Safety Issue: Minimum Required Insurance Limits for Buses

Inadequate Protection For Victims of Bus Accidents

Bad crashes happen everyday, all over the country.  You can’t predict where the next big crash will happen or who the victims will be.  People who pay to be passengers on buses expect the drivers of those buses to be safe drivers.  They expect the bus companies to be safety conscious and make sure that the bus drivers and the buses themselves are safe.

But what happens when those expectations are betrayed and a busload of passengers are badly hurt or killed in a bus accident?  What if the bus driver was not safe or the bus company had a long history of safety violations?  It happens more frequently than anyone would like to admit.  How do minimum insurance requirements play into this?

US president ronald reaganThe Safety System

In the early 1980, under the Reagan Administration, the bus industry was deregulated.  At the time, it was well known that we simply do not have enough police officers and safety inspectors to adequately police the bus industry and we knew that it would get worse because with deregulation it was expected that there would be a huge increase in the number of new bus companies.  So, what the government did to address this problem was to set what were at the time really high minimum insurance requirements on bus companies.  The required minimum insurance limits for bus companies were set to $5 million.  The rationale was simple:  Insurance companies would not write big polices to unsafe companies — so, the market would force unsafe companies out of business and safety would be preserved.  Meanwhile, if there were bad accidents, there would be adequate insurance to cover the victims.

The Safety System is Failing

The system worked for a while, but then it started to fail.  The reason for the failure is that the legislation that set the minimum limits did not require the limits to increase as inflation and costs increased.  So, 35 years later, the minimum insurance limits are still what they were in 1982.  While $5 million seems like a lot of insurance at first blush, it is not a lot at all these days, especially when you consider how many people can be hurt in a bus crash.  In fact, if you adjust for inflation, to be able to cover the same losses that it would take $5 million to cover in 1982, you would need about $21 million today.Bus in the city

The minimum limits have not kept up with the times. to insurance companies, $5 million in coverage is no longer high enough for them to worry about like they would have in 1982.  As a result, they are not serving that all important safety function that they once upon a time did.  So, the bad wrecks are piling up.

On Sunday, October 23rd, the USA Holiday bus was traveling from a casino in Thermal, California near the Salton Sea back to Los Angeles, when it collided into the rear a semi-truck moving at an estimated 5 mph. The results were the worst bus tragedy in the history of California; 13 dead, 31 others injured. The bus company had minimum limits of $5 million.  That amounts to a little over $100,000 in insurance per person.  This will not even cover the medical bills let alone other economic losses like lost wages — not to mention the human losses resulting from the death of 13 people and maiming of many others.

A similar scenario took place in New York, when a bus returning from a Connecticut casino slid out of control, turned over on its side and was sliced in half by a sign post in the Bronx. Again, the New York City bus company carried the minimum amount of insurance by federal law, which will have to cover the claims of 32 passengers or their survivors. This accident took place over five years ago, with no signs of being resolved in the near future.

What’s the Fix?

Reset the minimum limits so that the market forces will work to weed out bad companies like the system was intended.

Michael Goldberg, a partner with the firm said, “It’s an easy concept to understand; the less safe companies who are more likely to be involved in these catastrophic accidents are likely to go out of business, while the ‘safe’ companies would likely not be affected..”

What’s the Rub?

The Federal Motor Carrier Safety Administration (FMCSA) has attempted to increase the minimum amount of coverage required, they’ve ultimately been unsuccessful.  The pushback has not come from larger bus companies, it is coming from smaller ones.  They say that the costs of bigger policies will drive them out of business.

Is that a good thing or a bad thing?  According to trucking attorney Joe Fried, “safety has to win out over allowing less safe bus companies and trucking companies to be allowed to continue to operate.  If a bus company can’t afford to properly insure itself, that raises questions about whether it is sufficiently funded to ensure that its drivers are properly trained and supervised and that its buses and other equipment is safe to operate.  If you are a safe company, buying insurance should not bury you.” To those companies that argue otherwise, Fried says, “I would rather hurt your feelings or even put you out of business before I have to sit down in another living room and talk to the survivors of these terrible wrecks.”

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