Be on the lookout for our announcement later this week launching our new and improved Carrier and Vehicle Research System (the CAB subscriber website for those of you IT challenged like myself) to our premium subscribers. We are very excited about this and look forward to your comments and suggestions.
Here we are at the end of the summer once again. Hope you all enjoyed your summer and got a chance to take some time off. We have had many calls from underwriters concerning the upcoming termination of the BMC-32 endorsement. Right now there is no specific answer on what steps an underwriter should take to terminate existing endorsements. There is no rulemaking which automatically deletes them from any policy. We would be happy to discuss options with any subscriber to our services. This month we report:
NAFTA – Mexico is getting tired of waiting for the U.S. to move forward and open the border. More retaliatory tariffs on U.S. exports have been imposed to pressure the government to take action. Pork, cheese, pistachio nuts, ketchup and citrus fruits are among the new products subject to levies as high as 25%. Those Senators involved in the Transportation Department’s 2011 budget have included a provision in the proposed legislation which would require that that the President come up with a plan by October. DRUG TESTING – The DOT has issued new rules on drug testing for transport workers. The rule will become effective October 1, 2010. The DOT believes that it may classify 8,000 more transport workers as illegal drug users based upon these new rules. The DOT is focusing on popular drugs, including ecstasy, methamphetamines and cocaine and will add a new marker to identify heroin use. The DOT also reported that the sweep which it undertook in June removed 109 commercial bus and truck drivers from the roads and more than 175 carriers face enforcement actions as a result of the inspections.
CSA 2010 CHANGES – With the system not yet even in place, it is already being changed. FMCSA agreed to lower the importance of two of its safety categories when it rates carriers. Cargo securement and driver fitness will carry less weight as studies by some organizations have determined that there is minimal correlation between those categories and accidents.
HOURS OF SERVICE – The FMCSA has sent the new proposed rules to the Office of Management and Budget for review. Some motor carriers have indicated that a possible reduction in hours to 9 hours, down from the current 11 hours, would result in a reduced driving capacity of about 250,000 trucks. In related news the ATA has renewed litigation against the FMCSA to force a rule spelling out what evidence fleets need to retain in order to verify their drivers’ logbooks. The FMCSA has requested that the court hold the case in abeyance while it tries to get everything done as quickly as possible.
CARRIER BANKRUPCTIES AND CLOSINGS – Avondale Partners has reported that 2d quarter trucking failures have slowed considerably, with the lowest number of trucking company terminating operations. Only 355 carriers failed, slightly less than the amount in the 2nd quarter of 2009, and less than half of the 730 which failed in the first quarter of this year. In other positive news for trucking, PCI reports showed 8% increase in year-to-year growth in shipping in its report which is based upon fuel purchases at truck stops. The Cass Freight Index, which measures shipments, rose 8.9% in July, also year-over-year.
HAZMAT – There is a new proposal to eliminate the tough hazmat requirements for certain commodities. The Pipeline and Hazardous Materials Safety Administration has proposed a special permit which would allow the products to be shipped differently. The rule, if passed, will impact the transport of liquefied petroleum gas, liquid soil pesticide fumigants, road-striping materials and anhydrous ammonia fertilizers.
CARGO TANK ROLLOVERS – Interested in seeing what can be done to prevent those? The FMCSA has released a video which provides cargo tank drivers with best practices and safety tips on how to avoid rollover crashes while transporting hazardous materials. According to the FMCSA, “Cargo tank rollovers account for 31 percent of large truck rollover crashes. In 75 percent of those crashes, unsafe driver behaviors such as inattention or excessive speeding are the primary cause.” The video can be viewed here.
INTERMODAL CONTAINERS – The FMCSA has once again extended, this time until June 30, 2011, compliance with its final rule on the inspection, repair, and maintenance of intermodal equipment (IME). The time is extended for drivers and motor carriers to prepare a driver-vehicle inspection report (DVIR) on an item even if no damage, defects, or deficiencies are discovered by, or reported to, the driver.
CURRENT CASES
AUTO:
We often see drivers suing a shipper for injuries which result from some action during the loading process. The Court of Appeals In Kentucky held that the shipper was a contractor under a motor carrier agreement with the driver’s employer and therefore entitled to the protection of the worker’s compensation exclusive remedy. (Thornton v. Carmeuse Lime Sales Corp., 2010 WL 3270055)
A manufacturer of boxes was not liable for injuries to a driver allegedly caused by improper loading. The Eighth Circuit held that the defect was not latent and that the driver had an obligation to inspect the load. Coupled with the driver’s experience in transporting loads for this shipper, the actions of the shipper would not give rise to a cause of action the shipper. (Vargo-Schaper v. Weyerhaeuser Co., 2010 WL 3075701)
When two trucking companies with MCS-90 endorsements on their policy are involved in a loss both endorsements are available to the injured plaintiff. The District Court in Utah held that both insurers are required to respond as the liability of each of the trucking companies is distinct, one owning the trailer and one the tractor. The allocation of risk agreed to by the parties was irrelevant to the obligations under the endorsement. (Herrod v. Wilshire Insurance Co, 2010 WL 3075457)
South Carolina requires that motor carriers, unless otherwise exempt, maintain insurance limits of $750,000, The District Court considered the application of the log hauler exclusion, ruling against the motor carrier and requiring limits of $750,000. The court undertook a detailed analysis of the meaning of shipment from the “forest to shipping points” (United Financial Casualty Co v. Lewis, 2010 WL 3271740)
The Federal Court in Mississippi held that it does not have jurisdiction over a declaratory action on a coverage dispute simply because there is an MCS-90 in the policy. As there was dispute that the endorsement did not apply to the claim, the case was dismissed. (Canal Insurance Co. v. Bond, 2010 WL 3190753)
A trucking company was unsuccessful in its efforts to sue a contractor contending that the contractor overcharged for repairs to a guard rail damaged by the trucking company. The court held that the trucker was obligated to assert its claim for abuse, deceit and misrepresentation in the action which the contractor had brought for recovery of the charges. Compulsory counter-claim rules required dismissal of the suit in Massachusetts. (Keystone Freight Corp. v. Bartlett Consolidated, 2010 WL 2978095)
The District Court in Minnesota spent considerable time this month detailing the meaning of the MCS-90 and considering the effect of a “filings only” policy when the motor carrier actually had two other policies which provided coverage for a loss. The court held the filings only policy did not apply. It then considered the various tests for determining the priority of coverage for the other policies, holding the owner/operators’ policy primary and the motor carrier’s policy secondary. (Great West Casualty Company v. General Casualty Company of Wisconsin, 2010 WL 3269900)
Whether an owner/operator working for a motor carrier was an employee or an independent contractor was held to be a question of fact in the Court of Appeals in Louisiana. (Morgan v. Bell, 2010 WL 2960570)
The Appellate Court in Illinois upheld an $8.3 million verdict against a trucking company and its driver involved in a fatal accident killing a construction worker at a job site. The court accepted the expert retained by the plaintiff to address the obligations of the driver to ensure that the area surrounding his dump truck was clear before moving, along with other evidentiary issues which supported the verdict. (Colella v. JMS Trucking Co., 2010 WL 2977602)
The insurer of a trailer involved in an accident was permitted to intervene in the declaratory judgment filed by the insurer for the trucking company operating the trailer. The Middle District of Georgia held that there was a mutual interest and that efficiency would be served by allowing any coverage concerns to be addressed by all insurers in one case. See Lancer Ins Co. v. Hitts, 2010 WL 2944303
The Seventh Circuit held that when there is an accident involving a number of trucks in a convoy, the policy occurrence limit applies and the plaintiff could not get an occurrence limit for each vehicle involved in the accident. The court also held that it did not need to address the question of whether the MCS-90 endorsement provided any increased payment as the plaintiff had entered a settlement agreement in which they agreed to accept the policy limits. As there could never be a claim in excess of the limits the endorsement was not applicable. (Auto-Owners Ins Co. v. Munroe, 2010 WL 2852611)
An insurer was successful in applying the pollution exclusion to a claim against a shipper for injuries caused by parties unloading a trailer when it was alleged that the shipper loaded the trailer with product which contained hazardous materials. The court also held that the failure of the insurer to specifically plead the coverage defense was not a waiver when it was raised in the denial letter and all parties understood that it was a defense. Obviously it is better to raise it and not face the issue. (Standard Waste Systems v. Mid-Continent Casualty Co, 2010 WL 2793537)
The 10th Circuit upheld a 15 million plus verdict against a trucking company whose driver was accused of driving while under the influence of drugs after considering a myriad of evidence issues. The court also held that punitive damages were permissible against a trucking company if there was evidence of separate actions by the company which formed the basis for the punitive claim. The court also denied prejudgment interest to the plaintiff, noting that the simple fact that there was a great disparity between settlement offers and judgment was not enough to justify prejudgment interest. (Frederick v. Swift Transportation, 2010 WL 3122883)
A driver was not permitted to recover for injuries to a driver caused by his loading of cargo which the shipper was contractually obligated to do. The court held that the breach of the contract to load did not give rise to a tort claim. The court also held that the shipper had not duty to the driver and owed no duty to warn the driver about dangerous conditions which were obvious. (Pippin v Hill-Rom Company, 2010 WL 2990935)
There is an action proceeding in California against a trucking company which procured insurance for its drivers. It is alleged that the trucking company charged the drivers more than the actual premium on its policy. The court is allowing the action to proceed, noting that the drivers, part of a class action, have to prove they were damaged. If they still paid less than they would have paid on their own, damage is difficult to support. The court also left open the question of whether these owner operators were employees under California labor law which requires the employer to indemnify the employee for liability insurance. (Perez v. Pacific Rim Transport, Inc., 2010 WL 2892804)
CARGO:
Carriers working for UPS Supply Chain beware. The Southern District of New York held that a shipper was limited to $250,000 from UPS under the terms of the contract. However, as there was no contract limiting the actual carrier’s liability, the shipper could proceed against the actual carrier for amounts in excess of the $250,000. (Royal & Sun Alliance v. UPS Supply Chain Solutions, 2010 WL 3000052) In a different action, also involving UPS and Royal, the Southern District of New York, in a case argued by this office, held that UPS was liable for the amount in excess of the $250,000, but the underlying carrier was not, as it had an agreement with UPS that its liability would be limited to $250,000. (Royal & Sun Alliance v. Rogers Transportation Management Services, 2010 WL 3291808)
When one carrier brings a third party action against another carrier seeking indemnity for a cargo loss, that action is also subject to the Carmack Amendment. The Northern District of California dismissed all state laws claims for indemnity against the third party defendant. (Travelers Property & Casualty Co. v. Legacy Transportation Services, 2010 WL 2836766)
The Second Circuit has determined that it has accepted the Supreme Court’s decision on the impact of Carmack on shipments arriving from overseas. In two virtually identical decisions, the court held that an inland carrier would be permitted to rely upon the provisions of the ocean bill of lading when the shipment originated overseas and the inland carrier was not the receiving carrier. (Sompo Japan v. Union Pacific Railroad, 2010 WL 3044188 and Sompo Japan v. Union Pacific Railroad, 2010 WL 3044884)
Taking it even further, the Second Circuit continued to follow the Supreme Court rule noted above, holding that an NVOCC was also subject to COGSA and not Carmack. The court held that the bill of lading provision which indicated that national laws would apply would not constitute an “opt-in” to Carmack. The Carmack Amendment is not a mandatory provision, as parties are free to contract out of Carmack under 49 USC 14101. The decision extended to all parties including the inland carrier. (Royal and Sunalliance v. Ocean World Lines, Inc, 2010 WL 2813650)
And yes, there continue to be cases on pre-emption. The District Court in Massachusetts addressed a number of issues on cargo claims. In this action it held that the cargo claim requirement was not met with the shipper presented a spread sheet with approximate damages. The court also held that all claims are preempted, including claims for accessorial services. Finally the court held that no cause of action would exist against a household goods insurer for the alleged deceptive actions of the carrier. (Noble v. Wheaton Van Lines, 2010 WL 3245421)
On the other side of the country, in the District Court in Tennessee the court held that a shipment which consisted of a local move into storage, storage for a number of years and then final delivery out to another state would all be encompassed in the Carmack Amendment exclusive remedy. The court dismissed an action which was not commenced within two years and one day of the written declination, holding that it did not matter that the shipper had not signed the bill of lading. (Thornton v. Philpot Relocation Systems, 2010 WL 3283023)
We are seeing more cases against transportation brokers for cargo losses. The Northern District of Texas held that even claims against brokers are subject to some aspect of preemption. While there is no Carmack claim against the broker, the court held that Interstate Commerce Act allows only for a breach of contract claim against a broker. (Chatelaine, Inc. v. Twin Modal, Inc., 2010 WL 3294242)
MISCELLANEOUS:
The Eastern District of New York permitted an insurer to recover from a general agent who failed to properly cancel a trucker’s policy. The court, applying Texas law, held that the insurer was a beneficiary of a contract between its managing general agent and the defendant general agent. The court also held that under New Jersey law the negligence claim against the agent was a question of fact which could not be decided on summary judgment. (Luizzi v. Pro Transport, 2010 WL 3023928)
Be careful when settling underlying cases when there is a coverage dispute in Florida. The Middle District of Florida reaffirmed the statutory mandate that the payment of a claim is the equivalent of an admission that there is coverage and the insured becomes entitled to recovery of any fees incurred in the declaratory judgment action. (Penn-America Ins. Co. v. Lucky Entertainment, LLC, 2010 WL 3043833)
