Welcome to Spring and hopefully some warmer times ahead. I am looking forward to the annual IMUA meeting this month in Austin. CAB will be sponsoring a Transportation Session on the changing insurance needs and exposures for the logistics industry, moderated by yours truly. Come join the fun! I look forward to seeing many of you there. It is a great time for all of us to catch up.
This month’s news:
INCREASED FILING LIMITS? – Last year there was a movement to increase filing limits for auto liability which failed quickly. However the FMCSA has now released a report indicating that the current financial responsibility minimum of $750,000 for motor carriers is inadequate to meet the costs of some crashes. The report concluded that while catastrophic motor carrier crashes are rare, the costs for resulting severe and critical injuries can exceed $1 million. The agency said it has formed a rulemaking team to further evaluate the appropriate level of financial responsibility and has “placed this rulemaking among the Agency’s high priority rules. A copy of the report can be viewed here.
HOURS OF SERVICE – The American Transportation Research Institute (ATRI) has released its evaluation of the FMCSA field study report on new Hours of Services rules, and it was not happy with the study. The ATRI identified problems with numerous technical issues including research design flaws, validity of measurement techniques and interpretations; and data conflicts. Of most concern to the ATRI were the following:
The field study report purports to have measured differences between restarts with one and two nighttime periods (1 am to 5 am) but instead measured differences in restarts that range from 34 hours to an unknown/non-limited number of hours off-duty.
MAP-21 required that the field study be “representative of the drivers and motor carriers regulated by the hours of service regulations” but the study includes, on average, less than 12 days’ worth of data for each of only 106 drivers.
The FMCSA field study does not present research to support the limitation of the use of the 34-hour restart to once per week (168 hours).
Use of the 3-minute Psychomotor Vigilance Test (PVT) showed lapses of attention by drivers in both duty cycle groups, but offered no link between the average number of lapses, fatigue and the safe operation of commercial vehicles.
The two duty cycle groups had lane-deviation measurements that differed by 1/10th of a centimeter and the study authors provide no evidence that these findings are relevant or have a nexus to driver fatigue in either of the two groups.
The difference in sleep obtained by the two duty cycle groups on their restart breaks differed by only six minutes per 24-hour period.
Average driver scores on the subjective sleepiness scale did not indicate any level of sleepiness.
The study confirms that drivers in the “two or more nighttime” group are more likely to drive during the day; a time when FMCSA’s own data shows a higher crash risk”.
The FMCSA, of course, stands by its detailed field study.
BRIDGE SAFETY – According to the government if all the structurally deficient bridges in the United States were placed end-to-end, it would take 25 hours driving 60 miles per hour to cross them. The DOT shows cars, trucks and school buses cross the nation’s more than 63,000 structurally compromised bridges 250 million times every day. The most heavily traveled are on the Interstate system, with the 250 most heavily crossed structurally deficient bridges on urban interstate highways, particularly in California. Pennsylvania (5,218), Iowa (5,043), Oklahoma (4,227), Missouri (3,357) and California (2,769) have the highest number of structurally deficient bridges. Nevada (36), Delaware (56), Utah (117), Alaska (133) and Hawaii (144), have the least. At least 20 percent of the bridges in four states — Pennsylvania (23 percent), Rhode Island (22 percent), Iowa (21 percent) and South Dakota (21 percent) — fall in the structurally deficient category. State specific bridge information from the analysis — including rankings and location lists of the 250 most heavily travelled structurally deficient bridges in the nation and 10 most heavily travelled in each state — is available online here.
NAFTA – Two of five transportation modes – truck and pipeline – have increased freight transport over the last year according to the TransBorder freight data released by the DOT Bureau of Transportation Statistics .Trade using truck grew the most of any mode, 2.6 percent, as the value of overall U.S. trade with its North American Free Trade Agreement (NAFTA) partners Canada and Mexico rose 1.3 percent from year to year. Trucks carriy nearly 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. Truck carried 59.8 percent of the $89.6 billion of U.S.-NAFTA trade in February 2014, accounting for $27.8 billion of exports and $25.8 billion of imports.
TRACTOR TRAILER SAFETY REGULATIONS – The NTSB released seven recommendations to the National Highway Traffic Safety Administration (NHTSA), addressing safety of tractor-trailers. Areas identified for safety improvements include the need to:
enhance the ability of drivers of single-unit trucks to detect vulnerable road users such as pedestrians and cyclists,
prevent passenger vehicles from underriding the rears and sides of single-unit trucks,
improve conspicuity of single-unit trucks,
improve federal and state databases on large truck crashes,
continue the functions of databases vital for accurate fatality data or that link hospital data with police reports,
examine the frequency and consequences of single-unit truck drivers operating with an invalid license, and
research the potential benefits of expanding the commercial driver’s licensure requirement to lower weight classes.
OUT OF SERVICE ORDERS – DND International, DOT #1434005 was declared an imminent hazard and placed out of service. This carrier had been involved in a fatal accident in January. Also declared an imminent hazard and place out of service was FTE Transport, DOT #1891989.
CURRENT CASES
AUTO
When is the operation of a truck in furtherance of the motor carrier’s business operations? That question was discussed by the Supreme Court of Wisconsin this month. The Court held that the non-trucking policy applied when the driver was on his way for repairs to a grill and an oil filter. The Court held that such actions were not in furtherance of the operations of the truck, and were not required by the lease so the non-trucking use coverage applied. (Casey v. Smith, 2014 WL 1508506)
Independent contractor? Employee? The Court of Appeals in California held that determination to be a question of fact when the driver was promised a lump sum payment for a cross-country trip which ended in an accident. The plaintiff attempted to argue that based upon the definition of an employee in the MCS-90, which was not even attached to the policy; it was entitled to worker’s compensation. The Court held that you cannot rely on an endorsement which is not on the policy. (Global Hawk Insurance Co. v. Le, 2013 WL 1478514)
The Court of Appeals in Georgia held that a manufacturer did not have a duty to provide protection from falling cargo from a loaded trailers and especially where the driver also had knowledge of the potential problem. Finally the Court held that the trucker’s insurer had no obligation to defend the manufacturer when the causes of action asserted against the manufacturer were for the direct negligence of the manufacturer and were not derivative of the carrier’s liability. (Bruce v, Georgia Pacific v. Lincoln General Insurance Co., 2014 WL 1243866)
Over in Illinois the Northern District held that a contract which required the shipper to load and unload cargo did not extend to tarping the load and therefore could not give rise to a contractual duty to safely tarp when the failure to do so caused bodily injury. The Court went on to hold that there was a question of fact as to whether there was a common law duty to indemnify. (Smith v. MH1 Injection Molding Machinery, 2014 WL 1516592)
While over in New York the Court held that a consignee that no duty to protect the driver when a pallet fell on his head at delivery. Even if the consignee was aware of the problem with loading at origin it did not give rise to a duty to the driver. (Coolbaugh v. International Business Machines, 2014 WL 1612990)
We often see cases dealing with whether an entity is a broker or a carrier for purposes of cargo losses. This month the issue was raised in the context of a personal injury suit in which a broker/carrier sought to avoid primary liability for a truck accident. The Court in the Western District of Oklahoma discussed the fact that one who brokers a shipment can still beheld to be a carrier but ultimately concluded that there was no vicarious liability or liability for a non-delegable duty, but that there might be liability for negligent hiring and exposure for punitive damages. (Beavers v. Lenniere Victorian, 2014 U.S. Dist. Lexis 40892)
When the parties agree that the vehicle at issue is not a covered auto under the auto policy, and the only issue is whether the MCS-90 triggers coverage, the matter is not ripe for determination in the absence of a judgment against the carrier and evidence that no other insurer provides coverage. So says the Northern District of Oklahoma, following the majority rule. (Progressive Northern Insurance Co. v. Spencer, 2014 U.S. Dist. Lexis 54088)
Trial issues abound in the Court of Appeals In Michigan. The Court awarded sanctions against the truck for failing to admit a rear end collision- to the tune of $62,224. In addition, when the driver failed to appear for trial his deposition testimony was admitted only to the extent of his admissions and all else was left out as hearsay. Finally the court held that the trial court’s admission of information on vehicle violations should have been inadmissible to show proximate cause, but it was harmless because it would still have been admitted for negligent entrustment. Watch all of those violations in the CAB report to determine how they will affect your claim analysis. (Button v. Tim Bills Trucking, 2014 WL 1612996)
The Western District of West Virginia held that a general liability policy did not provide coverage for the vehicle owner’s agreement to indemnify the lessee for a personal injury claim based upon improper maintenance of the vehicle. The Court held that as all of the claims essentially arise out of the maintenance of the vehicle the general liability policy would not be triggered. (Nautilus Insurance Co. v Johnny Clark Trucking, 2014 WL 1365836)
The District Court in Minnesota held that the Federal Motor Carrier Safety Act did not preempt compatible State regulations, standards and orders relating to motor vehicle safety and transportation. In addition, while there was a state regulation which required all drivers to stop 10 feet from a railroad crossing, the driver could introduce evidence showing the reasonable grounds for the violation. (Soo Line Railroad Company v. Werner Enterprises, 2014 U.S. Dist. Lexis 43332)
CARGO
The Courts do not like forum shopping as was reflected by a decision in the District Court on Colorado. An insurer’s declaratory judgment on the applicability of an exclusion for improper packing and stowing was dismissed when it appeared to the Court that the plaintiff was attempting to obtain a better forum than the state court which had already ruled against the plaintiff. (Pennsylvania Mfg Assoc v. Landon Transport Logistics, 2014 WL 1455592)
When the plaintiff assigned her claims against a mover to the insurer who issued partial payment of the damages plaintiff was foreclosed from pursuing the motor carrier directly. (Pringle v. Atlas Van Lines, 2014 WL 56982)
Preemption once again. The Northern District of Illinois held that the Carmack Amendment preempts claims against carriers in interstate commerce. When will they learn that this is the law of the land? (Mitsui Sumitomo Insurance Co. v. Landstar Ligon, 2014 U.S. Dist. Lexis 39910)
The common exclusion in a cargo policy for valuable papers and documents does not apply to the loss of a shipment of annual reports. The Northern District of Illinois held that the insurer provided coverage for the loss, including all related costs for replacement, including bindery, alterations and travel expenses/client fees. (Champion Transportation Services v. Lexington Insurance Company, 2014 WL 1612946)
Beware of the impact of contracts between brokers and carriers. The Western District of Wisconsin held that the indemnification required between the broker and the carrier was outside the scope of the Carmack Amendment and simply gave rise to a breach of contract claim. The Court also held that the broker was liable for failure to complete timely delivery. It is also important to note that the Court held that the broker could be liable for conversion when it sold the goods after rejection by the customer as it was not the owner of the goods. Claims adjusters should be aware of this potential exposure and verify salvage rights before proceeding. (VVP Group v. Total Quality Logistics, 2014 WL 1515510)
The Southern District in Ohio held that a carrier who clearly took itself out of a transportation arrangement was held not to be the carrier for the cargo loss. The Court also held that simply putting a carrier with a shipper would not make the carrier a broker under the regulatory scheme. (APPA Seafood v. Obetz Transportation, 2014 WL 1400972)
A trucking company avoided sanctions for failure to produce the driver for a deposition where there was still ample time for the deposition to be completed and evidence that the plaintiff was not actively pursuing the deposition. The Court also noted that the attempt to obtain costs for depositions when the plaintiff was still able to take additional depositions was surprising and indicated counsel’s efforts to gloss over the real intent of the trip –which was met. (Monds v. Watkins Trucking Co., 2014 WL 1288869)
The 6th Circuit Court of Appeals held that the Carmack Amendment did not automatically apply to road and rail portions of a through intermodal international move. The Court did hold, however, that the service contract with the master carrier governed the downstream carriers and since that contract applied Carmack to the domestic portion of the transport it would still be considered when determining the carrier’s liability. The Court also held that the shipper was entitled to prejudgment interest on the breach of contract claim. (CNA Insurance Co. v Hyundai Merchant Marine, 2014 WL 1227776)
A trucker was successful in having an action dismissed against it when there was a through ocean bill of lading which precluded suits against downstream carriers. As the ocean bill of lading also had a forum selection clause the plaintiff’s action against the ocean carrier was also dismissed. (Fubon Insurance Co. v. OHL International, 2014 WL 138604)
Thanks for listening.
