Dive Brief:
- U.S. Xpress Enterprises posted a $22.7 million operating income loss in Q3, largely driven by a spike in insurance and claims costs.
- A leading factor in costs was two large claims from crashes, according to a news release. CFO Eric Peterson said on an earnings call that insurance and claims expenses in Q3 was $20.8 million higher than the carrier’s eight-quarter average.
- U.S. Xpress also noted $4.4 million in extra costs, which included $1.2 million from the termination of an Atlanta lease. The company, which has recently expanded cost-cutting efforts, wrote off obsolete technology and bad debt in addition to paying a severance-related expense.
Dive Insight:
The financial hit from higher insurance premiums and claims comes as U.S. Xpress has worked to consolidate operations in an effort to save costs.
The carrier announced layoffs in August for up to 10% of its staff, as part of a $25 million annual savings plan. U.S. Xpress has since expanded that plan to target $28 million in savings through cuts to real estate and other expenses, according to its Q3 earnings.
Added insurance premiums and claims will make it harder for the carrier to achieve those savings goals. The carrier has an overall deductible of $3 million in which it’s on the hook for a majority of expenses up to that threshold, Peterson said.
U.S. Xpress considers the large spike in insurance claims in Q3 to be an anomaly. Courts were backlogged during the pandemic, meaning the carrier is just now receiving judgments on years-old cases.
“Our safety record has improved by an incredible amount over the last three years. Our preventable accidents are down over 30%,” he said. “But that doesn’t mean you can’t have a bad one. And so we don’t anticipate having those bad ones, but they do happen when they do.”
One of the recent lawsuits against the carrier involved a complaint that sought $15 million after a 2020 crash in New Jersey involving a Freightliner truck and bus that flipped onto its side, according to a court filing. U.S. Xpress rejected the lawsuit’s claims, and it was settled in July, according to a court document.
Another lawsuit involved a 2019 crash in Iowa that was settled Aug. 4, 2022, according to court documents. U.S. Xpress denied accusations made in the complaint, which argued the driver was negligent.
Companies have decried nuclear verdicts, or those in which a jury awards a payout of $10 million or more. Certain states are more likely to award hefty payouts, and one executive even said his refrigerated business reroutes trucks in areas such as eastern Texas due to potential liability.
Like U.S. Xpress, Yellow reported this month a similar financial setback. The carrier saw a $19.4 million increase in third-party liability claims following the resolution of cases from prior years, CEO Darren Hawkins said in a Nov. 2 news release.
