COVENANT LOGISTICS GROUP, INC.

Current report

Our business is subject to the risk of litigation by employees, independent contractors, customers, vendors, government agencies, stockholders, and other parties through private actions, class actions, administrative proceedings, regulatory actions, and other processes. Recently, trucking companies, including us, have been and currently are subject to lawsuits, including class action lawsuits, alleging violations of various federal and state wage and hour laws regarding, among other things, employee meal breaks, rest periods, overtime eligibility, and failure to pay for all hours worked. A number of these lawsuits have resulted in the payment of substantial settlements or damages by the defendants. We operate a business that hauls arms, ammunitions, explosives, and other hazardous materials that could increase our exposure if there were an accident involving this freight.

Current report

The outcome of litigation, particularly class action lawsuits and regulatory actions, is difficult to assess or quantify, and the magnitude of the potential loss relating to such lawsuits may remain unknown for substantial periods of time. The cost to defend litigation may also be significant. Not all claims are covered by our insurance, and there can be no assurance that our coverage limits will be adequate to cover all amounts in dispute. Additionally, our premiums for certain insurance layers are subject to upward adjustments based on claims experience. To the extent we experience claims that are uninsured, exceed our coverage limits, involve significant aggregate use of our self-insured retention amounts, or cause increases in our insurance premiums, it could lead to increased volatility in our insurance and claims expense and any resulting increases in such expenses could have a materially adverse effect on our business, results of operations, financial condition, or cash flows.

Current report

In addition, we may be subject, and have been subject in the past, to litigation resulting from trucking accidents. The number and severity of litigation claims may be worsened by distracted driving by both truck drivers and other motorists. These lawsuits have resulted, and may result in the future, in the payment of substantial settlements or damages and increases of our insurance costs.

Current report

In the Montgomery v. Caribe Transport II, LLC case, decided in May 2026, the United States Supreme Court (the "Supreme Court") determined that the Federal Aviation Administration Authorization Act does not preempt state law liability claims against freight brokers. As a result of the Supreme Court decision, freight brokers, including certain of our subsidiaries, can be held liable if proven to be negligent or otherwise culpable in connection with selecting or interacting with a motor carrier it selects that injures a plaintiff in a motor vehicle accident. Because the law varies from state-to-state, we may experience inconsistent outcomes depending on where a claim is filed. If we are found liable for the acts or omissions of third‑party providers, we could be subject to significant damages, increased insurance and claims costs, volatility in our results, and other adverse impacts that could be materially adverse to our business, financial condition, and results of operations. For additional clarification, see Note 9, "Commitments and Contingencies" of our condensed consolidated financial statements.