, it is unlikely to result in widespread reductions that are substantial enough to significantly lower insurance rates. For insurance rates to drop as much as the industry has promised, there has to be a widespread drop in verdicts—millions of dollars less in damages, on average, for these cases.

Accidents involving tractor-trailers often result in serious injuries due to the large size of the vehicle and the force involved. These are generally massive wrecks with massive injuries. I expect we will continue to see substantial verdicts in these cases, meaning the impact of the new law may not be enough to drive rate cuts across the industry.

Navigating the new landscape

What can Georgia plaintiffs’ attorneys do to navigate the limits of this bill? One possible approach could be for lawyers to challenge the definition of the word ‘insolvency’. Typically, in personal injury discovery, we do not invest in the financial background of the parties involved. This means that if two people get into a car accident, one person can’t start asking for the other person’s bank statements, how much they make in a year, or what their hourly wage is. None of this is considered relevant. This is “post-judgment discovery”: a judgment must be entered before one party can claim that because they are owed money, they are now entitled to know how much money is in the other party’s bank account.

Does SB 426 give plaintiffs’ attorneys a way to claim that the financial health of a trucking company is now relevant to the case? If the company is insolvent, lawyers should be allowed to bring the insurance company as a named defendant. Therefore, there may be an increase in financial litigation and the definition of insolvency in terms of bringing an insurance company into a lawsuit.

Is the insurance industry shooting itself in the foot?

Interestingly, the insurance industry’s push for this bill may have other unintended and unintended consequences. Conventional wisdom in both plaintiffs’ and defense attorneys’ circles has long been to avoid mentioning “insurance” during trials, believing that mention of the word by either side could lead to unjustified awards. That’s the common belief, at least.

But recent anecdotal evidence from conversations I’ve had with fellow lawyers suggests that this paradigm may be changing. A defense attorney told me that naming an insurance company in their case resulted in lower verdicts. Usually, no defense attorney wants to be called an insurance company. Their theory is that when jurors are explicitly aware of an insurance company’s involvement, they become aware of how much it could affect their own insurance rates. They’ll think, “Wait, is insurance involved? This is exactly the kind of thing that could raise my insurance rates!”

The defense attorney I spoke with may be an outlier—certainly their perspective runs counter to common wisdom about the impact of insurance on case evaluation—but their theory actually makes sense, at least on the surface. It could be an indicator that the tides are turning, perhaps because we are in an inflationary environment with rising insurance costs, and that awareness could have the complete opposite effect of what the industry intended.

At the end of the day, SB 426 was a politically motivated push by insurance companies to try to save money on verdicts. While at first glance this bill appears to have been designed to save insurance companies money, lower verdicts and lower insurance rates, its ultimate impact could actually be a potential and costly reverse for the insurance industry.

It is worth asking whether any cost savings achieved by insurance companies would even be passed on to policyholders. I personally doubt that would be the case. The insurance industry has made a lot of money since the start of the pandemic. They don’t hurt. And they don’t lower the rates.

As always, the true test of SB 426’s impact will come as these cases make their way through the courts in the coming months and years.

Spaulding is the founder of Spaulding Injury Law: Atlanta Personal Injury & Car Accident Lawyer in Atlanta.