Volume 16, Edition 10 - Central Analysis Bureau

Happy Halloween! May the ghouls and goblins stay away and may you only get candy in your trick or treat bag! Seriously though, as we head into the holiday season we wish you all the best. Enjoy the coming Thanksgiving holiday too.

The response to our training sessions has been great – We appreciate your taking the time to learn how the CABAdvantage can work for you. Because of the continuing interest we will be holding sessions again in November. These are open to anyone and we would encourage you to take advantage of this opportunity to learn about our new SALEs program and the CAB Basics. The SALEs training will be approximately 30 minutes and will demonstrate effective use of the system. The CAB Basics will be an hour and will include an overview of our new features as well as a refresher of the features and navigation of the CAB website. To register click on the following:

CAB Basics- Tuesday November 12^th at 3:00 p.m. EST

CAB SALEs- Wednesday November 13^th at 3:00 p.m. EST

In addition to our standard CAB Basic and SALEs training, we are going to be offering focus sessions. These will be short training sessions on a particular topic or feature of CAB. The November focus session will be November 19th, at 3:00 p.m. Eastern Time and you can click here to register. The session will focus on the Workspace and all of its features and different ways it can be used. Also, we would like your feedback on topics for future focus sessions. Please email us by clicking here with the topics you would like us to cover.

For those of you who will be attending TIDA’s annual seminar this year, we have a great training opportunity. CAB will be holding a subscriber training meeting prior to this year’s TIDA conference. On Wednesday November 13, 2013, from 3:30 PM – 5:00 P.M., prior to the Cocktail Reception, CAB will hold a hands-on training session on effective use of the CAB’s premier website to enhance claim handling. This session is only open to CAB Subscribers and space is limited. Please reserve your space here.

Shuie and Tiana were at the Transportation Risk Specialist’s annual Motor Carrier Insurance Education Foundation seminar this month and were pleased to bring back to the rest of us here all of the accolades for the programs that we offer. Thanks for all of the great feedback.

This month we report:

SLEEP APENA RULES – The Senate followed the House and approved measures to require the FMCSA to undertake a formal regulatory process before implementing any future requirements with respect to sleep apnea, which the President quickly signed into law. Rather than simply issuing guidance they will be required to analyze the potential cost of sleep apnea before they can determine the applicable regulations.

CARGO THEFT REPORT – Freight Watch International has reported that cargo theft in the third quarter is up 15 percent, but the average loss value is down about 5 percent compared with second quarter 2013. In the reporting period, FreightWatch recorded a total of 231 thefts, with 74 thefts in July, 76 in August, and 81 in September. The average loss value per incident was $154,866. Food and drinks topped the list, with 21 percent of all incidents from July to September. Following close behind was electronics, 29 thefts, home and garden supplies, 25 thefts. California remained the state with the most thefts, accounting for 31 percent of all thefts in the quarter. Florida took over the second spot with 30 thefts, while Illinois and Texas tied for third with 28 each. Georgia rounded out the top five with 15 thefts.

ANTI-INDEMNITY STATUTES – Nevada became the 39th state to limit indemnification clauses in transportation contracts. The clauses are placed into contracts to protect shippers or hold them harmless from anything that happens with a shipment. Nevada joins Idaho, Utah, Montana and Arkansas which implemented similar laws this year. Affected contracts in Nevada are defined as a contract, agreement, or understanding between a motor carrier and a shipper covering the transportation of property for hire by the motor carrier, entry on property to load, unload or transport property, including the storage of property. The protection excludes intermodal chassis, containers, or other intermodal equipment.

FMCSA ANNOUNCES MUTIPLE CHANGES TO REGULATIONS – The FMCSA announced 17 changes to its regulations now that the highway funding legislation was signed into law. All of the changes are effective as of Oct. 1, with petitions for review required to be filed by December 2. OOIDA provided the following list of the changes to the regulations:

Motor carrier related

Safety fitness of new operations. Previously new motor carriers underwent a safety review after 18 months of operation. MAP-21 changed that to a review after 12 months. Bus operations will be reviewed after 120 days of operation.
Increased penalties for operating without registration. Penalties have been increased to $1,000 for record-keeping violations and $10,000 for registration violations, up from $500 and $2,000 respectively.
Revocation of registration and other penalties for failure to respond to subpoena. Motor carriers that ignore subpoenas or an agency order to appear or testify can now be fined between $1,000 and $10,000, up from $100 to $500.
Fleetwide out-of-service order for operating without required authority. Previously if a motor carrier operated without proper authority or outside the scope of its authority the offending truck would be put out of service. Now the entire motor carrier can be put OOS.
Employer responsibilities. Employers were prohibited from allowing employees to drive with suspended, canceled or revoked CDLs previously and could be enforced on if they knew about the license. MAP-21 mandated a change that employers are now prohibited from letting a driver operate a truck if the employer knows or should reasonably know the CDL is not valid.
Penalties for violation of operation out-of-service orders. Motor carriers now face a $25,000 penalty for operating CMVs in violation of an unfit or imminent hazard OOS order.
Increased penalties for evasion of regulations. Willful violations of the federal regulations now have a $2,000 to $5,000 penalty for first offense and $2,500 to $7,000 for subsequent violations. Those amounts are increased from $200 to $500 and $250 to $2,000 respectively.
Civil penalties. Violations of hazmat regs that result in “death, serious illness or severe injury to any person or substantial destruction of property” now carry a penalty up to $175,000, up from $100,000. Violations of transportation of hazardous materials regs carry a fine up to $75,000, an increase from $50,000.

Foreign drivers and motor carriers

State reporting of foreign commercial driver convictions. States will now have to report convictions of foreign drivers to FMCSA of CDL holders as well as unlicensed drivers operating either commercial motor vehicles or non-CMVs.
Authority to disqualify foreign commercial drivers. MAP-21 mandated that the criteria to disqualify drivers now apply to foreign drivers as well.
Revocation of foreign motor carrier operating authority for failure to pay civil penalties. The regs on FMCSA’s authority to suspend, amend and revoke operating authority now apply to foreign motor carriers as well.

Enforcement community

Inspection demand and display of credentials. Employees of MCSAP-funded states are now included on the list of those authorized to inspect certain equipment and records.
Violations relating to CMV safety regulation and operators. The final rule removes “ability to pay” from the list of items to be considered by FMCSA when assessing a penalty on a motor carrier.
Emergency disqualification for imminent hazard. The definition of imminent hazard is changed to: “imminent hazard” means any condition of vehicle, employee, or commercial motor vehicle operations that substantially increases the likelihood of serious injury or death if not discontinued immediately.
Motor Carrier Safety Assistance Program. MAP-21 mandated that local governments can now be identified as MCSAP partners.

Brokers

Financial security of brokers and freight forwarders. The final rule officially sets minimum broker bond amount at $75,000.

Miscellaneous

Waivers, exemptions and pilot programs. The home state of a person granted an exemption must inform roadside enforcement of the exemption. Pilot programs no longer have to be published in the Federal Register.

TRUCKING TOP CONCERNS – American Transportation Research Institute released its study of the top concerns for the trucking industry. It was of no surprise that the HOS topped the list, with the CSA program, driver shortage and continued economic growth following the HOS. The other seven issues making ATRI’s 2013 Top 10 list were the electronic data logging mandate, truck parking, driver retention, fuel supply and prices, infrastructure funding, and driver health/wellness.

TRANSPORT CAPITAL SURVEY – Transport Capital Partners truck industry 3rd quarter survey was released and it indicates that shippers are not placing much emphasis on trucker’s CSA scores. The number of shippers not concerned by carrier CSA scores has increased from 15 percent to 22 percent, approximately the same numbers as in May 2012. The survey also showed that the use of electronic logging devices continues to grow and increasingly truck speeds are controlled.

DRIVER TURNOVER RATES – The annualized turnover rate at large truckload fleets rose two percentage points to 99% in the second quarter of 2013, its highest point since the third quarter of 2012 and just above the annual rate of 98% in 2012. Turnover at truckload fleets with less than $30 million in annual revenue remained unchanged at 82% while turnover at less-than-truckload fleets plummeted nine percentage points to 6% – the lowest level in two years.

FREIGHT FORECAST – The ATA U.S. Freight Transportation Forecast to 2024 was released this month. It projects trucking’s share of tonnage will rise to 70.8% by 2024 from 68.5% in 2012. It also reports that overall freight revenue will grow by 63.6% to $1.3 trillion annually in 2024 and trucking will see its share of those revenue rise to 81% from 80.7% in 2012, truckload volumes will grow 3.2% through 2018 and 1.1% annually between 2019 and 2024. Less-than-truckload volume should grow 3.5% annually through 2018 and by 2.4% until 2024, anemic growth for rail carloads of just 1.5% through 2018 and 0.4% from 2019 through 2024 contributing to a decline in market share to 14.2% from 14.8% in 2011 and intermodal rail will continue to be the fastest growing freight mode, growing an average of 5.1% a year until 2018 then slowing moderately to 4.8% annual through 2024.

OUT OF SERVICE REPORTS – Philadelphia, PA based Bus Go Bus, Inc. was placed out of service by the FMCSA because its vehicles and drivers pose an imminent hazard to public safety. Also, three drivers, Tracy A. Ferrell, Scotty G. Arnst and Stewart G. Snedeker were ordered not to operate any commercial motor vehicle in interstate commerce as an imminent hazard to public safety.

CASES

AUTO

Truckers are on the attack on the repeated demands for punitive damages and we see a number of cases this month that address the liability of truckers for punitive damages. In the Eastern District of Missouri the court held that a punitive damages claim could not be asserted in conjunction with a cause of action for vicarious liability for the actions of the driver. However the demand for punitive damages could stand when joined with a claim for direct negligence in failing to properly maintain equipment. (King v. Taylor Express, 2013 WL 5567721) Over in Nevada the District Court in Nevada held that there would be no claim for negligent hiring when there was truly only a claim for vicarious liability against the trucking company. However when the direct claim for negligent hiring or supervision sought to impose additional liability beyond that available for the derivative action, i.e a claim for punitive damages, the cause of action for negligent hiring or supervision would be allowed to proceed. (Wright v. Watkins and Shepard Trucking, 2013 WL 5585005 In the Western District of Virginia the court dismissed a claim for punitive damages against a trucking company. Where the facts supported that the suit was for a routine traffic accident there was absolutely no basis for a claim for punitive damages. (Boone v. Brown, 2013 WL 5416873)

Beware of missing court deadlines. A trucker in Missouri found out why when a judgment was entered against it for a personal injury action which it ignored. The trucker’s technical efforts to have the default vacated failed as the service was still good. The Court also held that a judgment rendered for $745,000 when the medical expenses were only $43,000 was not a violation of the trucker’s due process rights. The court also held that the trucker was not entitled to notice of the hearing on damages when it was in default. (Christianson v. Goucher, 2013 WL 545885)

When a shipper’s employee fatally ran over a truck driver who has just completed a delivery, the trucking company was not obligated to indemnify the shipper for its liability for that accident. The Northern District of Florida concluded that the indemnity provision was limited to losses arising from the negligence of the carrier and not of the shipper, further concluding that Florida law rejected any right to indemnity for a party’s own negligence. (Snyder’s-Lance, Inc. v. Cowen Truck Line, Inc., 2013 WL 5745709)

A trucker’s failure to produce any evidence that a plaintiff’s subsequent accident enhanced or caused additional damages rendered the trucker liable for all of the injuries suffered by the plaintiff. The Court of Appeals in Texas also upheld the legal sufficiency of the evidence used to support the jury’s verdict. (JLG Trucking v. Garza, 2013 WL 5570823)

The Southern District of Illinois considered the impact of a general liability policy on an auto accident when the motor carrier was sued both for causing the accident, and also for creating a dangerous situation which caused the loss. The motor carrier was in the process of an environmental clean-up from another event and the plaintiff alleged that the carrier failed to properly secure the scene. The Court held that the clean-up site was so intertwined with the accident that a claim for negligence related to the scene could not be treated as a totally separate tort. As the general liability policy excluded loss arising out of the use of the auto, coverage was not afforded, and there was no duty to defend or indemnify the motor carrier. (Cincinnati Insurance Company v. William F. Braun Milk Hauling, Inc., 2013 WL 5718201)

When a plaintiff’s case against the driver was dismissed because she did not complete service on the driver, the vicarious liability action against the trucker also had to fail in the Northern District of Indiana. The Court held that the trucking company could not be liable if the driver could not be held liable. The Court dismissed all causes of action, also concluding that there was no support for a claim for negligent hiring. (Kapitan v. DT Chicagoland Express, Inc., 2013 WL 5655704)

Under Montana law, the 9th Circuit ruled that a violation of a statute may be negligence per se, however the violation of a regulation was not. The Court support a defense verdict in favor of a trucker, concluding that there was insufficient evidence to show that the pigtail cables had detached and the turn signal on the trailer was not working at the time of the accident. (Mann v. Redman Van & Storage, 2013 WL 5648953)

Continuing in our efforts to report on experts in the field, the Western District of Kentucky held that Larry Cole was an expert who could testify as to existing trucking standards even through he was not an experienced trucker driver. However he was precluded from testifying as to his conclusions that the driver was negligent or that causation of the loss. (Seiber v. Estate of McRae, 2013 WL 567601)

The failure of a plaintiff to seek work after an accident can assist a trucking company in reducing potential damages. The Middle District of Louisiana, holding the motion to be borderline frivolous, held that the affirmative defense of failure to mitigate damages would be permitted where there was ample evidence that the plaintiff failed to seek acceptable employment after a truck accident. (Washington v. celadon Group, 2013 WL 5554273)

In Missouri, an excess insurer can recovery the amounts it paid when the primary insurer failed to settle with the policy limits on a theory of equitable subrogation. The Court sent the case back to determine if all of the necessary elements were present to establish the excess insurer’s right to seek recovery. (Scottsdale Insurance Company v. Addison Insurance Co., 2013 WL 5458918)

CARGO

In case you did not know it, cases against motor carriers for cargo loss in interstate commerce are preempted! The District Court in Florida rejected claims for fraud, unauthorized use of an artist’s name, and conversion for the loss of an interstate shipment of art work which was later found by the carrier and auctions as lost goods. (Mlinar v. UPS, 2013 WL 5538770)

A shipper’s letter asking for damages for an estimated total damage was sufficient to meet the claim filing requirements. The 5th Circuit held that the use of the word “estimate” was of the value of the items not of the claimed damages. The court also held that the cargo claim regulations do not require the claimant to specify the total amount of the claim and itemize the value of the components of the claim. (Williams v. North American Van Lines, 2013 WL 5354306)

The Texas Appellate Court reaffirmed that attorney’s fees are not recoverable under the Carmack Amendment, concluding that the state law claim for fees is preempted. (Daybreak Exp., Inc. v. Lexington Ins. Co., 13 WL 5629813)

The District in New Jersey held that when a motor carrier’s rates are based solely on the weight of the shipment, and not the value of the shipment, the motor carrier has not effectively limited its liability. The Court concluded that there was no opportunity to choose between different levels of liability. The Court also held that the burden rested with the carrier to show that a shipper was not entitled to market price. As the motor carrier has failed to meet that burden the motor carrier was liable for selling price for the goods. (Donna Karan Co. LLC v. Airgroup, 2013 WL 5730428 (D.N.J.))

Auctioning a customer’s goods requires strict compliance with the technical requirements of the relevant state. The Appellate Court in Indiana concluded that a facility had failed to properly dispose of the goods and held them responsible for the value of the goods. However it supported a substantial reduction in the value of the goods, given that plaintiff’s own valuation of his goods at $600 correlated to the sale price at auction. Interestingly the court held that plaintiff’s argument on sentimental value was not supported when he left the goods in a storage unit he failed to pay for. (McCreary v. Connersville Storage and Miniwarehousing, , 2013 WL 5744753 (Ind.App.))

The Southern District in California confirmed that the good faith settlement procedure in California would apply to Carmack cases. The Court held that UPS’s settlement with the cargo owner when there was a dispute over the applicability of a limitation of liability was a good faith settlement and that UPS could continue its indemnity and contribution claim against the actual carrier. (Rohr, Inc. v. UPS-Supply Chain Solutions, Inc., 2013 WL 5676355)

The Eastern District of California remanded a case back to State Court when the defendant had failed to show that the action was fully preempted by Carmack. As the defendant was a transportation broker, and the complaint did not specifically allege Carmack liability, there was an insufficient showing that the Court has jurisdiction over the action. (Lion v. Echo Global Logistics, Inc., 2013 WL 5718728 (E.D.Cal.))

Preloaded household goods are becoming a bigger part of the household goods transport industry and carry special concerns for carriers and their insurers. The Middle District of Florida held that a motor carrier hired to transport a customer pre-loaded trailer of household goods was still obligated to comply with all of the household goods regulations for limiting liability. If done right, the Court also held that the shipper can be bound by a contract between the carrier and a relocation broker. (Laing v. Cordi, 2013 WL 5498271)

A shipper was unable to get summary judgment, with the Western District of Missouri remanding a case for trial, on the issue of whether the shipper established a prima facie case for recovery for damage to 28 tankers of milk product. The Court held that where there was evidence that the filters at the farm may have shown some presence of contaminates there was questions of fact as to whether the shipment was delivered to the carrier in good order and condition and where the losses occurred. (Aurora Organic Corporation v. Western Dairy Transport, 2013 WL 5636671)

If a shipper exercises reasonable steps to mitigate a loss, in this case by hiring an investigator to assist in the recovery of stolen goods, those charges may be considered as a part of the cargo loss. The Northern District in California also held that there was a question of fact as to whether the motor carrier and the shipper had agreed to a limitation of liability for the shipment in question. (Sephora USA v. J.B. Hunt Transportation, 2013 WL 5592912)

MISCELLANEOUS

The fight over payment of freight charges when brokers/originating carriers fail to remit monies to carriers continues. The District Court of Appeals in Florida held that the subcontracting carrier could not be held to a provision in the shipper/carrier contract which precluded any action by the subcontractor against the shipper if the shipper had already paid the freight bills. At the same time, however, the subcontracting carrier was not permitted to recover under the bill of lading, which was deemed to only be a receipt for the goods and not a binding contract with the subcontracting carrier. (Apex Capital LP v. Carnival Corp., 2013 WL 5338774) Elsewhere, in Bankruptcy Court in Kansas a Court held that a shipper was in fact obligated to pay a carrier on a bill of lading, even where nonrecourse provisions were signed, when the bills of lading were also marked pre-paid. The shipper was permitted to offset the duplicate payments against other monies owed to the bankrupt broker. (GMJ Global Logistics, Inc. v. IGT, 2013 WL 5365340)

For our inland marine folks, the Eastern District of Michigan concluded that an inland marine builder’s risk policy was not a fire policy, a subject of dispute in various states. The Court upheld the one year suit clause and concluded that time to sue was not tolled between submission of the claim and the time that the insurer denied coverage. (Oakland Macomb Interceptor Drain v Zurich American Insurance Co., 2013 WL 56338755)

Enjoy the start of the Holiday Season. See you next month.