Welcome to spring. It is a wonderful time of the year as we are all revitalized by the fresh spring weather. Speaking of reV*I*T*A*Lization, in case you missed our recent news bulletin, we are pleased to announce the introduction of our newest service, Vehicle Inspection Tracker and Locator System, otherwise known as VITAL. Now you can track individual vehicles and obtain even more critical information to underwrite and manage claims better. If you are a premium subscriber you already have access to this program for the rest of your contract. If you are not, you should be a subscriber. Call Laib Roberts at (212) 244-6575, ext 227 or e-mail by clicking here to arrange for your free trial of this amazing program.
This month we report:
BANKRUPTCIES – The economy continues to take its toll on the transportation industry. This month saw 4 more good size carriers go under. Mid-States Express, Inc., Price Trucking, F.T. Silfies and Gulf Coast Transport have all sought protection from the bankruptcy courts. There have been reports that some trucking companies are mandating across the board pay cuts in order to keep operations running. Avondale Partners, a financial analyst has reported that 480 trucking companies went out of business in the first quarter of 2009. This should stress upon all that financial underwriting is very critical in this market.
HOURS OF SERVICE – The Commercial Vehicle Safety Alliance is seeking to have the exemption for agricultural and utility service motor carriers repealed. The recent study by the DOT revealed that agricultural carriers operating exclusively within a 100-mile radius had a 19 percent higher crash rate than agricultural carriers operating outside a 100-mile radius The study also showed that in 2007, agricultural carriers as a whole had higher violation and out-of-service rates than the rest of the trucking industry in the categories of unsafe driver, driver fitness, vehicle maintenance and improper loading; the overall average increase was 32 percent
TRANSPORTATION SECURITY – The GOA has issued its report on the need for increased security in the transportation industry to prevent the use of trucks as a weapon by terrorist organizations. The office recommended that the TSA establish a process to coordinate state local and industry operations to better protect the country. A copy of the report can be viewed here.
NAFTA – Mexican truckers have now formally served notice that they will be seeking billions in damages for U.S. violations of NAFTA. While on our side of the border the OOIDA has requested that the court determine whether the DOT has the right to determine whether Mexican regulations meet federal guidelines.
CRITICAL REGULATION VIOLATIONS – The FMCSA has announced that it will begin imposing maximum fines on repeat offenders of critical regulations. In prior years carriers would not be accessed additional fines until there were 3 serious violations. Under the new guidelines the penalties will be imposed where there are two violations in a six year period.
ROAD FATALITIES – The DOT’s National Highway Traffic Safety Administration reports that 37, 313 people were killed in motor vehicle traffic crashes in 2008. The number has not been lower since 1961. The fatality rate has also dropped. There were 1.28 fatalities per 100 million vehicle miles traveled, down from 1.36 in 2007. Much of this is accredited to the economic downswing as more people stay off the road.
INDEMNICATION CONTRACT CLAUSES – In a move highly desired by truckers and truck insurers alike more states have moved to prohibit contractual indemnification clauses which shift the responsibility to the trucker for injuries arising from a shipper’s negligence. Wyoming has passed the law, New Mexico is awaiting the Governor’s signature and North Dakota has gotten it through the initial legislative stages.
CURRENT CASES:
The Southern District of Texas held that the Carmack Amendment could be applicable to losses which occur in Mexico. The court held that as long as there was evidence of a through bill of lading, commencing in the United States, Carmack would apply. (Apparel Production Services, Inc. v. Indiana TransportUnited States District Court, S.D. Texas, Laredo Division. APPAREL PRODUCTION SERVICES, INC., Plaintiff, v. INDIANA TRANSPORT, S.A. de C.V. d/b/a Indiana Transport and Trafago Forwarding, Inc.,
The question of whether the theft of two trailers is one theft or two has been raised by cargo insurers in the past. This month the District Court in California held that it was one occurrence for the purpose of recovery under a cargo policy. The Court said that the burden was on the insured to establish that it was two separate thefts; otherwise it would be one occurrence. (Budway Enterprises, Inc. v. Federal Ins. Co., 2009 WL 1014899)
The same court also, once again upheld the preemption doctrine. Of note to subrogation departments, the court also held that a subrogation notice that a claim would be forthcoming was insufficient to meet the cargo claim requirements. (Allstate Ins. Co. v. Mayflower Transit, LLC, 2009 WL 1015120)
In other cargo liability news the District Court in Florida held that an option to defend was not a duty to defend so the insurer could also not be liable for failure to defend. The Court also held that the insurer had no duty to investigate and determine whether the carrier was liable for the loss or whether there was any defense available to the carrier. As the policy was one which indemnified the insured for its liability, it was up to the motor carrier to make the requisite showing. (Underwriters At Interest Subscribing To Certificate No. 3860-7800-0000-0025 v. Seaboard Marine Ltd., 2009 WL 928719)
The Southern District of Ohio considered both a carrier’s liability for loss to a shipment of meat and the applicability of coverage under the carrier’s policy. The court held that the shipper was entitled to full recovery for a cargo loss, but was not entitled to attorney’s fees under the Carmack Amendment. The cargo insurer sought to deny coverage on the basis that the meat was actually damaged while in the possession of the wrecker when it was trying to uplift the trailer after an accident. In an interesting analysis the court actually looked to see whether the meat was damaged while in the possession of the motor carrier, and held it to be a question of fact as to whether it was damaged while in the possession of the carrier or during the wrecker operations, even though the motor carrier would be liable for the loss. The court also held that a right to defend under a cargo policy was not a duty to defend. Directly contrary to the decision addressed above, this court held that there was a question on whether the insurer undertook a proper investigation and left open the issue of bad faith. (Great West Cas. Co. v. Flandrich, 2009 WL 824719)
The need to ensure that terminology is uniformly used throughout a policy is something that you have heard from us over and over again throughout the years. The Third Circuit Court of Appeals considered it this month in interpreting the warehouse coverage under an ocean cargo policy. As the insurer failed to delineate that the policy only covered imported goods, coverage was provided for the insured’s storage of international and domestic goods, which resulted in a substantially larger claim. (Royal Ins. Co. of America v. KSI Trading Corp.. 2009 WL 1011980)
We have reported on the ongoing saga of the effect of a default judgment on an MCS-90 claim. The Eastern District of Michigan held that the default against the trucker was sufficient to establish the negligence required by the MCS-90. The court also held that the plaintiff was not entitled to damages under the Uniform Trade Practices Act as the issues were reasonably in dispute and the insurer was entitled to litigate the matter. (Hawthorne v. Lincoln General Ins. Co. 2009 WL 1035293)
The application of the lessee as an insured exclusion was the topic of choice in the Eastern District of Tennessee. Coverage was sought under the trailer owner and lessor’s policy on the basis that the MCS-90 endorsement negated the exclusion. The court held that it did not negate the exclusion and that the MCS-90 applied only to the obligations of the named insured. (Armstrong v. U.S. Fire Ins. Co., 2009 WL 804670)
The Court of Appeals in Mississippi ruled this month that a trucker and its driver were not covered under the hired car coverage afforded by the shipper’s policy. The court held both to be independent contractors not under the control of the shipper. (Lewis v. Progressive Gulf Ins. Co., Inc., 2009 WL 820221)
The importance of confirming that a filing is properly cancelled is something that is not always considered by an insurer. The Court of Appeals in Georgia addressed the question of whether a state cancellation which was incorrectly completed was actually a cancellation. On this occasion the court held that the error was not substantive and the burden was on the state to return it for the correction. In the absence of evidence that the state returned the form, and the insurer failed to correct, the court held that the filing was cancelled. (Brown v. QBE Ins. Corp., 2009 WL 783081)
Once again a court has held that suit can not be commenced against a motor carrier in a state where the accident did not occur simply because the carrier is a regulated carrier. While it will confer jurisdiction on the defendant, it will not support venue and the case was transferred from the District Court in New Jersey. (Butz v. Schleig, 2009 WL 971410)
The 11th Circuit Court of Appeals held that an insurer is not obligated to notify the state regulatory agency when a motor carrier’s policy simply expires. Notice is required only when the policy is cancelled. The Court also held that it would not imply an MCS-90 endorsement which was not actually part of the policy, especially where there was no evidence that the insurer was aware of the carrier’s interstate operations. (Waters v. Miller, 2009 WL 997647)
Werner Enterprises was successful in having a $3 million dollar judgment remanded back for a new trial in the 10th Circuit. The court held that plaintiff’s counsel’s improper statements concerning the defendant and its attorney, as well as counsel’s misstatement of non-existent admissions was enough to send the case back for a new trial. (Whittenburg v. Werner Enterprises Inc., 2009 WL 884616)
An insurer’s efforts to seek reimbursement of MCS-90 payments was partially successful in the District Court in Minnesota. The court held that the insurer was entitled to recover payments and expenses from the named insured. However the court would not permit recovery from the equipment leasing company. The court held that the leasing company would not be liable for the actions of the motor carrier and therefore not an insured under the policy or bound by the reimbursement provision of the policy or the endorsement. (Canal Ins. Co. v. J. Perchak Trucking, Inc., 2009 WL 1086524)
The move to impose punitive damages against motor carriers for driver’s operations seems to be on the rise. This month the court held that the issue of the driver, and the carrier’s liability for punitive damages would go to a jury. The court acknowledged that Pennsylvania would, if applicable, impose punitive damages on the carrier both for its own liability and for the vicarious liability of the driver. (Burke v. Transam Trucking, Inc. 2009 WL 827765)
The Ninth Circuit refused to impose vicarious liability on a shipper for the actions of a truck driver. The court would not let stand a negligent entrustment claim against a shipper who entrusted its loaded trailers to a carrier who was alleged to have been improperly trained by the motor carrier. Alaubali v. Rite Aid Corp., 2009 WL 886889)
The Western District of Texas held that the employee and domestic employment exclusions in a policy would apply to a personal injury action and that the standard MCS-90 endorsement would not, as a general matter, change the applicability of that exclusion. However as there was conflicting testimony and evidence as to exactly what policy and MCS-90 endorsement was issued, and which insurer actually provided coverage, the court denied judgment to the insurer until such time as those matters were resolved. (Canal Ins. Co. v. Flores, 2009 WL 1033770)
The Middle District of Pennsylvania was requested to consider the impact of the MCS-90 and Pennsylvania state law on an Occupant Hazard Exclusion. However as there was insufficient facts for the court to determine if the accident involved interstate or intra-state carriage, judgment was denied. (Canal Ins. Co. v. J. Perchak Trucking, Inc., 2009 WL 959596)
The ramification of destruction of evidence continues to be a source of contention. This month the District Court in Colorado would not impose sanctions on a trucker which failed to maintain records on vehicles where there was no evidence of willful destruction and no formal notice by the opposing party that items must be maintained. It is important to remember to send those notices out early to prevent a possible party from destroying records. (Salvatore v. Pingel, 2009 WL 943713)
I look forward to seeing many of you at the upcoming IMUA meeting. Have a great month.
