Welcome to 2014. In looking back over prior year end reports it seems that the last few years the New Year sentiment was one of simply “holding on” and hoping for the best. This year it feels like more people are actually looking forward to an upturn in 2014 for the transportation and insurance industries. There is a general cautiousness, likely associated with the apprehensions we all faced these last few years, but the overall mode is positive. While insurers and motor carriers change and reformat their business plans they continue to remain dedicated to staying in their respective industries. We are thankful that you do!
For CAB, the start of any year gives us a moment to reflect on how we have changed and to focus on plans for the future. We remain excited at the new features and enhancements that we have put into place and promise that you can expect more this year. Feedback is really important to us. Most of the new features came directly from suggestions that you made. As other groups involved in the transportation and insurance industries have turned to us to get the CAB Advantage, we look forward to the new ideas that they bring to us and will continue to work at a fever pitch to implement as many of the ideas as we can. Whether you operate as a motor carrier insurer, a motor carrier, a shipper, a broker, or any of the other businesses that utilize motor carrier information, we will continue to strive make your life easier in evaluating and monitoring commercial motor carriers.
CABs LAB: By now, those of you that frequent our Carrier Search page will have noticed the dramatic changes that were released at the beginning of the new year. One of the most popular functions of the search tool is the ability to quickly identify associations and relationships between entities. With this new release, all names, addresses, phone numbers and emails can be viewed directly in the search results together with the sources of the information. We’ve also enhanced the ability to search for multiple matching entities with a single click. Make sure to tune in to this coming month’s Focus Training webinar to see all the details and to view them in action first hand. Details for signing up for the webinar are below.
We have a number of training and information opportunities up-coming. Our regular monthly CAB Basic Training will be on February 11 at 2:00 PM EST. The link to sign up for it is: https://www1.gotomeeting.com/register/204883385. The Focus Training session in February will be on all the new features of the Carrier Search introduced above. It will be on February 12 at 2:00 PM EST. The link to sign up for it is: https://www1.gotomeeting.com/register/246035041. There will also be an informational demo and training session for retail agents. Underwriters may want to pass this on to their retail agents who do not already take advantage of our AgentAdvantage program. Agents who use the AgentAdvantage program are able to present better and more complete applications to underwriters. The session for retail agents will be on February 13 at 2:00 PM EST. The link to sign up for it is: https://www1.gotomeeting.com/register/281831040. Finally, looking ahead to March, on March 12 at 2:00 PM EST there will be a very special Focus Training session specially designed for people involved in claims that will show all the ways the CAB website can be used for claims to help achieve better results. This special session will be led by Jean Gardner and the link to sign up for it is: https://www1.gotomeeting.com/register/413093200.
This month we report:
TRUCKING BANKRUPTCIES – We also take a moment to remind you how important it is to monitor the financial stability of a motor carrier. Our analysts stand by ready to assist you with our comprehensive review of financial statements. Financial statements (balance sheet and income statement) can be emailed to ratings@cabadvantage.com for review. Avondale Partners reports that failures rose to the highest level in more than three years during the fourth quarter. A total of 335 fleets with 7,775 trucks failed during the fourth quarter, the highest since the third quarter of 2010 and more than double the 150 carriers and 2,515 trucks in the final quarter of 2012. Failures also rose from the 2013 third-quarter total of 235 carriers and 4,985 trucks. A total of 21,775 vehicles were removed from the road in 2013. Financial instability has long been linked to reduced safety performance. The breakdown of the ratings distribution for carriers reviewed by CAB is available here.
ANTI-INDEMNITY STATUTES – Michigan has joined the bandwagon, signing into law new legislation banning indemnification clauses in trucking contracts. Michigan’s rule takes effect in March. The law voids the provisions in contracts that provide for shippers to be indemnified for losses caused by their own negligence. Affected contracts in the Michigan law are defined as “a contract, agreement, or understanding” 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, including the storage of property. The protection does not apply to intermodal chassis, containers, or other intermodal equipment. States yet to adopt protections are Colorado, Delaware, Kentucky, Mississippi, New Hampshire, New Jersey, New York, Ohio, Rhode Island and Vermont, although Kentucky has just introduced its own legislation on the issue.
PATTERN OF SAFETY VIOLATIONS RULE – The FMCSA has published the Patterns of Safety Violation rule. This rule will allow the FMCSA to revoke a carrier’s operating authority if the carrier or a company officer is determined to have a history of purposeful violations of safety regulations.
POCKET GUIDE TO TRANSPORTATION – The BTS has released the Pocket Guide to Transportation. The guide is a compilation of statistics related to the performance and impact of the U.S. transportation system. You can view of a copy of the guide here.
NAFTA – The Supreme Court has denied a request for an appeal of the Appellate Court decision permitting the Mexican pilot program to continue. Expect a lobbying push for legislation to prohibit the program to be next on the agenda. The most recent BTS report confirms that this trade route is only growing bigger. In October 2013 trade was $103.1 billion, up 4.5 percent from October 2012 and exceeding $100 billion for the first month on record. Total surface transportation trade topped its previous high of $81.7 billion set in March 2013. Trucks, which carry three-fifths of U.S.-NAFTA trade and is the most heavily utilized mode for moving goods to and from both U.S.-NAFTA partners, rose 3.1 percent year-to-year while rail rose 7.1 percent. Vessel declined 3.6 percent and air declined 1.0 percent. Trucks carried 59.5 percent of the $103.1 billion of U.S.-NAFTA trade in October 2013 accounting for $32.3 billion of exports and $29.0 billion of imports.
DRIVER COERCION – The FMCSA, as it was required to do by MAP-21, has sent a proposed rule to the Office of Management and Budget to address actions by carriers, shippers, receivers, brokers and other intermediaries in which they attempt to coerce drivers into violating safety regulations. An OMB review is the last step before an agency publishes a proposed rule for comment.
BROKER BONDS – The attack on the newly implemented $75,000 broker bond continues. The FMSCA is seeking comment on a petition filed by The Association of Independent Property Brokers and Agents which asked that all brokers be exempt. The organization contends that the policy hurts fair competition among brokers. The Association reports that approximately 38% of freight brokers have had their licenses revoked because of the new bond level. The International Association of Movers also requested an exemption from the new bond level for companies who are certified to broker household goods for the Department of Defense
DRIVER MEDICAL CARDS – While drivers were no longer going to be required to carry medical cards, the FMCSA has extended the requirement for an additional year. Apparently many states are not ready to have the information readily available on line for law enforcement.
HEALTH RISKS – As more workers’ compensation employers look to utilize CAB to address their underwriting concerns, we will include news reports which may impact that area of underwriting. This month the National Institute for Occupational Safety and Health (NIOSH) released its study concluding that U.S. long-haul truck drivers were twice as likely to be obese compared to the adult working population, as well as more likely to smoke and suffer from other risk factors for chronic disease. NIOSH conducted the survey in 2010 interviewing 1,670 long-haul truck drivers at truck stops across the continental U.S. about their health and work practices. According to the survey, 69 percent of these drivers were obese and 54 percent smoked. Additionally, 88 percent of long-haul truck drivers reported having at least one risk factor (hypertension, smoking, and obesity) for chronic disease, compared to only 54 percent of the general U.S. adult working population. The study can be viewed here.
OUT-OF-SERVICE REPORTS – The FMCSA declared two related Walterboro, S.C.-based trucking companies, CER Trucking, Inc. and Edward Risher Trucking as well as its owner-driver, Clarence Edward Risher, Jr., to be imminent hazards to public safety and has ordered all three entities to immediately cease interstate commercial operations.
CASES
AUTO
In the Southern District of Texas, the Court refused to dismiss a plaintiff’s claim for punitive damages against a driver and its employer. The Court held that the plaintiff had sufficiently alleged facts which would support a claim for punitive damages and therefore discovery on the issue would be allowed. (Evans v. PMT Express, 2013 WL 6816574)
When a jury held that a driver was not negligent when bales of hay fell from his truck causing an accident the Court of Appeals in Texas held that trial court was not at liberty to reverse that finding. The Court concluded that the jury was within its rights to make a factual finding that the driver had in fact followed reasonable steps to secure the load and there would be no finding res ipsa loquitor simply because the bales fell. (In Re Baker, 2014 WL 60958)
When the owner of a tanker was sued for injuries to the driver due to a defect in the hatch the owner sought to bring in the parties who arranged for the cargo to be hauled. The District Court in Kansas held that that party was not indispensable and that Kansas state law allowed for apportionment against phantom defendants. The tank owner was free to assert the contributory negligence of the shipper without having them present at the trial. (Perez v. West Plains Transport, 2013 WL 61473)
The Southern District of Ohio held that the statutory employment doctrine which was still followed in Ohio was abrogated by the federal regulations providing that the lessee would have exclusive possession and control of the vehicle and would assume all responsibility for the operation of the vehicle. The Court further held that the trucking company was not obligated to reimburse the bobtail insurer for payments made in settlement of a personal injury action when the driver was not under dispatch at the time. (UPS Ground Freight, Inc. v. Farran, 2014 WL 60075)
The 6th Circuit reversed a lower court ruling that an insurer did not provide coverage for a loss involving a vehicle which was listed on the policy as an owned vehicle when in fact it was not owned by the named insured. The Court concluded that once the insurer listed it as owned, and took premium, it would not be allowed to deny coverage where there was no evidence of any misrepresentation by the insured. (Carolina Casualty Insurance Co. v. Canal Insurance Co., 2013 WL 114667)
In the District Court in Connecticut the Court concluded that an insurer who listed a leased vehicle as an owned vehicle would not be permitted to utilize the other insurance clause to make its policy excess over the lessor’s policy. The Court also held that the endorsement on the lessor’s policy which rendered its policy only contingent would not provide any coverage for the loss. (Liberty Mutual Insurance Co. v. Harco National Insurance Co., 2013 U.S. Dist. Lexis 180942)
Over in Illinois the District Court considered the application of reciprocal coverage provision in a commercial auto policy. The Court concluded that the policy issued to the lessor would not provide coverage for the loss when the vehicle was being operated under the motor carrier’s operating authority. (Northland Insurance Co. v. Barnhart Crane & Rigging, 2013 WL 685279)
In a strange move, a Court in Minnesota concluded that there was no jurisdiction over a defendant, but then went on to grant summary judgment to the defendant. When the plaintiff filed another suit in the District Court in Colorado the Court held that while it would not void the decision in Minnesota it would conclude that it was not binding on the Court and that plaintiff would not be subject to attack on the grounds of res judicata and collateral estoppel. (Jenkins v. Duffy Crane & Hauling, 2013 WL 6728892)
When a driver failed to appear for a deposition after repeated notices the Court in the Middle District of Louisiana held that the driver should not be permitted to testify at trial, acknowledging that its ruling seriously impacted the defense of the trucking company and its insurer. The Court held that they should bear the disadvantage not the plaintiff. (DeLoach v. Hartford Accident and Indemnity Insurance Co., 2014 WL 118511)
The Northern District in Texas held that an insurer could add an injured party to a declaratory judgment filed against its motor carrier insured even before there was a judgment against the motor carrier. The Court held that the general liability insurer’s request for a determination on whether it covered the liability of the mover for improperly shipping a gun to U.A.E. would ultimately impact the plaintiff in the underlying suit and therefore they should be a party. (Vanliner Insurance Co. v Dermargodian, 2014 WL 113595)
Although a broker can be deemed a carrier for the purpose of cargo losses that would not create a presumption of liability for personal injuries caused by an accident. The Western District of New York dismissed a suit against a broker concluding that there was no evidence of an agency relationship and no exercise of control over the motor carrier. As to the motor carrier the Court found liability, but left open the question of whether there was a serious injury and dismissed the claim for punitive damages. (Kavulak v. Laimis Juodzevicius, 2014 WL 173905)
Just because a motor carrier trains its drivers on how to operate its vehicles will not make the motor carrier liable when a third party car wash operator negligently operates the vehicle and causes injury to another. The Court of Appeals in California held that Fed Ex had no obligation to confirm that all operators were proficient in the operation of the vehicle. (Aguilar v. Fed Ex Corp., 2013 WL 6824945)
CARGO
While a shipper was held bound to the terms of a bill of lading which held that there was a warranty of fitness for the transport of the goods, the shipper was held not liable for damages caused by a derailment when large molds broke through the container. The Court in the Northern District of Illinois agreed that there was no evidence of improper lashing and/or overweight problems with the goods, placing the blame instead on a defective container. (Kawaski Kisen Kaisha v. Union Pacific Railroad Co., 2013 WL 68588842)
Although not a suit against the motor carrier, it is interesting to report that the Supreme Court of Nebraska held that a household goods carrier’s refusal to deliver a shipment without additional payment rose to level of conversion, which constituted theft under a homeowner’s policy. As the policy did not exclude such acts, coverage was afforded for the loss of the goods. (Peterson v. Homesite Indemnity Company, 2013 WL 6713183)
In another Court, a plaintiff tried the same thing, only to have the case dismissed for lack of subject matter jurisdiction. The Eastern District of Texas did allow the action against the mover and the broker for wrongfully withholding delivery of goods to proceed in that venue. Interestingly the Court held that the broker’s argument that it bore no liability for the actions of the motor carrier appeared to be nothing more than a shell game. (Stewart v. American Van Lines, 2014 WL 243509)
Establishing a prima facie case for recovery is critical. The 5th Circuit held that a shipper’s use of import forms to establish that all items were turned over to the carrier was insufficient to conclude that the carrier actually received all of the goods at origin. The Court held that there remained a question of fact and refused summary judgment to the shipper. (Distribuidora Mari Jose v. Transmaritime, 2013 WL 6857997)
Is the shipper’s purchase price, less the salvage value at destination the correct measure of damages? The Southern District of Texas held that the correct measure is based upon the fair market value less salvage. While purchase price is one means of establishing fair market value it is not the only means and a cargo owner can present other evidence that the equipment had a greater market value. The Court also held that consequential damages were not recoverable in the absence of notice to the carrier. (Maass Flanges Corp. v. Totran Transportation Services, 2014 WL 29006)
When suit was brought against a transportation broker for shipments which were never delivered by the carrier, the Southern District of Florida granted a motion to dismiss the complaint where there were no allegations that the downstream broker was the agent of the defendant. The Court also held that the motor carrier was not an indispensable party to the suit and allowed plaintiff an opportunity to re-plead the complaint to allege the necessary facts to support a claim. (Taste Trackers, Inc. v. UTI Transport Solutions, 2014 WL 129309)
A premium finance company was unsuccessful in its suit against a truck insurer for return of premiums after the finance company cancelled the policies. When an intermediary perpetuated a fraud on both parties, by taking money and not procuring coverage, that party was held not to be the sole agent of the insurer. The Southern District in Mississippi dismissed the suit against the insurers. (First Trinity Capital Corp v. Canal Indemnity Insurance Co., 2014 WL 129802)
Stay warm. Happy Valentine’s Day.
