Well Good Day to you all. Just can’t believe that May is already here. I am looking forward to getting together with so many of you in a few weeks at the IMUA annual meeting in Virginia. This is a busy time for all as everyone tries to get caught up before summer hits. It just seems more difficult each year to get everything done with information at an overload stage. We take extra effort to make this as short and to the point as possible. The rules at CAB are to keep you informed, about the transportation world and your carrier, with only the need to know information. SO this month we report:
CURRENT NEWS
ON BOARD RECORDERS – The FMCSA has now issued a rule that will require carriers and bus companies with serious patterns of hours-of-service violations to install electronic on-board recorders (EOBRs) in all their vehicles. Under the EOBR final rule, carriers who have 10 percent or more HOS violations during a compliance review will be required to install EOBRs in all their vehicles for a minimum of two years. Any carrier who voluntarily adopts the rule will receive relief from certain regulations on the paper trail for hours of service compliance. A copy of the full rulemaking can be viewed here.
DISTRACTED DRIVING –The FMCSA has made distracted driving a number one priority this year. The FMCSA has issued proposed rulemaking which will prohibit texting while operating a commercial motor vehicle in interstate commerce and will impose sanctions, including civil penalties and disqualification for drivers who fail to comply with this rule. Additionally, motor carriers would be prohibited from requiring or allowing their drivers to engage in texting while driving. The FMCSA has also indicated that a rule making will be issued shortly to restrict the use of cell phones. A copy of the proposed rulemaking can be viewed here.
STOP THAT SCAM – I do not know if I would go this far, but one shipper took a stand against scam operators. In Utah three men posing as Atlas Van Line employees tried to scam a household goods customer by increasing her move price from $1800 to $5100. The woman checked to see if they were real employees and when she found that they were not she stood in front of the truck until the police came. Brave or crazy?
NAFTA – And the saga continues. Members of Congress have proposed legislation which would allow the implementation of NAFTA. They simply want to pull trucking from the NAFTA legislation and have sent a letter to the DOT requesting that it be done. They believe that this will remedy all of the truck safety, homeland security and unemployment issues since the trucks will not be allowed in. Guess how Mexico feels about this?
INTERMODAL CHASSIS REQUIREMENTS – The Ocean Carrier Equipment Management Association and the Institute of International Container Lessors has filed a petition for reconsideration of certain aspects of the new rule. Specifically they have requested that the record-keeping requirement be changed. Right now, drivers are required to conduct a pre-trip inspection before accepting the chassis for on-road use. Drivers are required to refuse any equipment found to be defective or need repairs. Records are required to be submitted on all inspections. The group is requesting that drivers not be required to submit inspection reports on chassis which do not have any known defect or damage. They believe that requiring submission of all reports will result in too many reports and the chance that those which are important and show needed repairs will get lost in the shuffle.
CSA 2010 – The FMCSA has delayed the implantation of the CSA 2010 until later this year. Full scale implementation of the system is now projected for next year. The delay is to permit carriers to check their own data and allow that review to continue until November. The FMCSA has also confirmed that it will replace SafeStat with the CSA 2010 system.
ECONOMIC NEWS – Avondale Partners has reported that there were 730 truck failures in the first quarter, the largest number of failures since the third quarter of 2008. Overall 7,100 companies have gone under in 3 years. The 730 carriers who shut their doors had an average of 46 trucks each, cutting overall capacity by 33,660 heavy-duty vehicles. On the upside, there is more freight for those who remain. Trucking jobs are on the increase as manufacturing starts to move product again. There have been reports that salaries are increasing in the trucking industries as increased freight generally comes along with driver shortages. Keeping good drivers is once again a focus of the trucking industry. Many of the publicly traded trucking companies have reported good first quarter earnings, supporting the hope that the economic recovery is moving forward. The strength of a carrier’s balance sheet continues to be a critical component of the underwriting process. Firms with manageable debt loads that have kept current with their equipment payments will have a much better chance of success. Cash flow will be critical and we remind you that it is important to get a CAB Financial rating when underwriting any account.
CURRENT CASES
AUTO
In the Southern District of California the court held that an independent owner operator working for a trucking company would be considered an “insured” under the auto policy. As the policy excluded coverage for injury to an insured, the policy did not apply to the owner operator’s claim for personal injury. (Progressive Casualty Ins. Co. v Soto, 2010 WL 1407264)
Defense verdicts were big this month. The Court of Appeals in Washington upheld a defense verdict for a shipper who had succeeded in defeating a truck driver’s claim for injuries suffered when she fell at the shipper’s plant. The court held that the shipper did not create a dangerous condition simply because there was an ungraded area of natural vegetation near the loading site. The court also held that the shipper did not know that there was a risk of harm to invitees. (Narrance v. Ball Metal Beverage Container Corp., 2010 WL 1379990)
A trucking company in the Court of Appeals in Georgia was also successful. The plaintiff was precluded from recovering from the trucker when the court held that the plaintiff could well have avoided the trucking accident. The plaintiff had attempted to pass a stalled front end loader by venturing into oncoming traffic and was struck by a tractor trailer. (Weston v. Dun Transportation, 2010 WL 1576776)
The Supreme Court of Mississippi would not allow a truck driver’s record into evidence when the violations were unrelated to the type of loss suffered. The court also held that Federal Motor Carrier Safety regulations are relevant and admissible only if violations were the cause of the loss. (Utz v. Running & Rolling Trucking, Inc., 2010 WL 192507)
The Third District of Florida also upheld a defense verdict for a trucking company. The court held that where the only evidence the plaintiff had presented was a possible failure to inspect the vehicle, and the failure was unrelated to the cause of the accident, the trucker bore no primary liability for an accident. (Beltran v. Rodriguez, 2010 WL1460298)
A trucking company was also permitted to avoid summary judgment and was given a chance before a jury in the Court of Appeals in Washington. The Court held that negligence per se did not apply simply because a hose had broken off a tanker truck spilling liquid onto the roadway. The Court also held that the issue of whether there was negligence on the part of the trucker was a question of fact to be presented to a jury. (Mattson v. American Petroleum Environmental, 2010 WL 1453997)
The Southern District of Texas considered the claim of a manufacturer for defense and indemnity under a trucker’s auto policy and general liability policy where it was listed as an additional insured on that policy.. As the causes of action against the manufacturer were unrelated to the trucker’s operations the trucker’s policy was held not to cover the manufacturer. However the same was not true under the general liability policy. Of additional interest was the court’s holding that an insurer can not delegate the duty to defend. (Shell Chemical L.P. v. Discover Property & Casualty Ins. Co., 2010 WL 1338068)
CARGO
Once again, preemption. The Eastern District of Missouri held that all state law causes of action would be preempted. While the court suggested that the plaintiff should properly pled a cause of action under Carmack it was willing to conclude that a breach of contract action pled the necessary elements of a Carmack claim. (Wise v. Weaton Van Lines, 2010 WL 1489901)
The Northern District of California also upheld preemption. It also went further and held that forum selection clauses were not permitted under Carmack and that Carmack preemption extended to accessorial services. A loss which occurred during unloading would be subject to the preemptive effect of Carmack. (Travelers Property & Casualty v Legacy Transportation Services, 2010 WL 1463574)
The Southern District in Texas also held preemption applicable to a claim against a motor carrier. At the same time the court dismissed any claim for attorney’s fees as unrecoverable under Carmack and held that no cause of action would stand for consequential damages in the absence of any evidence of notice to the carrier, pre-shipment, of the potential for the consequential damages. (Armadillo Glass v. Emmegi USA, 2010 WL 1435159)
Be aware when settling a cargo loss without an indemnity agreement. A shipper has brought an action against a truck stop seeking recovery for 2 large pharmaceutical losses after settling with the motor carrier for its limitation of liability. The Southern District of New York held that the truck stop would be permitted to bring the motor carrier in as a third party defendant for contribution if permitted to do so under relevant tort law. (Royal Sun Alliance Insurance v. TA Operating, LLC., 2010 WL 1438990)
The enforceability of a Himalaya clause was considered in the Southern District of New York. The court held it applicable to a crane operator and stevedore who dropped a yacht when unloading it from the vessel. It was important to consider all of the arguments under possible shipping documents as the plaintiff’s efforts to enforce a service contract were unavailing. The liability and the form was determined under the bill of lading. (St. Paul Travelers Insurance Co. v. M/V Madame Butterfly, 2010 WL 1244285)
Celsius or Fahrenheit? The failure to ask that question got the motor carrier in trouble in the District Court in New Jersey. The court held that it was reasonable to assume that any temperature requirement would be in Fahrenheit when given in the United States and held the carrier liable for failure to properly set the temperature. The shipper was also awarded selling price for the cargo which was spoiled as a result of the temperature abuse. (Kraft Foods v. Transportation Made Simple, 2010 WL 1257717)
What are the obligations of an insurance broker to make sure that a shipper has full coverage for all of its goods held throughout the world? The Eastern District of California granted judgment to the insurance broker when the insured did not have coverage for all of its Katrina losses under its ocean cargo policy. In this case some of the goods were already in storage at the time that the ocean cargo policy was procured and where therefore no longer in transit. The court held that the broker had no increased obligations to the insured to verify whether all of their goods would be covered as soon as the policy incepted. (Dairy America, Inc. v. New York Marine & General Insurance Company, 2010 WL 1328740)
MISC
It is not premature for an insurer to seek a declaration regarding coverage even when the insured has not sought coverage from the insurer. The Northern District of Texas held that the insurer was permitted to seek a declaration that injuries suffered by an employee were not covered in anticipation of litigation seeking damages. (Carolina Casualty Ins. Co. v. Tutle & Tutle Trucking Co., 2010 WL 1459207)
We do like to provide you with information on experts. This month the Eastern District of Missouri held that William Hampton would be permitted to testify on safety and operations of a trucking company. Specifically the expert would be permitted to testify concerning the failure of the trucking company to monitor the safety performance of their own fleet. (Burroughs v. Mackie Moving Systems Corp., 2010 WL 1254630)
Very often cases simply come down to a battle of the experts. In this case an insurer denied coverage under a contractor’s equipment policy for a loss caused by mechanical failure while the plaintiff claimed that it was unknown vandals who causes the loss. The court held that the cause of the loss was subject to debate by experts and therefore sent it to a jury. (Nord Excavating, Inc. v. Northland Insurance Co., 2010 WL 1326533)
Sometimes a criminal case is of interest. This month the Court of Appeals in Texas upheld the conviction of a cargo thief. The short opinion details the events of the cargo theft and should be of interest to underwriters. (Graham v. State of Texas, 2010 WL 1236317)
See you next month.
