Where do we even begin?  This has, without question, been one of the most horrific events to ever hit the New York/New Jersey area and we face another storm this week.  Our thoughts and prayers go out to everyone who has suffered far greater than we have.  Many of us remain without power, and with damaged homes, but thankfully everyone is safe.   Businesses and transportation are starting to resume and the recovery and rebuilding will begin as soon as possible.

I personally want to take a moment to express my gratitude to Shuie who worked around the clock coordinating with our engineers before, during and after the storm to ensure CAB’s services stayed up and running through this mess.  How he actually did that is beyond what I can describe here, but we are all so thankful that he was able to keep that going, even while he had no power and four young boys at home!  We hope to have everything and everyone back in operation quickly.

As this was already in the works before the storm hit we are still going to provide a limited Bits and Pieces this month.

BRAKE SAFETY RESULTS – CVSA results for Brake Safety Week, the annual enforcement and education campaign focused on regulatory compliance of truck and bus brake system maintenance, found at least one in seven vehicles chosen for inspection had brake-related out-of-service (OOS) violations. These rates are comparable to recent years, but slightly higher for the second year in a row. Of the vehicles inspected September 9-15, the OOS rate for all brake-related violations was 15.3%. This is higher than in 2011, 2010 and 2009 (at 14.2%, 13.5%, and 15.1%, respectively), but lower than in 2008 and 2007 (18.4% and 17.8% respectively).  They reported:

21,255 vehicles were inspected. This is fewer than the record 30,872 vehicles in 2011.

1,993 or 9.4% of vehicles were placed OOS for brake adjustment (8.4% in 2011, 8.9% in 2010).

1,664 or 7.8% of vehicles were placed OOS for brake components (7.9% in 2011, 8.0% in 2010).

3,248 or 15.3% of vehicles were placed OOS for brakes overall (14.2% in 2011, 13.5% in 2010).

Over 2.6 million brakes have been inspected in the 15 years since the program’s inception.

HURRICANE REGULATION MODIFICATIONS – Various states and the DOT have waived many regulations as they look to get trucks into effected areas.  A listing of all waived provisions is being maintained by the DOT and can be viewed here.

INSPECTOR GENERAL INVESTIGATIONS – I learned this month that the DOT Inspector General maintains a data base of fugitives involved in interstate transportation crimes, mostly involving household goods fraud.  You can check that website to see if any of the names ring a bell.  Speaking of HHG movers, the FMCSA has announced stiff penalties and suspensions under a new enforcement policy to get at rogue carriers.

TRUCKING FINANCIAL ISSUES – Truck failures are up slightly from a 25 year low according to Avondale Partners.  115 companies operating 2,020 trucks failed between July and September.  In other financial news initial third quarter results for publically traded companies are not great.  There are mixed results as soft demand and increasing costs have impacted the bottom line for many carriers.  On the plus side, 3600 jobs were added, with a total of 1.354 million jobs, up 3.6 percent year over year.

The economic impact of Hurricane Sandy on the transportation industry is now being considered.  The initial estimated loss is $140 million per day, although expectations are that the losses will be recouped with the growing need for trucks to move supplies back into these areas.

CARGO THEFT – Freightwatch has released its third quarter report on cargo thefts.  They recorded a total of 225 thefts in the United States, with an average loss value per incident of $172,403, a 23% increase from the previous three months of the year. There were 78 thefts in July, 71 in August and 76 in September.  Food and drinks was the product type most often stolen in the third quarter, with 35 thefts, or 16% of all thefts in the quarter. The Electronics category saw 30 thefts (13%), mainly of computers, TVs and cell phones. There were 26 thefts (12%) in the Auto/Parts category, including tires, motor oil and batteries. From July to September, California lead the pack for thefts, with 45 incidents accounting for 20% of the thefts. Florida and Texas followed with 37 thefts (16%) and 30 (13%), respectively. Unsecured parking was the location targeted most often by cargo thieves when a location was recorded.

UCR REGISTRATION – UCR rates for 2013 will not change. Enforcement begins Jan. 1 and there’ll be no exceptions. UCR registration for 2013 is now open and due. For 0-2 vehicles, the amount due is $76; for 3-5, it’s $227; for 6-20 it’s $452; and for 21-100 the amount due is $1,576. For the complete fee table, click here. The following 41 states currently participate: Alaska, Alabama, Arkansas, California, Colorado, Connecticut, Delaware, Georgia, Idaho, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Montana, New Hampshire, New Mexico, New York, North Carolina, North Dakota, Ohio, Oklahoma, Pennsylvania, Rhode Island, South Carolina, South Dakota, Tennessee, Texas, Utah, Virginia, Washington, Wisconsin and West Virginia.

FMCSA REGULATIONS – FMCSA has amended regulations to remove the provision that the agency will consider a 10-day extension of the 45-day period after which passenger and hazardous materials carriers must cease operation after receiving a proposed unsatisfactory safety rating. Although the FMCSA will continue to review requests for upgrades of proposed unsatisfactory safety rating for such carriers, the agency will no longer grant extensions to the 45-day period.

CSA – The Inspector General has agreed to undertake an audit of the CSA system after a direct request from Congress.  It is expected that the main focus will be on the relationship between CSA safety data and actual crash risk.

DOD CONTRACT – Menlo Logistics received a one year extension on its contract for the outsourcing of military shipments. This occurred while the Inspector General is questioning whether this contract is in fact saving money for the government.

CASES:

In the Third District Appellate Court in Florida a plaintiff who had its case dismissed against a truck driver for failure to prosecute was allowed to continue that action despite the long delay. However the plaintiff’s efforts to have the appellate court review the dismissal of the trucking company, which took place two years earlier, was thwarted.  As that was a final judgment against the trucker when it was entered plaintiff’s time to appeal was long gone.  Plaintiff could not seek to get a second window of appeal because it had continued the action against another party.  (Portis v. Seatruck, Inc., 2012 WL 4511616)

New Jersey permits an insurer who pays PIP claims to seek recovery of those payments from the tortfeasor (a trucker) and its insurer within two years of initialing receiving a PIP claim.  This month the Appellate Court considered whether the two year statute of limitations started to run when the insurer opened the claim or when the insured presented a formal claim for PIP benefits.  The Court held that the statute did not commence to run until a formal request for PIP benefits was made.  (AAA Mid-Atlantic Ins. Co. v. SWSNJ Warehouse, 2012 WL 4475415)

Indemnity clauses in interchange agreements are generally looked at strictly by the courts.  In the Appellate Court in New York the court held that under California law a shipper was not entitled to indemnity from a trucking company under the interchange agreement for its own negligence when the agreement did not explicitly extend to include indemnity for the shipper’s negligence. (Converse v. Dole Foods, 2012 WL 4469954)

Across the Hudson River, the Appellate Division in New Jersey concluded that under the UIIA agreement a trucker was obligated to defend and indemnify the trailer owner who was sued for injuries by the driver.  The court also held that the insurance policy issued to the trucker which contained contractual indemnity coverage was triggered. Finally the Court held that the agreement, which was constructed under Maryland law, also allowed for recovery of fees and costs incurred even prior to the tender of the defense.  (Santana v. Inter-America Insurance Co., 2012l WL 5199613)

Removal and remand were once again a topic this month.  In the Southern District of New York a motor carrier’s efforts to remove a personal injury action to Federal Court failed when the complaint on its face did not establish diversity or jurisdictional limits of $75,000 and the defendant failed to make the required showing in the petition for removal.  (Sailer v. Responsive Trucking, 2012 WL 4888300)

In the Western District in Oklahoma the Court also remanded an action which was not removed for 5 months after service of the complaint on the motor carrier.  The Court rejected the defendant’s contention that the removal was timely because it was unaware of the residency of the plaintiff when the evidence showed that the defendant had been in possession of the police report which contained that information.  (Burch v. Payne-Jimenez, 2012 WL 4748859)

Both the general liability and the auto liability carrier were held not to provide coverage for injuries suffered by an owner/operator while unloading cargo. The Northern District of Alabama held that the loss arose during the operation of the vehicle and was therefore excluded under the general liability policy. The Court also held as the driver was the statutory employee of the trucking company, coverage would not be afforded under an auto policy which contained an employee exclusion.  (Lancer Insurance Co. v. Newman Specialized Carriers, 2012 WL 4813857)

Is a lessor of equipment a motor carrier so as to trigger the MCS-90 when there is a loss?  The 10th Circuit held that the endorsement would only apply if there was a determination that the lessor was acting as a motor carrier in transporting property when the accident occurred, remanding a case for a determination on that issue. The Court also held that the MCS-90 could still be triggered, even if the plaintiff had recovered more than the statutory limit from other parties.  (Herrod v. Wilshire Insurance Co., 2012 WL 4820722)

An insurer’s disclaimer for non-cooperation failed in the Appellate Court in New York. The Court held that as the insurer was aware of the grounds for disclaimer for four months it was estopped to raise the disclaimer. (Country-Wide Insurance Co. v. Preferred Trucking Services Corp., 2012 WL 5193417)

CARGO/PHYSICAL DAMAGE

Identity theft, and whether there is coverage for such losses, has been an issue in the last year as more brokers are defrauded when engaging motor carriers through internet sites. In the District Court in Oregon the court held that a contingent cargo insurer would provide coverage for such a theft and that a limitation for theft by a party entrusted with the property would not apply. The insuring clause was triggered because the broker only had to arrange for transport with a carrier, legitimate or not, with the court concluding that the term carrier was ambiguous.  As it was ambiguous it was construed to allow coverage under the inuring grant but then construed against the insurer when considered in the context of the exclusion. Finally the court held that the entrustment exclusion could not apply as it too was ambiguous.  (InTransit, Inc. v. Travelers Property & Casualty Company of America, 2012 WL 5208170)

Adding a loss payee to a physical damage policy or a cargo policy often raises issues when the insured intentionally causes a loss.  The 4th Circuit held that when an insured intentionally destroyed vehicles the loss payee was entitled to recover its interest when the endorsement stated coverage would apply unless there was a conversion, secretion or embezzlement on the part of the insured.  Arson did not fall within that category.  (Wells Fargo Equipment Finance v. State Farm Fire & Cas. Co., 2012 WL 4711554)

The District Court in Massachusetts upheld the nine month claim filing requirement in a household goods carrier bill of lading.  Although the plaintiff had filed a written notice the letter failed to specify any determinable amount.  (Bowman v. Mayflower Transit, LLC, 2012 WL 4787354)

An attempt by a carrier to have a complaint dismissed on the grounds that it delivered goods, albeit damaged, failed in the Middle District of Florida.  The Court held that the plaintiff is simply required to allege that the defendant undertook transport goods and the goods were damaged in order to defeat a motion to dismiss.  (Fourth Dimension Securities, Inc. v.  Fed Ex Freight, Inc., 2012 WL 5188054)

A motion to dismiss or in the alternative to provide a more definite statement failed in the Southern District in Florida when a cargo owner sued the ultimate carrier on whose line the loss occurred. The Court held that the plaintiff is not required to explain in the complaint the nature of the interaction of various non-parties (logistic companies) with the transportation and also held that the bills of lading did not have to be exhibits to the complaint to make it definitive.  (Hewlett-Packard Co. v. CP Transportation, 2012 WL 4795766)

MISCELLANEOUS

The Second District in Florida upheld a conversion claim against a tow company who sold a truck which it had lawfully towed.  The evidence showed that the truck owner had contacted the tow company to advise that he would make payment for the tow and actually designated counsel to deal with the tow company, a fact which the tow company ignored when auctioning the vehicle.  The tow company attempted to argue that the conversion claim was preempted under federal law as it related to the rates and services of the tow company.  The Court rejected that argument under these circumstances and allowed the conversion claim to stand.  (Joe Nagy Towing v. Lawless, 2012 WL 4839853)

Although not a trucking case, I did feel the need to report on a decision on an inland marine contractor’s equipment policy which has a fact pattern which often arises in physical damage and cargo liability policies. The insured had failed to notify its insurer that it had sold a piece of equipment which was scheduled on its policy and replaced it with a different piece of equipment.  The insurer denied coverage for a loss to the unscheduled policy.  The Court of Appeals in Michigan held that the insured was not entitled to reform the policy to cover the new piece of equipment because it was the one who failed to properly insurer the vehicle.  The Court also rejected any argument that the coverage was illusory as the insured created the reason why the policy covered a piece of non-owned equipment.  (Merlo Construction Co. v. Citizens American Insurance Co of America, 2012 WL 4373294)

As we head into the holiday season, with Thanksgiving almost upon us, we express our thanks to all of you for your business and your friendship this last year. These events this last week bring home the importance of people over stuff.   We hope that you all have the opportunity to celebrate the holidays with family and friends.

See you next month.