Volume 11, Edition 7 (posted 7/29/2008)
This will be a short Bits and Pieces this month as I am writing this from the Green Mountains of Vermont. Work and the transportation industry seem so far away and just not quite as important! I hope you all get the chance to take some time off this summer. It is just a great feeling. I can give you some news for the month:
HAZARDOUS MATERIALS – The Transportation Security Administration has released security recommendations for the transportation of certain quantities of hazardous materials. These guidelines are currently voluntary, but will be looked to as standard for the industry. TSA’s security action items address general security; personnel security; unauthorized access; and en-route security. General security measures include conducting security threat assessments, security planning, protecting critical information and enhancing awareness of industry-security practices. Personnel security and unauthorized access refer to practices affecting the security of a motor carrier’s employees, contracted employees and its property. En-route security refers to the actual movement and handling of motor vehicles transporting highway security-sensitive materials. The nine page recommendations can be viewed here.
HOUSEHOLD GOODS MOVERS – The FMCSA is once again on the attack against movers that violate consumer protection and safety regulations. In a recently conducted strike force investigation involving nearly 350 moving companies located in 13 states and the District of Columbia the FMCSA issued 1,140 violations of federal regulations and issued nearly $325,000 in assessed fines. From May 5 through May 16, FMCSA — in cooperation with state law enforcement and consumer protection agencies — conducted focused compliance reviews on carriers hired to transport consumers’ personal property across state lines. They chose the states with the most complaints filed with the FMCSA for the 2007 year. A list of the carriers who were cited can be viewed here.
STOCK REVIEW – The transportation economic industry may have had some good news this month. Transport Topics reported that its mid-year review of the stock prices of publicly traded U.S. carriers showed that 27 of the 36 carriers reported stock price increases. Many analysts do not see this as a major rebound, noting that the prices are still lower than 2007 and gas does not seem to be getting any cheaper. It sounded good anyway.
SAFETY STUDY – A GAO safety study caused much public interest this month. I must extend my thanks to the Hanover underwriter who sent the information to me moments after its release! Thanks for staying on top of these things and helping get it out to the industry. Keep them coming. The report, which generated articles and television reports indicates hundreds of thousands of medically unfit truckers are operating on the road. Texas, Maryland, Georgia, Florida, Indiana, Pennsylvania, Illinois, Michigan, Alabama, New Jersey, Minnesota and Ohio has the largest number of violations, accounting for over ½ of the violations. Hearing started last week on why the FMCSA has not completed any of the regulations proposed 7 years ago and those hearings are expected to be contentious. A copy of the report can be viewed here.
LATE REPORTING – New York has finally gone the way of the rest of the country. The last remaining stand for support of a denial of coverage for late reporting, without a showing of prejudice, has fallen. The new rule goes into effect March, 2009 and now requires insurers in New York to establish that a late report materially prejudiced the carrier in evaluating the claim.
CDL LANGUAGE ISSUE – The push appears to be getting stronger as states start to enforce regulations requiring that CDL licenses tests be given in English, with no translations possible. Missouri has passed their law this month and the FMCSA has proposed new rulemaking which would eliminate the use of translators for drivers who can not pass the test without them.
INSURANCE PREMIUMS – I’m not sure if this is correct, but Transport Topics has reported that insurance premiums for truckers are falling at a rapid pace, with reports that over the last 18 months rates have fallen from 10% to 50% as new insurers enter the market. Let’s hope not. We would like to hear your feedback on the issue.
NAFTA – As you may recall, the FMCSA continued its pilot program after legislation failed to make it clear that funding would not be provided for existing programs. Legislation has been introduced to amend the statute to make it clear that the FMCSA can not continue its program.
An unhappy UPS customer was unable to avoid dismissal of all other causes of action in the District Court in New York, in a case involving federal common law and not the Carmack Amendment. The plaintiff sought to assert a claim for breach of an insurance contract based upon his purchase of additional insurance coverage with UPS. The court held that even when the shipment is not regulated the customer’s sole remedy is one for breach of the transportation contract. (Feldman v. UPS, 2008 WL 2540814)
The District Court in New Jersey also upheld preemption in a Carmack action, dismissing all but the breach of contract action against the motor carrier. The court also refused to permit an action to continue against a local drayage carrier which had performed all of its transportation in New York. (NII Brokerage, LLC v. Roadway Express, Inc. 2008 WL 2810160)
The Missouri Court of Appeals considered Missouri’s position on the placard rule. The Court held that the vicarious liability imposed by simply having placards on the truck could be rebutted only when the carrier has attempted to end the lease and reclaim the placards or where the driver has embarked on a personal mission. The court held that vicarious liability would exist when the driver was transporting a vehicle back from maintenance, concluding that maintenance was in the interest of the motor carrier. (Horner v, Fedex Ground Package System, Inc. 2008 WL 2726341)
The Northern District of California held that insurer of the cargo owner had no standing to pursue an action when the cargo owner was not named on the bill of lading. The court also held that the Carmack Amendment did not require that the carrier offer a full value rate – simply a choice of rates. (OneBeacon Insurance Co. v. HAAS Industries, 2008 WL 2740330)
In a contrary action, the Eastern District of Wisconsin rejected an argument that the ultimate cargo owner has no standing when it was not a party to the bill of lading. The Court also held that the Carmack Amendment venue statutes did not trump the obligation of a shipper to establish personal jurisdiction over the motor carrier in the relevant jurisdiction. (Winona Foods v. Timothy J. Kennedy, 2008 WL 2570600)
In the Middle District of Pennsylvania a plaintiff was entitled to the benefit of an adverse inference because of a motor carrier’s spoliation of evidence. The motor carrier had destroyed the driver’s logs for the week preceding the accident, after receiving notice from the plaintiff’s counsel that all records were required to be retained. The court held that the destruction of the records prevented the plaintiff’s from ascertaining whether there were any violations of the safety regulations. It is important to make sure that records are secured after an accident. The adverse inference can seriously impact the defense of a suit. (Ogin v. Ahmed, 2008 WL 2580374)
A warehouseman’s effort to defeat liability following a fire was unsuccessful this month in the Southern District in Illinois. Shortly after the fire the Illinois Environmental Protection Agency ordered all evidence destroyed, which included paint products. Although the warehouseman was able to produce evidence of its normal operations, the court held that insufficient to overcome the presumption that they were negligent in this instance. The court also refused to enforce a limitation of liability when the parties had failed to sign the agreement, although it did appear that they were operating under the new rates. (Continental v. TKT, Inc. 2008 WL 2766078)
The fact that a court will go far to find a defense obligation was brought home in the Middle District of Alabama this month. The insurer, whose policy provided coverage only for trailers while attached to a scheduled tractor, was obligated to defend a mobile home hauler when the mobile home, unattached for more than a day, fell on the plaintiff. The court held that as there was an allegation that the mobile home hauler has acted negligently while the home was attached to the scheduled tractor and found that sufficient to trigger a defense obligation. (Canal Insurance Co. v Cook, 2008 WL 2718355)
An individual unloading a vehicle is deemed an operator of the vehicle in Wisconsin. While the state statute does require that the insurer of the motor carrier be directly liable for the actions of an operator, the statute was held inapplicable where the motor carrier was registered in a different state under single state registration. The Court of Appeals in Wisconsin also held that the state omnibus statute was inapplicable to policies not issued in the state. (Sisson v. Hansen Storage Co., 2008 WL 247685)
Continuing with our recent efforts to provide information on experts, the District Court in Mississippi would not permit an expert, Larry Park, to testify that a driver should not have been given a CDL license. The testimony of other experts is also considered by the court. (U.S. Express, Inc. v. American Field Service Corp., 2008 WL 2714635)
The Court of Appeals in Georgia was not pleased when it was compelled to dismiss claims against a trucking company for an accident. The motor carrier utilized the services of a sales agent, who, without complying with the terms of its agreement, utilized an owner operator to pick up a shipment. The court held that the trucking company was not the statutory employee of the driver and that the trucking did not exercise control over the hiring by the sales agent, (Clarendon National Insurance Co. v. Johnson, 2008 WL 2699578)
Although this is only a decision attacking the sufficiency of an answer to the complaint, and the sufficiency of pleading certain affirmative defenses, we did want to note that the case, which has not yet been fully litigated, address one of the current common cargo losses occurring this year. Once again a motor carrier has been sued for a cargo loss for which the motor carrier contends it was never hired to haul. Identity theft has become a big concern in the motor carrier industry, especially in the Midwest, where the last year has seen a large surge in thefts of cargo in the metal industry. (Northern Indiana Metals v. Iowa Express, 2008 WL 2756330)
The Court of Appeals in Kentucky rejected a claim by a shipper that it could ignore the unattended vehicle endorsement in a cargo policy because it was given a certificate of insurance which did not contain notice of the exclusion. The court rejected the plaintiff’s argument because the certificate clearly stated that it was subject to the policy terms and conditions. The court did specifically consider, and reject, other decisions in which the certificate was held to provide greater coverage, something to be considered by underwriters when issuing certificates. Schindel, Farman, Lipsius, Gardner & Rabinovich, LLP was lead counsel for the successful insurer. (Ann Taylor, Inc. v. Heritage Insurance Services, 2008 WZL 2696735)
The 10th Circuit Court of Appeals considered the effect of the MCS-90 endorsement this month. The auto liability insurer had accepted coverage and paid its policy limit. A different insurer, who did not cover the vehicle, had the MCS-90 exposure. The Court, recognizing that its position was the minority view in the country, continued to hold that the endorsement only negates limiting provisions in the policy to which it is attached but does not establish primary liability over other policies that are primary by their own terms. The Court also held that the carrier with the MCS-90 still had an exposure even when the auto liability carrier had paid its limits of $750,000. (Carolina Casualty Ins. Co. v. Yeates, 2008 WL 2737274)
Have a great summer. See you next month.