Trucking executives David Parker, founder and CEO of Covenant Logistics Group, and Max Fuller, co-founder of U.S. Xpress, appeared on FreightWaves Today to discuss the state of the freight market — from nuclear verdicts and tort reform to the freight supercycle and the future of team operations. Their conversation ranged across insurance economics, regulatory enforcement, strategic repositioning, and what Parker called an existential legal threat to the trucking industry.

$86 Million Verdict Despite No Negligence

A Utah jury awarded an $86 million nuclear verdict against QXO — formerly Beacon Roofing — despite finding the carrier was not negligent. Parker cited the ruling as emblematic of the unpredictable legal exposure facing motor carriers and brokers.

The term "nuclear verdict" generally refers to jury awards exceeding $10 million, and the American Transportation Research Institute has documented a sharp escalation in both their frequency and size over the past decade. Cases like the QXO ruling illustrate how a single verdict can exceed a carrier's entire insurance policy limits, exposing corporate assets directly.

Matt Leffler, an attorney and FreightWaves contributor, noted that juries and trial courts sometimes get it wrong, which is why the appellate process exists. He cautioned that these cases can take years to resolve through appeals, and pointed to a similar pending case involving C.H. Robinson in Dallas. The uncertainty of where these verdicts ultimately land, Leffler said, is what makes the current environment so dangerous for carriers and brokers.

Insurance Costs Surge 300% While Coverage Halved

Parker said Covenant's insurance costs have surged roughly 300% over the past three to four years, while total coverage dropped by 50%.

"300% cost for 50% of total coverage," Parker said. "I don't know what kind of insurance any of us got. I mean, it's like I'm naked on this quarter."

His current policy does not expire until next April, but he said the exposure grows larger with every rate cycle. Fuller elaborated on the dynamic: courts are awarding such large verdicts that insurance companies must continually increase charges, and carriers — to keep costs manageable — are forced to accept bigger exposures. That compounds an industry already struggling with thin returns. Insurance consistently ranks among the top operating costs per mile for trucking fleets, and ATRI's annual operational cost data shows premium increases accelerating alongside the rise in nuclear verdicts.

Tort Reform as Industry's Top Political Priority

Parker said he has traveled to Washington six or seven times since October to push for federal tort reform. He has met twice with former President Donald Trump, as well as with the House Judiciary Committee and Rep. Jim Jordan roughly two months ago. He credited having Ben Carson on Covenant's board with helping him secure key meetings.

Federal tort reform in the trucking context typically centers on measures such as capping non-economic damages, limiting plaintiff attorney contingency fees, and raising the bar for negligence standards that vary widely across state courts. Several states — including Texas, Florida, and Georgia — have pursued their own civil litigation reforms, but carriers operating interstate face a patchwork of legal environments that federal legislation would seek to standardize.

ATA President Chris Spear is leading the industry's lobbying effort, Parker noted. He put the current odds of passing meaningful tort reform at 20% — up from what he described as zero probability for most of his career. He attributed the shift largely to Trump's personal familiarity with the litigation system.

Fuller was more blunt: "If it doesn't happen, we're not going to have an industry at all. The losses are coming on so strong and so hard against these carriers, and it's destroying their balance sheets."

Parker echoed that urgency: "I heard Max say earlier that if we don't get tort reform, it's not going to matter. And it's true. It's not going to matter."

The Freight Supercycle: At "First Base"

On the freight cycle, Parker said DOT enforcement activity — which he dated to October, following a high-profile August accident in Florida — has removed an estimated 2% to 3% of capacity from the market. He placed the cycle at "first base," using a baseball analogy: the ball was hit last October when DOT ramped up enforcement.

"Whoever invented the term supercycle, I believe it," Parker said. "I believe that's where we're at."

The trucking industry has long operated in boom-and-bust cycles, with the 2018 freight surge followed by a prolonged 2019–2020 downturn being a recent example. A "supercycle" implies a more sustained capacity-tight period, driven not just by demand spikes but by structural reductions in carrier ranks — carrier bankruptcies rose sharply during the 2023–2024 freight recession, thinning the field ahead of any recovery.

Parker said load-to-truck ratios in Covenant's expedited and brokerage divisions fell from roughly 3-to-1 before July to about 1.5-to-1 during the month. Despite that seasonal dip, he projected that the following week's revenue would likely be the company's highest of the year. The freight market's load rejection rate stood at 14.5%, a level that a year ago would have been enviable.

Parker emphasized that even a 2% reduction in capacity meaningfully shifts the market, comparing it to oil pricing where the incremental barrel sets the price. Fuller agreed that the runway ahead is long, and that more capacity removal is coming.

Covenant's Strategic Pivot Away from OTR

Parker said Covenant has deliberately exited the over-the-road segment — retaining only about 100 OTR trucks — and restructured around four units: expedited, dedicated, freight management, and warehousing. That pivot, which he formalized with his board in 2015, followed two near-insolvencies across his 40 years in business.

"In 40 years of being in business, I've been broke two times and just didn't shut the doors," Parker said. In 2008, Covenant's stock traded as low as 78 cents per share amid bankruptcy concerns. The company now carries a market cap approaching $1 billion.

Parker told his board in 2015 that he was tired of earnings volatility and wanted to move deeper into the supply chain. A pivotal contract with Delta Air Lines accelerated the transformation. Covenant has served Delta for 11 years, hauling aircraft engines, tires, and brakes from Atlanta to destinations including LaGuardia, Minneapolis, Chicago, and Detroit on next-day delivery schedules. The company also serves Delta locations in Chattanooga, Tennessee; Columbia, South Carolina; and Auburn, Alabama — and now operates a warehouse for the airline.

Team Operations: From 1,800 to 750

Covenant's team-truck fleet, once as large as 1,700 to 1,800 units, currently stands at approximately 750 teams. Parker said he needs 20 to 30 more to fill open trucks. He reduced the fleet by 150 team trucks in the first quarter, which created some cost headwinds in the second quarter due to lingering insurance claims and fixed-cost absorption.

Parker said team trucks must generate about $10,000 per week to justify the capital investment — not $8,500 — given that Freightliner and Peterbilt prices rise $8,000 to $12,000 with each new model cycle and teams require truck trades roughly every 18 months. He contrasted this with dedicated operations, where trucks can run for five years.

"To get the ROI on a team operation, you've got to be somewhere in the mid-80s ORs — 85, 86, maybe 87," Parker said, referring to operating ratio. He noted that Covenant has gone to its customers and told them directly: if they do not need teams and are unwilling to pay for them, the company will reassign those trucks.

The reduction in team operations also reflected broader market shifts. Parker cited the "Amazon effect" — warehouses moving closer to consumers and demand shifting toward next-day delivery — as a structural factor that reduced long-haul team demand. In 2020, Covenant went from approximately 1,200 teams down to its current level.

Fuller said that when U.S. Xpress launched roughly 20 to 30 years ago, it was nearly 80% team-based, peaking at around 2,200 to 2,300 teams. He credited his father, Clyde Fuller, as one of the first to enter the long-haul market from Southern California points east. For years, Covenant, U.S. Xpress, and CRST dominated the team segment.

Brokerage Under Pressure

Covenant's brokerage book runs roughly 70% contracted and 30% spot, a mix Parker said has been painful as carrier capacity rates rose faster than contracted pricing. He noted that Covenant's asset side handles only about 0.5% of its broker freight, keeping the two largely separate.

"We went from doing great until you couldn't find capacity, and then our margins have squeezed," Parker said of the freight management division. He said the company continues to focus on either raising rates or finding cheaper carriers, adding, "I got a feeling raising rates is easier."

Operating Ratios: 92 Is the New Breakeven

Fuller offered a blunt assessment of industry profitability: an operating ratio below 92 is essentially breakeven once interest, taxes, and working capital are factored in. Operating ratio measures operating expenses as a percentage of revenue — lower is better — and the best-managed publicly traded truckload carriers historically target the low 80s, making Fuller's 92 threshold a stark illustration of how thin margins have become.

"Most shippers think when you say 92 that you're making an 8% profit," Fuller said. "That's not true. You've got interest, you've got taxes, you've got all kinds of things that get added to it. And it really takes at least a 92 to break even. And this industry doesn't break even very often."

Parker quipped that across the industry's history, reaching that threshold has been rare — "all five times," he joked.

Driver Shortage and Qualified Driver Recruitment

When asked whether a truck driver shortage exists, Parker acknowledged an ongoing debate with his son-in-law, who runs a recruiting company. Parker said he does not believe there is a shortage; his son-in-law disagrees. "The only thing I know is I need drivers," Parker said.

He noted the shift in the conversation from a general driver shortage to a shortage of qualified, fully vetted, fully registered drivers. Parker said that after the past four years of oversupply, he welcomes driver scarcity as a problem. "It's given me pricing power to be able to cover my costs," he said, emphasizing it is not abusive pricing power.

Regulatory Engagement and the FMCSA

The conversation touched on FMCSA's engagement with freight market data. Parker credited DOT enforcement with removing unsafe operators and driving the capacity reduction that underpins the current cycle. He noted that the DOT's goal is ensuring the motoring public perceives interstate trucking as safe.

Fuller emphasized that mid-market carriers are often the ones sacrificing investments in training and equipment to stay afloat, citing a statistic that one-fifth of all trucks on the road are not roadworthy. He argued that carriers must earn a sufficient return to make safety investments — a dynamic that regulators increasingly recognize, similar to the Surface Transportation Board's mandate to stabilize railroad economics.

Source: FreightWaves