Volume 11, Edition 8 (posted 8/29/2008)
Well here we are at the end of the summer. We expect that most of you are already gone and will not even read this until September. We hope you enjoy (or enjoyed) the Labor Day Holiday. We would also like to welcome Michael Pennisi, our newest financial analyst. Hopefully you will get a chance to speak with him soon. Welcome Michael!
The slow pace of the August month results in little to report. We noticed that there were even fewer judicial decisions this month. But we can always find something to comment on.
BANKRUPTCIES DOUBLE – Once again we can not stress the importance of knowing the financial security of your insured. Transport Topics reports that trucking bankruptcies doubled in the second quarter, with 970 carriers closing up shop. This took approximately 88,000 trucks off the road. We are here to help you understand their financial records and help you evaluate their chance of continued success.
DRIVER HEALTH LEGISLATION – Congress has threatened to proceed with legislation which will require driver health checkups if the FMCSA does not have rule making in place by early fall. The current proposed rulemaking is apparently in review at the DOT and it does not appear that it will be ready for release soon.
DRIVER SHORTAGE – A recent study has indicated that there will be a severe driver shortage in the containerized import freight category as new security rules move forward. Many of the drivers who operate in and out of the port and airport areas are immigrants who, it is believed, may not be able to pass the rigorous security screening. On the other hand, other reports indicate that there is a driver surplus for experienced drivers due to the number of companies which have shut down, and the overall economic turndown in other industries.
NAFTA – Here we go again. The House transported committee voted to stop the DOT from its pilot program. Days later the DOT announced it would continue the program for 2 more years. Where this will wind up remains a mystery. As of now, 27 Mexican carriers with 107 trucks and 10 U.S. carriers with 55 trucks have joined the program.
In other NAFTA news, the DOT study just released indicates that surface trade among the United States, Canada and Mexico increased 6.6% in June, rising to $74.1 billion. U.S. imports dropped 0.2% to $24.4 billion, while exports rose 7.9% to $24.8 billion.
LANGUAGE SKILLS – Federal regulations require that all drivers be able to converse in the English language. After many years of ignoring this requirement, there has been a serious effort to enforce these regulations. Last year 25,230 tickets were issued nationwide. The newest proposal will require anyone applying for a CDL to be able to speak English during the road test and vehicle inspection. Currently a driver can have an interpreter. Thos subscribers who utilize our premium services can determine whether a driver has been ticketed for this infraction during inspection. Ability of the driver to understand cargo directions, and road operations, should be a factor in any underwriting analysis.
TRUCK CRASH DEATHS – The DOT has reported that truck related deaths fell 4.4% to 4,808 last year. The decline marks the second consecutive decline. The fatality rate per 100 million vehicle miles traveled was 1.37, the lowest fatality rate on record. The report can be viewed in its entirety at: http://www-nrd.nhtsa.dot.gov/Pubs/811017.PDF
BUS CARRIERS – As a direct result of the horrific bus accidents this month the FMCSA has suspended granting licenses for new bus companies. The FMCSA is attempting to determine how it can cross-reference applicants to determine if companies are operating under multiple names.
The Middle District of Florida determined that the misdelivery by a Federal Express ground handler of a shipment which was transported under an airway bill would not be subject to preemption, a ruling not favored by all courts. The court ordered the case remanded to the state court. The court also held that the Warsaw Convention limitations would not apply as the loss occurred outside the airport. (Universal Imports v. Federal Express, 2008 WL 2952843)
In a very surprising, and welcome decision, one Judge in the Southern District in New York has ruled that inland carriers are entitled to the benefit of the COGSA limitations without establishing compliance with all of the rules of the Carmack Amendment. The Judge held that the Supreme Court ruling in the infamous Kirby opinion was correctly decided and did not accept the 2d Circuit Court of Appeals modification of that ruling. (Royal & Sun Alliance Ins. Co. v. Ocean World Lines, Inc., 2008 WL 3854556)
The fact that there are many trucking companies bearing the same name was brought home for one plaintiff this month. The Eastern District of Arkansas granted summary judgment to US Xpress, Inc. in a personal injury action in which the plaintiff’s sole basis for the suit was a belief that the trailer which sideswiped the plaintiff bore the logo US Xpress. The court took notice that there 17 other companies with similar names and that US Xpress had interchange agreements with 119 other carriers. (Bode v. U.S. Express, Inc., 2008 WL 3845388)
The Ninth Circuit Court of Appeals affirmed a lower court decision in an action in which a successful insurer was represented by Schindel, Farman, Lipsius, Gardner & Rabinovich, LLP. The Court held that the attachment of an MCS-90 endorsement did not make a policy primary over another insurance policy. The court also held that the unsuccessful insurer could not establish that its insured knew it was supposed to report all drivers. (Clarendon National Insurance Co. v. H&G Transport, Inc., 2008 WL 3822309)
A similar issue was considered by the Western District in Washington shortly before the above decision was issued. The Court noted that the Ninth Circuit has not yet ruled on the issue of whether the attachment of the MCS-90 made a policy primary even when it did not, by its terms, provide coverage. The court went through the various positions in the other jurisdictions and concluded that the Ninth Circuit would decide that the MCS-90 endorsement did not make the policy primary. Good call in light of the Clarendon decision. The court also considered when a vehicle would be a temporary substitute vehicle. (Canal Insurance Co. v. Lincoln General Insurance Co., 2008 WL 3103270.
Every once in a while we throw in an interesting criminal case. This month we found a case involving the theft of a shipment of Nike shoes and the appeal of the conviction of the thief, the driver. It is an interesting story and, try as he might, his conviction was not overturned. (State v, Perry, 2008 WL 33667544)
There are always questions as to the condition of goods which are in storage for many years. In the District Court in Massachusetts the court held that a plaintiff met its burden of proof when he testified that the goods were in excellent condition when placed into storage and was able to produce testimony from the storage facility that the goods were in the same condition before delivery to the motor carrier. Unfortunately for the plaintiff he was then subject to a limitation of liability which was known to the storage company which hired the trucker for the plaintiff. (Center v. Roadway Express, Inc., 2008 WL 3824782)
Despite the many efforts by the plaintiff to avoid being found an employee of a trucking company, an insurer was successful in asserting its lack of coverage under a trucker’s auto policy. The plaintiff was a passenger in the tractor trailer and sought recovery from the driver and the trucking company. The court held the MCS-90 inapplicable, and upheld the employee exclusion and the occupant hazard exclusion. (Basha v. Ghalib, 2008 WL 3199464)
Preemption, preemption, preemption. This time the Northern District of Ohio actually dismissed a complaint where the plaintiff alleged only a negligence claim for cargo loss. Often the court will grant an opportunity for the plaintiff to replead the action. Not this time as the plaintiff will have to bring a whole new suit. .(Frankenmuth Mutual Insurance Co. v. D.J. Franzen, Inc. 2008 WL 3836535)
Bringing a declaratory judgment action in the venue where the accident occurred is not always the best place for an insurer. This month the insurer was successful in keeping its action in the venue where the policy was issued, and not where the injured parties suffered damages. The court looked to the policy issues to determine the correct venue. (Clarendon National Insurance Co. v. TMI Enterprises,, 2008 WL 3838025)
Enjoy the end of summer. See you next month.