It is that time of year again. I get to write this to you from the Green Mountains in Vermont. The trip here makes me realize just how long I have been at this trucking stuff. I look at all of the trucks on the road traveling up Interstate 95 and 91 and realize that I know more about some of those companies than the driver does. It is wonderful to take some time off and enjoy family vacation time. I hope you all get a chance to do so.
This month we report:
INFRASTRUCTURE FUNDING AND THE SURFACE TRANSPORTATION BILL – U.S. Transportation Secretary Ray LaHood announced that there was $17 billion in loans available for critical infrastructure projects across the country now that the surface transportation bill has been passed. The recently enacted surface transportation bill, known as MAP-21, provided $1.7 billion in capital over two years for the TIFIA credit assistance program, up from $120 million in 2012, making it the largest transportation infrastructure finance fund in the Department’s history. The DOT also announced the establishment of the Project Finance Center (PFC) to help state and local government project sponsors analyze financial options for highway, transit, rail, intermodal and other surface transportation projects facing funding challenges.
GOVERNMENT REGULATIONS IMPACTING JOB CREATION? – Who would have thought that could be the case? The Committee on Oversight and Government Reform released its report titled “Continuing Oversight of Regulatory Impediments to Job Creation: Job Creators Still Buried by Red Tape” The study commented that following regulations may be problematic and impact job creation:
• Hours of Service
• Duplicative CDL background checks and credentialing for hazardous materials drivers
• A broaden definition of a tank truck
• A rule that requires truckers to submit a copy of their annual biennial medical certificate to the state agency that issues their CDL
• A rule that requires carriers to review every driver’s motor vehicle record annually to ensure that they are safe and qualified to continue driving despite the fact that many trucking companies review their drivers’ record, anyway, every time they received a driving violation.
• CSA
• Expectation of a proposed rule for judging safety for motor carriers.
• EOBR mandate
• Proposed electronic stability control rulemaking for heavy trucks, and
• A heavy vehicle speed limiter proposed rule.
HOURS OF SERVICE – The hours of service rules continue to be attacked. This month one coalition filed a brief seeking to vacate 2 elements of the rules – the 34 hour restart and the 11 hour driving limit. The group claims that the FMSCA has repeatedly ignored a Congressional mandate to adopt Hours of Service rules that reduce driver fatigue, increase highway safety and protect driver health by adopting a rule that allows more weekly driving hours.
DRIVER DATABASE – The FMCSA is getting hit from all sides this month. The Owner-Operator Independent Drivers Association has brought suit alleging that the database of driver information lacks assurance of accuracy and a functioning process for dispute resolution. The lawsuit asks the court to order FMCSA to purge all data for which there has not been a judicial determination of guilt; purge all reports where a court has dismissed or ruled the driver not guilty; purge all reports that are not “serious driver-related violation(s)”; enjoin the agency from distributing information without any reference to a dispute and a summary of the dispute; and enjoin the agency from distributing false, inaccurate, incomplete or misleading inspection reports.
SMS METHODOLOGY – Another group has filed suit against the FMCSA seeking review of the regulator’s “New Resources Available for Shippers, Brokers, and Insurers”. They allege that the publication is a “bureaucratic overreach without process.” They claim that the publication seeks to transfer the obligation to evaluate the safety of carriers to shippers, brokers and insurers, rather than to the FMCSA. These groups take the position that the current SMS methodology inappropriately brands safe motor carriers.
In other news, the FMCSA announced a review of crash weighting which is a pivotal issue in the CSA controversy. Currently, all crashes, whether a motor carrier is at fault or not, count against the carrier in scores derived from data in the CSA safety measurement system. The agency will “analyze a process” for updating the state-reported crash records it receives to include a determination of a motor carrier’s role in a crash. The agency expects to release the results of the study in the summer of 2013.
ANTI-INDEMNITY STATUTES – Hawaii has joined the growing list of states which have outlawed indemnification provisions in shipping contracts. Affected contracts are defined as “a contract or agreement” between a motor carrier and a shipper covering the transportation of property for hire by the motor carrier, entry on property to load, unload or transport property.
DRIVER FATIGUE – An Oregon DOT report released indicated that more than 25 percent of commercial truck drivers who checked in at Oregon stops during a monitored week in June were considered fatigued drivers. The agency put 256 drivers out-of-service because of violations.
DRIVER RETENTION – The ATA released a report titled “Benchmarking Guide for Driver Recruitment and Retention” concluding that 90% of truckload carriers in the U.S. say they cannot find enough drivers which is forcing more carriers to consider inexperienced drivers.
TRUCKING BANKRUPTICIES – Avondale Partners reports that trucking bankruptcies have reached their lowest level in 25 years during the second quarter of the year. 70 carriers with a total of 725 trucks failed during the second quarter. Last year there were 240 companies which failed during that time frame. The latest numbers indicate that failures removed about one of every 2,500 trucks on the road. Avondale also reports that the rate of demand growth is waning, which, coupled with the lack of capacity reduction has caused them to lower expectations for increased pricing for carriers, which may impact the next quarter failures.
CHAMELEON CARRIERS AND UNSAFE CARRIERS – Alabama-based truck company MTI Transportation has been shut down as a chameleon carrier. The agency issued an imminent hazard operations out-of-service order against MTI Transportation of Athens, Ala., corporately, and against Ollie L. McWilliams and Autora “Tory” Rogers individually based on evidence that it was a chameleon operation for two unsafe trucking companies previously shut down by the agency. The FMCSA placed MTI Transportation OOS after safety investigators discovered the company was transporting goods for the former BM&L Trucking and IDM Transportation, both of which had been shut down in May.
They also ordered Tennessee-based truck company Three Angels Farms and its owners, Edwin Ayache and Dorian Ayache, to immediately cease all transportation services based on serious safety violations that posed an imminent hazard to public safety. The shutdown order was the result of FMCSA’s findings of multiple federal violations in hours-of-service compliance, driver qualification requirements, drug and alcohol testing and vehicle maintenance.
TRAFFIC DEATHS – The National Highway Traffic Safety Administration has estimated that 7,630 people died in motor vehicle crashes in the first three months of 2012, up from 6,720 deaths in the first quarter of last year, a 13.5% increase. The number of miles driven by motorists also increased by 1.4 percent, but so did the rate of accidents per miles driven.
CASES:
CARGO
The Middle District in Florida held that the Carmack Amendment did not preempt claims against a broker, but did preempt claims against the carrier. As the plaintiff’s complaint did not specifically allege whether the entities were carriers or brokers, the court dismissed the complaint, giving plaintiff leave to amend the complaint to delineate what was being alleged against the involved operations. (Laing v. Cordi, 2012 WL 2999700)
The Southern District of New York granted a motion to transfer a suit brought in NY which arose out of a cargo transport from Shanghai to Mexico. The court held that as the parties had contractually agreed that California law would apply, and that the parties would be subject to jurisdiction in California, that the California court would be the more proper venue for the case. (Nipponkoa v CEVA, 2012 WL 2550278)
The District in New Jersey held that the Carmack Amendment would preempt a claim against a motor carrier, but not against a broker. As one of the defendants took the position that it was acting as a freight broker, it could not also rely on preemption to seek dismissal of causes of action for negligence. (Continental Casualty v. Quick Enterprises, 2012 WL 2522970)
Try as they might to get it right, there are just too often conflicting provisions in contracts and tariffs. The 7th Circuit held that there was a question of fact as to whether a shipper was offered a choice of rates when the tariff referenced insurance and not valuation. The court also held there to be a question on whether intermediate facilitators who agreed to the limitation were acting on behalf of the shipper in doing so. (Nipponkoa v. Atlas Van Lines, 2012 WL 2580120)
Were the May, 2010 Tennessee floods an Act of God or an Act of civil authority? The Middle District of Tennessee concluded that they were an Act of God, and may have been contributed to by governmental agencies. However that was not enough to exonerate the motor carrier from liability. The court held that carrier was still required to prove itself free from negligence. There were enough questions of fact raised to defeat summary judgment. (Omega Apparel Inc. v. ABF Freight Systems, 2012 WL 2814300)
The Southern District of New York once again addressed the Carmack v. COGSA issue. The court concluded that when a carrier was hired for a small portion of a through move arranged for by a freight forwarder it was not a receiving carrier and therefore COGSA and not Carmack applied to determine the liability of that entity. The court also held that where the carrier received a loaded and sealed shipment the burden was on the shipper to show good order and condition at origin. When it could not, summary judgment was granted to the carrier. (Hartford Fire Ins. Co. v. Expeditors International of Washington, 2012 WL 2861433)
AUTO
You cannot remove an action to Federal Court under diversity when you have no information to sustain that the claimed damages are in excess of the required limit of $75,000. The Western District in Louisiana held that when a trucker improperly drove into a parking lot and damaged the property the case belonged in State Court where the complaint did not allege the amount of damages and the defendant had nothing to establish the jurisdictional limit. (Wright Family Investments v Jordan Carriers, 2012 WL 22457664)
The Northern District in Illinois held that an insurer was not entitled to reimbursement for payments made under the MCS-90. The insurer, which did not provide coverage under the policy, settled with the injured parties and did not allow the suits to go to judgment. The court held that fatal to recovery under the endorsement, concluding that reimbursement would be permitted only when the insurer paid as a result of a judgment, (West Wind Express v. Occidental Fire & Casualty Company of North Carolina, 2012 WL 3006409)
Causes of action or punitive damages were allowed to proceed against a driver and a motor carrier in the Western District of Pennsylvania. The court held there were reasonable facts to support a finding that both acted with disregard for the safety of the public. The Court also held that those facts would support a claim against the carrier for negligent hiring, retention, etc. even where there was already vicarious liability. (Guerra v. New Prime, Inc., 2012 WL 2498819)
The Appellate Division in New York held that an arbitration award which granted supplemental uninsured/underinsured motorist coverage to an injured party could not be confirmed. Although it was undisputed that the trucker’s primary insurer, Reliance, was insolvent, as there was an excess policy which had not been exhausted the vehicle was not under or uninsured. (In re Bobak (AIG Claims Service, Inc.), 2012 WL 2626913)
Insurers who decline coverage under a policy of insurance cannot rely upon breach of policy conditions after the denial. The Eastern District would not allow the insurer of a truck escort service to assert the failure of the insured to notify them of a suit when the insurer had denied coverage, contending that a cargo loss when the escorted struck hit a bridge did not arise out of the use of the auto. The Court also held that the plaintiff’s bad faith claim was subject to the statute of limitations of 2 years and that it commenced when the insurer denied coverage. (Lloyds London v. United Financial Casualty Co., 2012 WL 2501014)
Under Arkansas law a motor carrier will generally not have direct liability for a truck accident when it has already conceded vicarious liability for the actions of the driver. The Eastern District in Arkansas also refused to allow a claim for punitive damages to proceed when there was no clear and convincing evidence that the carrier knew that the driver was likely to have an accident causing personal injury. (Perry v. Stevens Transport, 2012 WL 2815026)
When the truck meets the train the results are never good. A Missouri Court of Appeals held that a railroad was entitled to a new trial on its damages stemming from a derailment, but not as to the apportionment of liability on the motor carrier – only 24.4%. Juror affidavits could not be used to impeach an unambiguous verdict. The court also considered issues related to the standard of care required of a railway and regulations that expressed desirable standards for railroad tracks. (Norfolk Southern Railway v, Crown Power & Equipment, 2012 WL 2378093)
The Appellate Division in New York held that there was a question of fact as to whether a miscarriage which occurred two weeks after a truck accident was related to the accident. While there were healthy exams between the accident and the miscarriage, the testimony of the obstetrician that it was caused by the accident was enough to raise the question of fact. (Brown v. MAT Enterprises, 2012 WL 2529854)
MISCELANEOUS
We generally do not report on criminal proceedings but thought that someone out there might be interested in this decision. The Court of Appeals in Texas was considering a defendants appeal regarding a June, 2009 theft of laptops being transported for Celedon. If you are the insurer who underwrote that loss you might be interested. For the rest of you, it tells the story of a real cargo theft. (Pedraza v. State of Texas, 2012 WL 2308256)
Although not addressing a trucking case, we report on a decision in the District Court in Maryland. The Court upheld the dishonesty exclusion in a builders risk policy on the entrustment part of the exclusion, something commonly addressed in cargo losses. The Court held it applicable when the named insured’s agents gave unfettered access to the property to a third party who stole the goods. (2315 St. Paul St. v. Hartford Fore Ins Co., 2012 WL 2450167)
Stay cool and enjoy the summer
