Have you finally finished the last of that turkey? I gave up after day three. I don’t think I want to see another turkey dinner for a while. I hope you all enjoyed the Thanksgiving repast. It was especially thankful for many of us here in the Northeast as we continue the efforts to focus on recovery. I am sure this month has been hard on underwriters and claims personnel throughout the country as everyone looks to see what accounts were impacted by the storm. And in the middle of all this we re-elected President Obama and the national news has turned to how that will impact the coming years. But we can save that for another day and limit this report to news in the transportation field.
OUT OF SERVICE ORDER – The FMCSA has declared Illinois-based C & D Transportation, Inc. (USDOT #2096634), an imminent hazard to public safety and ordered the motor carrier to immediately shut down its operations. The FMCSA reports that the carrier has willfully violated an out-of-service order and continued to operate by renting vehicles on the effective date of the out-of-service order, one of which crashed; has failed to ensure that its drivers comply with commercial driver’s license requirements, English proficiency requirements, and vehicle weight limits; and has committed records of duty status violations.
MEDICAL CERTIFICATES – The FMCSA has announced a new initiative in which inspectors will begin conducting random verifications of medical examiner certificates in mid-November during routine enforcement activities. Inspectors will contact the medical examiner’s office at the telephone number indicated on the certificate and seek confirmation that the doctor’s records conform to the medical certificate being presented by the driver. The effort is intended to crack down on the use of fraudulent medical certificates. We will let you know the results of the initiative.
NTSB MOST WANTED LIST – The NTSB’s announced its top priorities for the coming year, which primarily focuses on addressing distracted driving at all levels of transportation. The top priority of the NTSB is to mandate motor vehicle collision avoidance technologies, including lane-departure warning systems and forward collision warning systems that are available for cars, buses and big trucks, but only as optional add-ons. In addition to crash avoidance systems, the list includes improving safety of airport surface operations, preserving the integrity of transportation infrastructure; enhancing pipeline safety, implementing positive train control systems; eliminating substance-impaired driving; improving the safety of bus operations; eliminating distraction in transportation; improving fire safety in transportation; and finally improving general aviation safety.
APPEAL TIME LOST – The FMCSA announced that bus and truck companies can no longer seek a 10-day extension to resolve an appeal after they are ordered to cease operations for unsafe business practices. During fiscal 2011, 55 bus or truck carriers were ordered out of service, and eight 10-day extensions were granted. FMCSA is required by law to review a motor carrier’s corrective actions within 30 days after the date the carrier makes a good faith request that its operating authority be reinstated. In the case of other truckers, the final order to cease operations would take effect on the 61st day.
ECONOMIC UPSWING FOR TRUCKING? – GE Capital’s sixth market survey of chief financial officers of 500 U.S. middle-market companies reports that 79% of transportation CFOs expect to increase staff in the next 12 months. Trucking CFOs saw the largest increase in credit availability across all industries – a 35 percent increase and up 12 points from the previous survey. Transportation CFOs also indicate that 67% will increase equipment purchases. The greatest business opportunities are expected to focus on increasing average revenue-per-loaded-mile and increasing tonnage volume from existing customers.
CHAMELEON® CARRIERS – The FMCSA has published a Notice of Proposed Rulemaking that gives the agency the ability to more quickly shut down carriers. The FMCSA will target carriers which have “egregious” disregard for safety compliance, and which permit persons who have shown egregious disregard for safety compliance to exercise controlling influence over their operations or which operate multiple entities under common control to conceal noncompliance with safety regulations. Under the proposed rule, if the FMCSA suspects that an officer of a truck or bus company has demonstrated a pattern of avoiding regulatory compliance or ignoring civil penalties for safety violations the agency would investigate the carrier’s management structure and its operations to determine if it is deliberately concealing safety violations or a negative safety history. If a pattern of unsafe practices is found, FMCSA would suspend or revoke the company’s authority to operate.
FATIGUE AND CRASHES – There has been an on-going battle over the impact of fatigue on crashes. The ATA has released its report which concludes that fatigue is not the leading cause of truck involved accidents. To read ATA’s report, click here.
DRIVER ISSUES – The ATA reports that the current truck driver shortage is acute and limited primarily to the truckload sector, but that long-term trends could cause the shortage to spread quickly in coming years. In their most recent paper the ATA said that while private fleets and less-than-truckload carriers may have some difficulty hiring drivers, the bulk of the shortage was confined to long-haul, over-the-road truckload carriers. In other new, the Bureau of Labor Statistics reports that trucking is one of five occupations which accounted for nearly 20 percent of all days-away-from-work cases in 2011. Heavy and tractor-trailer drivers accounted for 44,120 days-away-from-work cases with 20 median days away from work. Trucking also was among the seven occupations which had an incidence rate greater than 300 cases per 10,000 full-time workers and who had greater than 20,000 days-away-from-work cases. Finally the University of Minnesota has published a study that severely obese truck drivers are significantly more likely than their peers to be involved in preventable crashes in their first two years on the job. Researchers looked at more than 700 drivers who were hired by truckload carrier Schneider National Inc., Green Bay, Wis., in 2006 and found that drivers with a body mass index of 35 or higher were 54% more likely to get into crashes than the average of all the drivers.
CURRENT CASES
MISCELLANEOUS
Remember that the court can consider damages permitted under state law when addressing whether a diversity action should be remanded. The Northern District in Texas sustained a trucking company’s efforts to remove a case to federal court even when the plaintiff had not specifically asserted damages in excess of $75,000, noting that based upon the limited information provided it was likely that the plaintiff could recover more then the required limit for removal. (Salazar v. Downey, 2012 WL 5389678)
While the applicability of the MCS-90 endorsement may be a federal question, the Eastern District in Louisiana held that it cannot confer jurisdiction over an action when coverage is not in dispute and the only issues to be litigated are under state law with non-diverse parties. (Thompson v. Zurich American Insurance Company, 2012 WL 5472957)
Multiple named insured on a policy is common in the transportation industry where there are often many affiliated companies engaged in similar endeavors. The Northern District of Indiana held an insurer could not seek recovery of deductibles payments from all of the insureds equally where the policy failed to delineate that coverage was joint and several. (St. Paul Fire & Marine Ins. Co. v. Schilli Transportation Services, 2012 WL 5471766)
The Carmack Amendment applies as the exclusive remedy, even for shipments which originate in Canada. The District Court in Kansas allowed for the dismissal of the state law actions alleged against the motor carrier. (Atlas Aerospace v Advanced Transportation, 2012 WL5398027)
CARGO
The District Court in New Jersey unilaterally ordered the removal of a Carmack action brought in its court, when it determined that the state where the loss occurred was the proper forum, and not the intended destination of the goods. (Tokio Marine v. Flash Expedited Services, Inc., 2012 WL 5721163)
When renting a U-Haul, purchasing insurance from the leasor does not protect the cargo inside the unit when it is stolen. The Court of Appeals in Kentucky held, however that the lessor was responsible for negligent misrepresentation as its own agents was unfamiliar with the terms and the policy and represented to the customer that coverage would exist. The insurer was not, however, responsible for damages under the applicable unfair claims statute when the policy did not in fact cover the loss. (Republic Western Ins. Co. v West, 2012 WK 5273995)
The Appellate Division in New York held that bills of lading prepared by the stevedore, who was acting as the shipper’s agent, were enough to establish what good were received by the plaintiff and that plaintiff was entitled to exercise a lien over the damaged goods until paid by the defendant. (K&K Enterprises, Inc. v. Stemcor USA, 2012 WL 5440001)
The Northern District in Alabama held that the failure to allege that a shipment was delivered to the motor carrier in good order and condition was not fatal to a prima facie claim when the complaint specifically alleged that the carrier hit an overpass with the cargo. The Court also considered a bill of lading, included as evidence in the motion, to support a claim under COGSA. Separately the court held that simply hiring one defendant to arrange transport to final destination was insufficient to sustain a basis for jurisdiction. (Alabama Dynamics, Inc. v. McDaniel Machinery, Inc., 2012 WL 5511052)
In the Eastern District in Missouri the court allowed a household goods carrier to enforce its lien against goods which it held as a result of a dispute between its customer and a third party over the ownership of the goods. The Court also held that carrier was required to establish the ownership of the goods before the goods could be sold to satisfy the lien. (Mayflower Transit v. T.J. Campbell, 2012 WL 5493970)
A motor carrier in the Western District of Kentucky was held liable for consequential damages stemming from a cargo loss. The carrier had signed a contract which permitted the damages and there was no fraud on the part of the shipper, who had modified and returned the original contract to include the damages. The motor carrier’s failure to verify the changes resulted in the increased exposure. (Mafcote Industries v Averitt Express, Inc., 2012 WL 5497936)
Cargo insurers remember this case. The District Court in New Hampshire held that a shipper who purchased used equipment was entitled to recover only its purchase price, less salvage. The Court held that conjecture on what the machines might sell for, without hard evidence of such sales, was insufficient to support a higher judgment. (Ameriswiss v. Midway Line of Illinois, 2012 WL 5567186)
The Supreme Court of South Dakota, addressing various other issues, concluded that a negligence claim by a consignee against a shipper for delivering contaminated product would fail because the motor carrier is the one responsible for making sure that the trailer was clean. (Jorgensen Farms, Inc. v. Cooperative, 2012 WL 5870585)
AUTO
A complaint which had been dismissed as a result of an attorney’s failure to respond to a motion to dismiss was reinstated in the Western District of Texas. The case against the trucker was reinstated, but moved to another jurisdiction as there was no evidence of jurisdiction over the trucker. (Roberts v Hartman, 2012 WL 5499553)
Beware the privacy settings in Facebook. The Appellate Division in New York allowed a trucking company to obtain access to a plaintiff’s Facebook information when the “non-private” photos on the site showed the injured plaintiff engaging in activities which she claimed she was unable to do. (Richards v Hertz Corp., 2012 WL 5503841)
We are sure that there was one happy trucker in the Court of Appeals in Louisiana when the court upheld a defense verdict for the motor carrier. Where the defendant disputed that it was ever in an accident with the plaintiff, the jury apparently agreed. The Court refused to reverse the jury’s findings. (Waguespack v Sentry Select Insurance Co., 2012 WL 5500492)
The Northern District in Indiana held that a plaintiff was entitled to prejudgment interest in a claim presented under the MCS-90 endorsement and that the rate of interest was based upon the state rate, which was substantially higher than the federal rate. (Fairmont Specialty Ins. Co. v. 1039012 Ontario, Inc., 2012 WL 5509626)
An insurer’s efforts to have a coverage issue litigated in a different court, in a different state from a pending personal injury action were successful in the Southern District of Mississippi. The court held that there were exceptional circumstances, including the issue of the applicability of the MCS-90, which permitted the court to continue the action and not stay it pending resolution of the personal injury action. (Progressive Gulf Insurance Co. v. Farve, 2012 WL 5414219)
A primary and excess insurer battled it out this month in the Eighth Circuit. The Court held that the excess insurer was not precluded from asserting a bad faith claim against a primary insurer who failed to settle within its policy limits. The Court also held that one call from the insurer to the claims agent did not give the agent sufficient information to know that failure to notify the excess insurer would result in harm to the primary insurer and dismiss the action against the agent. (West American Insurance Co. v. RLI Insurance Company, 2012 WL 5416088)
The enforceability of an indemnity clause in a shipper/carrier contract was questioned in the Court of Appeals in Texas. The court held that the obligation of the carrier to indemnify the project manager for a suit brought by a driver injured during unloading was enforceable as the indemnity clause was conspicuous and provided fair notice, as required under Texas law. (Tutle & Tutle Trucking, Inc. v. EOG Resources, 2012 WL 5695585)
While the insured was located in Georgia, when the vehicle was principally garaged in Indiana and the loss occurred in Indiana, the Court of Appeals in Indiana held that its law would apply to determine the applicability of the UM/IUM coverage, and whether the trucker company had appropriately waived the coverage. It concluded that it had. (Asklar v. Gilb, 2012 WL 5519616)
In another case in Georgia, the court held that a trucking company was solely liable for worker’s compensation for a driver injured while in the joint service of the trucking company and its customer at the time of the injury when the carrier was solely responsible for salary payments and the customer required the motor carrier to carry worker’s compensation insurance. (Aimwell v, McLenddon Enterprises, 2012 WL 5417362)
A truck stop is not responsible for injuries caused by a truck accident at the truck stop. The Middle District of Pennsylvania held that the operation of vehicles and the known and apparent possibilities of injury were reasonably known to anyone using the facility. (Estrada v. Wass, 2012 WL 5879629)
The Middle District of Florida upheld a conclusion that a non-trucking use policy did not apply when the driver was operating under dispatch. The Court also held that the UM coverage under the policy did not apply when the driver was dispatched, even though it did not specifically incorporate the terms of the non-trucking use coverage. The Court also held that the retail broker was not the agent of the insurer and therefore could not bind the insurer. (Great American Assurance Company v. Sanchuk, 2012 WL 5306354)
Whether you celebrate Christmas, Hanukkah, Kwanza, or just plain winter, I wish you a wonderful time this holiday season. Merry Christmas!
