Welcome to Spring. I don’t know about you but I am pretty tired of winter and looking forward to some sun and warmth here in New York City. I have received my package for the IMUA annual meeting and remind you that if you have not registered you should head over to the IMUA web site (after reading this report, of course) and sign up at www.imua.org. I am looking forward to meeting so many of you there.
This month we report:
MEXICAN STANDOFF? – President Obama has pulled the cross-border pilot program. In response to that directive, Mexico has imposed tariffs on approximately 90 products which is expected to cost millions. In other NAFTA news, a government funded intelligence group has issued a warning to trucking companies operating near the border. There is a high security risk as truckers are being exposed to violence and hijacking as a result of the Mexican drug wars. Apparently a number of hijacking rings have already been located and disbanded.
HOURS OF SERVICE RULES – Back to the drawing board. Well at least that is what some organizations hope for. A request for reconsideration of the final rules has now been filed in the District Court by the Teamsters and certain public safety groups. The ATA has moved to intervene to oppose the reconsideration. Want to take bets on whether the border opens before the rules go into place?
UNIFORM CARRIER REGISTRATION – The program, designed to help reduce overall carrier fees, and placed into effect in 2007 has not accomplished its goal. A proposal has now been recommend by the board to more than double the existing fees. For example, the fee for a 1,000 truck fleet would rise to $83,000 from the existing $37,000 fee. Expect some opposition.
INCREASING BANKRUPTCIES – As we wait for the end of the first quarter a number of analysts are reporting expectations that there will be higher bankruptcies this quarter as fuel surcharge revenues have slowed or disappeared. We remind you that it is critical to perform financial underwriting of your motor carriers in order to properly understand your risk. Getting the most up to date financial information is more important today then ever before and we are here to help.
GUILTY PLEAS – A number of months ago we reported on two individuals who were arrested for defrauding truckers. They had cleverly manipulated the FMCSA website and conned truckers and brokers to the tune of $2.4 million. They have now pled guilty. Identity fraud has seriously impacted the trucking industry this year and is something to be considered when evaluating a risk and it is important to know if your policy will cover that exposure.
ATA U.S. FREIGHT TRANSPORTATION FORECAST – The ATA has released its annual forecast and the forecast is good. According to the ATA, trucking with increase its share of freight transport by 2020. Now all we need to do is get the rest of the economy up to speed so there is something to put in those trucks.
FMCSA REPORTS ON SAFETY SYSTEMS – The American Transportation Research Institute has released its report on the return on investment for onboard truck safety systems. The forward-collision warning system, the roll-stability control and lane-departure warning systems were all found to have resulted in significant return on investment. A copy of the report can be viewed here.
CURRENT CASES:
The Southern District of Florida held that a pharmaceutical company was entitled to dispose of a shipment of insulin that was transported outside of agreed upon temperatures without actually showing that the product was damaged. The court held that the likelihood of exposure to sub-freezing temperatures, and safety concerns, precluded any further question of damage. The court also awarded the plaintiff its internal transfer price for the goods. (Eli Lilly and Co. v. Air Exp. Intern. USA, Inc., 2009 WL 667451)
A special thanks to Lon McCarty at Canal Insurance Company who sent us over an interesting decision to share. The Court of Appeals in Louisiana held that a plaintiff’s prior drug use and criminal actions could not be admitted to attack statements concerning his post accident personality changes. The court also reversed a defense verdict and held that a truck driver was 60% liable for an accident in which the driver changed lanes and was struck by the following vehicle. (Brewer v. J.B. Hunt Transport, 2008 CA 1666)
In a continuing effort to report on experts you might be interested in we can tell you that the District Court in Washington upheld the admissibility of the testimony of Charles Lewis. He was allowed to testify concerning the cause of a load shift which resulted in an accident. (Smith v. Ardew Wood Products, Ltd., 2009 WL 691133) In the Southern District of Indiana the court permitted Cline Young to testify on certain aspects of an accident reconstruction, and essentially dismissed all possible testimony by the plaintiff’s expert, Red Owen. (McQuiston v. Helms, 2009 WL 5554101)
The enforceability of the indemnity clause under the UIAA agreement was addressed by the court in the Northern District of Indiana. The court held that the motor carrier was obligated to undertake the defense of the ocean carrier and that separate counsel was required where indemnity depended, ultimately, on whether the container owner was negligent The court equated the provisions of the indemnity to that of insurance and utilized insurance principles to reach its decision. (Sitek v. J. Cerna Trucking, Inc., 2009 WL 624345)
The fact that a rate confirmation agreement provided that the driver would be responsible for loading was not enough to allow a shipper to exonerate itself from liability. The court held that there was still a question of fact as to whether the shipment was improperly loaded and should have been noticed by the motor carrier. If the shipment was improperly loaded and the carrier would not reasonably have known, the shipper would remain liable for the loss. (Big G Express, Inc. v. Leviton Mfg. Co., Inc., 2009 WL 690814)
We do not get many cases coming out of Oregon. This month the District Court in Oregon held that theft by an employee would not invalidate a limitation of liability, as it was not a true conversion by the carrier. The court also held that federal common law, which governs domestic air transport, would preempt all state law claims. (Otterson v. Federal Express Corp.Otterson v. Federal Exp. Corp. , 2009 WL 536280)
The Eastern District of Michigan addressed whether an interline carrier can have a limitation of liability which is separate from the originating carrier. The court concluded that when the originating carrier was not a freight forwarder it was not authorized to enter into contracts which limited the rights of the shipper. (Osman v. International Freight Logistics, Ltd. , 2009 WL 648520 (E.D.Mich.))
A court in Massachusetts considered the rights of an insured to recover under an inland marine policy for expenses incurred in inspecting product at its facility after a fire. The court held that the insurer was obligated to reimburse the insured for all expenses incurred in mitigating a claim for goods which were at the facility less then 30 days. The court also addressed the insured’s right to recover for additional items of customers which were damaged but at the facility more than 30 days. The court denied coverage on the basis that the goods were held under a storage receipt, noting the absence of definition of a storage receipt, but luckily finding that the invoice was sufficient to meet a standard view of a receipt. The decision may be of further interest to inland marine underwriters as it address the various recoveries available under a real and personal property form. ( Demers Bros. Trucking, Inc. v. Certain Underwriters at Lloyd’s, London 2009 WL 530915 (D.Mass.))
An insurer was successful in its argument that its policy limit of $1 million per accident was applicable to a multiparty accident. The injured parties argued that the MCS90 endorsement and the financial responsibility statutes required a minimum of $750,000 per person. The 7th Circuit disagreed. (Carolina Cas. Ins. Co. v. Estate of Karpov 2009 WL 673598 (C.A.7 (Ind.)))
The District Court in Kentucky considered the effect of an international ocean bill of lading, and a service contract, on the liability of the inland carrier. The court held that the service contract, which provided that the ocean carrier would indemnify the shipper for all cargo loss was sufficient to defeat the package limitation and also held that the contractual provision which required suit against the ocean carrier and not the downstream carriers did not preclude a claim against the downstream carriers. CNA Ins. Co. v. Hyundai Merchant Marine, Co. 2009 WL 700206 (W.D.Ky.)
Related companies, one a broker and one a carrier, often find themselves in the same action. This time the Eastern District of Arkansas actually dismissed the broker company, holding that there was no evidence that they were involved in the loss. They also held that a question of fact remained against the motor when a packed by owner shipment was found damaged at destination. (Corbin v. Arkansas Best Corp., 2009 WL 707407)
An insurer’s attempt to keep a cargo loss in New York was defeated this month where the limited connection to the state was based only on the presence of the claims adjuster and some possible witnesses who were outside the court’s venue. The proper jurisdiction was analyzed under Carmack and the case transferred. (Federal Ins. Co. v. Custom Expedite LLC, 2009 WL 508393)
At least in Florida if the suit can be brought in contract, a tort claim is barred under the economic loss rule. In an action in the Southern District in Miami the court held that a tort claim against a warehouseman was barred, leaving the plaintiff only to its contract claim. (Liberty Seguaras, S.A. v. Nobel Cargo Systems, Inc., 2009 WL 465044)
The Eastern District of Pennsylvania refused to dismiss a claim for punitive damages against a trucker. In the action the truck driver took a high shipment on a road which was marked at a height below the height of the shipment. When the driver hit a bridge the cargo fell off and killed a driver in a following vehicle. The court held that there were sufficient facts to allow the case to proceed to determine if the actions warranted punitive damages. (LaMaze v. Vidov Trucking, Inc., 2009 WL 650371)
It is really important to pay attention to discovery demands served, as one counsel found in the Northern District of Ohio. A household goods carrier sought sanctions against the plaintiff who failed to respond to discovery on the alleged damages to their goods. The court awarded attorney’s fees to the carrier, all to be paid by the plaintiff’s counsel. (Halpern v. Atlas Van Lines Inc. 2009 WL 484202)
As we all know, most shipper’s contracts require the trucker to indemnify the shipper for auto accidents. This month a shipper in Pennsylvania was dismayed to find that it could not enforce a contractual indemnity agreement when the master contract was determined not to apply to the subsidiary involved in the accident. While the parties may well have operated under the terms of the contract, the lack of execution of an amendment adding in the additional companies resulted in the loss of the shipper’s rights. (TDY Industries, Inc. v. National Freight Transp., Inc., 2009 WL 691947)
Trucking companies routinely utilize outside companies to supply drivers and other employees during peak season. On this occasion the individual was injured during his initial try-out at the facility. The court held that the plaintiff was still a borrowed servant of the trucking company and held that his exclusive remedy was worker’s compensation. (O’Donnell v. New England Motor Freight, Inc., 2009 WL 674131)
Kentucky does not provide for joint and several liabilities as each defendants stands on its own and bears its own responsibility for loss. Accordingly a third party action by a trucking company against a consignee must fail, as the trucker could never be liable for the actions of the consignee when a party was hurt during the unloading process. (Javins v. Five Star Freight Co., Inc., 2009 WL 465043)
When a driver comes onto the property of a shipper, the shipper bears responsibility for ensuring safe passage. The Supreme Court of Texas held that posting a 15 mile per hour speed limit notice was insufficient to warn a truck driver of a dangerous condition caused by potholes and held the shipper liable for the driver’s injuries. (TXI Operations, L.P. v. Perry 2009 WL 490059)
In an interesting twist, an injured plaintiff attempted to utilize an expert report prepared by an insurer for use in the insurer’s coverage case against the defendant. That coverage action has been resolved and the insurer and the defendant were now in harmony. The court refused to permit the plaintiff to utilize the report as the plaintiff could not authenticate the report so it was hearsay. (Lizotte v. Praxair, Inc., 2009 WL 564920) In another decision in the same case the court granted summary judgment to the trailer owner as there was no admissible evidence that there was any action which the trailer owner could have taken to prevent a crack in a weld. (Lizotte v. Praxair, Inc 2, 2009 WL 596600)
We are often asked whether various thefts which occur over a period of time constitute one event or multiple events for the purpose of coverage under a policy. This month the Eastern District of Wisconsin held that a series of thefts by an employee would constitute more than one event and would be subject to more than one deductible. (Basler Turbo Conversions LLC v. HCC Ins. Co., 2009 WL 585658)
Removal and preemption cases seem to go hand in hand. The Central District of California acknowledged that preemption continues to be the rule in an action removed to its court. However it held that the burden was on the defendant to establish the jurisdictional limit required. If the amount could not be determined from the complaint the defendant was required to produce admissible evidence to support a good faith belief that the amount met the minimum limit. (Titans Trading Corp. v. JTS Express, 2009 WL 537515)
See you next month.
