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FEDEX CORP 8-K Report, Corporate Update (Jun 1, 2022)

Filed June 1, 2022For Securities:FDX

Summary

This 8-K filing from FedEx Corp. (FDX) on June 1, 2022, provides an update on a significant legal matter concerning FedEx Ground. Specifically, it addresses a lawsuit originating in New Mexico, initiated in 2012, which stemmed from a fatal vehicle accident involving a driver employed by a FedEx Ground service provider. After a lengthy legal process, the New Mexico Supreme Court affirmed a prior appellate court decision, upholding a $157 million award to the plaintiffs for personal injury and wrongful death. The company has recorded an expense of $210 million for accrued pre- and post-judgment interest in the fourth quarter of fiscal year 2022. While FedEx Ground had a self-insured retention and insurance deductible of $7.5 million, the company believes the base award amount, exceeding this retention, will be covered by insurance. FedEx intends to vigorously pursue all available insurance coverages for reimbursement of the interest expense. Investors should note that the company is actively seeking insurance recovery for this significant interest charge, and the outcome remains subject to insurance claim processes and potential legal challenges.

Key Highlights

  • 1New Mexico Supreme Court affirmed a $157 million jury award in a 2012 lawsuit against FedEx Ground.
  • 2The lawsuit relates to a fatal accident involving a service provider's driver.
  • 3FedEx recorded an expense of $210 million for accrued pre- and post-judgment interest in Q4 FY22.
  • 4A loss reserve of $7.5 million was previously recorded for FedEx Ground's self-insured retention and deductible.
  • 5FedEx expects the base $157 million award (in excess of retention) to be covered by insurance.
  • 6The company will vigorously pursue insurance coverage for reimbursement of the interest expense.

Frequently Asked Questions

The filing concerns a lawsuit filed in 2012 against FedEx Ground in New Mexico, related to a fatal vehicle accident involving a driver from a service provider engaged by FedEx Ground. The lawsuit alleged personal injury and wrongful death, and a jury initially awarded $157 million.

FedEx recorded an expense of $210 million for accrued pre- and post-judgment interest in the fourth quarter of fiscal year 2022. A $7.5 million loss reserve was previously established for FedEx Ground's self-insured retention and insurance deductible.

FedEx believes the base $157 million award, exceeding its $7.5 million self-insured retention, will be covered by insurance. The company is actively seeking insurance coverage to reimburse the $210 million expense recorded for pre- and post-judgment interest.

FedEx intends to vigorously pursue all insurance coverages to seek reimbursement for the accrued interest expense. The success of this pursuit is subject to the terms of the insurance policies and the claims process.