CAB's Bits & Pieces: a digest of recent news events in the motor carrier and insurance industries.

If your company has any news it would like posted, or if you want additional information on any of these stories, please contact Jean Gardner at (212) 244-6575, ext 215, or e-mail: jgardner@cabfinancial.com.

Volume 12, Edition 6 (posted 6/30/2009)

Finally - summer.  Hope you all have some plans to take advantage of the slower pace of summer.  Even the news is short this month as it appears everyone is heading off to vacation.  This month we report:

CVSA ROAD CHECK 2009 - Good news from the CVSA.  This year’s road check indicates that carriers seem to be even safer than before, with the road check resulting in some of the best safety results in years.  There were drops in vehicle and driver out of service.  Data show the highest overall vehicle compliance rate — 80.4 percent — since 1996, and the highest overall driver compliance rate — 95.7 percent — ever. For North American Standard Level I inspections, the compliance rates of 77.8 percent (vehicles) and 96.1 percent (drivers) were both records. Safety belt violations dropped down 276, which was a 22.2% improvement over last year.

FMCSA FINANCIAL RESPONSIBILITY - The FMCSA has proposed amendments to financial responsibility regulations which will allow Canadian insurers to issue filings for Canadian based carriers.  Comments are due on August 9, 2009 in the event that you wish to comment.  A copy of the notice can be viewed here.

NAFTA - Canacar, Mexico’s national trucking association has filed for arbitration under NAFTA.  The organization seeks $6 billion in damages for lost business as a result of the US continued delays in opening the border.   

FMCSA LEADER - The president of the Maryland Motor Association has been nominated as the next head of the FMCSA.  If confirmed she gets the pleasure of dealing with the never ending saga of NAFTA and Hours of Service.

UCR FEES - Last month we reported on the proposed increase in UCR rates to combat the serious shortage due to under collection of fees.  The FMCSA has rejected the increase, apparently acknowledging that collecting the money owed by some is better than increasing payments for those who are already paid.

ECONOMIC REPORTS ON TONNAGE AND VEHICLE REGISTRATION AND JOBS - While April tonnage was reported to be the lowest since November 2001, the May report indicates that there was an increase of 3.2 percent. Another survey reports that new truck registrations have dropped 40% since last year, with only 78,900 vehicles being registered.  Those numbers, if carried through for the year, are expected to result in low numbers not seen since 1991. The trucking industry also lost 8,100 jobs in May, which is actually a slow down in the monthly number of jobs which have been lost in past months.

As you know, we search far and wide to find news which will impact the trucking industry.  During that search we find some irrelevant but bizarre information.  For example, new ways to transport illegal drugs into the country seem to crop up monthly.  This month a Mexican trucker was caught hauling more than $1 million worth of marijuana, all hidden in hollowed-out stacks of metal plates on his truck’s flatbed and another was caught with $2.5 million of marijuana mixed in with his watermelons.  Amazing what people think they can get away with.

CURRENT CASES:

The Supreme Court of South Carolina addressed the factors used to determine whether a carrier would be a common carrier or a private carrier for the purpose of regulatory financial responsibility requirements. In this case the court held that the insured was a common motor carrier when hauling logs and increased the insurer’s limits to reflect the statutory minimum requirements.  The court also addressed what constituted exempt logging operations. (Bovain v. Canal Insurance Company, 2009 WL 1587089)

The Supreme Court of Virginia rejected an insurer’s efforts to avoid the impact of the intra policy stacking of UM/UIM coverages.  While the state will generally permit intra policy stacking, it will permit an insurer, if done so properly, to clearly define the maximum recovery. Unfortunately the insurer did not.  (Virginia Farm Bureau Mutual Ins. Co. v. Williams)

A likely little known fact to be passed along.  In Mississippi a motor carrier bears full liability for any damage to a structure it hits if the vehicle height, with cargo exceeds 12 feet six inches.  That also means that the motor carrier has no right against the owner of the structure for the cargo loss.  The court did hold that the statute had no bearing on a personal injury claim or a claim for damages to other vehicles caused by the impact.  (Moncrief v. Bennett Truck Transfer, 2009 WL 1585890)

Punitive damages continue to be an issue for motor carriers. This month the District Court in Idaho permitted the plaintiff to amend the complaint and assert a claim for punitive damages against a motor carrier where there was evidence that the driver suffered from mental illness, was involved in a number of preventable accidents, and misstated information on his employment application.  (Davis v. Nevarez, 2009 WL 1532270)

In a rather bizarre case in the 10th Circuit, plaintiffs were injured when sweeping up a trailer after delivery of a load of recycled paper and were found to have been exposed to PCP. There was no evidence that the trailer had ever hauled hazardous materials and there was no trace of the PCP in the recycled paper.  No one knew where it came from. The court held that there was no basis to hold the motor carrier liable for the injuries suffered and that the motor carrier had no duty to protect the dock workers from this type of injury.  (Lamb v. JB Hunt Transport Services, 2009 WL 1514001)

The Court of Appeals in Indiana was required to determine how far the “statutory employee” rules would go. The court held that when a regulated carrier subcontracted its work out to another regulated carrier the driver of that carrier would not be the statutory employee of the original carrier under 49 CFR 390.5.  The court also addressed other state law vicarious liability provisions, and dangerous instrumentality exceptions holding the originating carrier free from liability for the actions of the driver.  (Illinois Bulk Carrier v. Jackson, 2009 WL 1674967)

The District Court in Arizona held that parties to a transportation contract can waive the provisions of Carmack yet still selectively incorporate the provisions in to the contract.  This does create a concern as the carrier is essentially waiving the preemption benefit of Carmack and also the right to remove the case to federal court.  (Smithfield Beef Group v. Knight Refrigerated, 2009 WL 1651289)

To be a package or not to be a package?  That is always the question.  The Southern District in Florida once again held that determining what was a package under COGA, bags or pallets, would be a question of fact.  (Garland Corp. v. Evergreen Marine Corp., 2009 WL 1660311)

A shipper’s efforts to avoid a limitation of liability were ineffective in the Northern District of Ohio.  The court held that when the shipper uses its own form bill of lading, which incorporates the carrier’s tariff, it can not argue that it has no notice of the limitation.  (F.M. Machine Co. v. R&L Carriers, Inc., 2009 WL 1759577)

The Southern District of Mississippi also considered limitations of liability in negotiated contracts, upholding its application.  It is important to understand how tightly these limitations are construed and how clarity is critical to avoid these extensive litigations. The court also held that the material deviation doctrine, which can avoid a limitation, was inapplicable to any claim brought under Carmack. (KLLM v. Watson Pharma, 2009 WL 1702075)

Co-insurance provisions in a cargo policy can be enforced.  The Court of Appeals in Texas held that the coinsurance provision was not ambiguous and applied to the value of the cargo on the truck.  (RSI International v. CTC Transportation, 2009 WL 1740051)

The Southern District of Texas held the Carmack Amendment inapplicable to a cargo theft which occurred in Mexico. While the motor carrier had transported the goods from South Carolina to Mexico the jurisdiction of the Carmack Amendment ended at the border. The court held that state law applied and that Texas choice of law principles would likely result in the application of Mexican law.  (Northern Marine Underwriters, Ltd v. FBI Express, 2009 WL 1546084)

Volume 12, Edition 5 (posted 5/28/2009)

It was wonderful to see so many of you at the IMUA’s annual meeting in Tucson, AZ.  A good time was had by all and once again the program was interesting and educational.  The inland marine industry well appreciates the services provided by this organization.

We are also very pleased to report that our new VITAL program is turning heads.  Vehicles are being tracked by underwriters and claim adjusters daily and we have had more than a few calls telling us that the information obtained through this service have already resulted in better underwriting and reductions in loss pay-outs. If you have not yet signed up for this amazing service, contact Laib Roberts at (212) 244-6575, ext 227 or lroberts@cabfinancial.com.

Summer is starting so news should be winding down and we all head into the slow pace of summer.  This month we report:

UNIFORM CARRIER REGISTRATION - The FMCSA has rejected a recommendation by the UCR Board to increase registration fees next year.  Because there has been very limited focus on collection, many carriers have not paid their existing fees, resulting in a serious shortfall. The Board sought to double the fees, essentially impacting those who are already being responsible and paying their fees.  More focus will be put on getting the existing fees paid by carriers.

BAD DRIVERS - We hate to admit this, but the GMAC Insurance National Drivers Test survey was released this month and New Yorkers were found to be the worst at knowing the rules of the road, with New Jersey a close second to the bottom.  Apparently over 20.1 percent of licensed Americans, about 41 million folks, could not pass the written exam. The lowest average test scores are in the Northeast, with the Midwest having the highest. Males squeak over females and older drivers have better scores.  Before you get cocky about where you live, or your age you can take the test at www.nationaldriverstest.com and see how you fair.

NAFTA - U.S. Secretary of Transportation Ray LaHood has announced that he will seek to open the border as early as next month. He is proposing a permanent program with new safety guidelines. The Motor Carrier Safety Advisory Committee has submitted its proposed principles for creating a new cross border operation.  The report includes 38 guiding principles broken down into four sections — program design, enforcement data, collection/information exchange and education/outreach. The full report can be viewed here. 

ROAD SAFETY - Bad roads increase the cost of vehicle operation by an average of $335 per year, according to the American Association of State Highway and Transportation Officials. Poor-quality or deteriorated pavement affects vehicle maintenance, tire wear, fuel consumption, insurance premiums and other operating costs.  California tops the list, with increased costs over $700 per year. (At least New York did not top this study)  The state with the lowest percentage of roads considered in good condition was Hawaii, followed by California and Rhode Island. The national average for arterial highways was 13 percent poor, 20 percent mediocre, 16 percent fair, and 51 percent good.  The best roads are found in Nevada, Alabama and Tennessee. The study can be viewed here.

RAILER REGISTRATION - Pay attention to the condition of your insured’s fleets.  Apparently registration of new trailers has dropped 65.5% in the first quarter.  Trailer manufacturers are expected to make only 70,000 new trailers this year, the lowest level since 1975. 

HOUSEHOLD GOODS MOVES DROP TO LOWEST LEVEL - The Census Bureau has report that the national mover rate has dropped to 11.9% in 2008, an extremely low level.  As housing prices stall, people are not moving and the household industry is continuing to feel the pinch.  Military moves continue to prop up the industry.

HAZARDOUS MATERIALS - The U.S. House Committee on Homeland Security approved an amendment to the Transportation Security Administration authorization bill. The amendment, named the SAFE Truckers Act, would repeal the Patriot Act’s requirement that all hazmat haulers undergo federal background checks and require only those truckers who haul security-sensitive materials to undergo background checks. Security sensitive materials would include only about 5 percent of the materials currently considered hazardous materials. The second amendment directs the Transportation Worker Identification Credential program to process TWIC cards within 30 days “to the greatest extent possible.”

CURRENT CASES:

As we have been reporting in Bits and in the various cargo seminars given throughout the year, identity theft is ever present in the motor carrier industry.  Copper and other metals seem to be a big target. This month the court refused to allow a carrier out of a suit in which the carrier contended that it had not been hired to haul the shipment and that someone had apparently stolen its identity.  The Northern District of Indiana held that there would be a question of fact as to whether it was reasonable for the shipper to believe it was dealing with the motor carrier.  (Northern Indiana Metals v. Iowa Express, Inc., 2009 WL 11139986)

Once again a court held a cargo claimant’s feet to the fire, holding that the shipper could not simply rely on paperwork to establish what was in a stolen container. The Court of Appeals in Georgia held that when the shipment was a sealed container the burden rested with the shipper to provide direct evidence of the contents. (Transport Solutions, Inc. v. St. Paul Mercury Insurance Co. 2009 WL 1299043)

In the Southern District in Florida the court held that a carrier would not be liable for a shortage in a sealed container when the shipper had not introduced any specific evidence that all of the cargo had been loaded into the container.  The court held that the carrier was bound by the weight listed on the ocean bill of lading, as that was easily determinable. However with discrepancies on the actual weight of the transporting conveyance it was insufficient to show what was in the container. The court also held that while the carrier would be bound by the weight on the bill of lading, the shipper would be required to establish that it weighed the container at release or at a minimum that it was short while in the possession of the carrier.  (Channa Imports v. Hybur, Ltd., 2009 WL 1308910)

It seems that every month someone tries to come up with another argument on why a claim against a motor carrier would not be preempted by Carmack. This month the District Court in Arizona held that the simple fact that a carrier did not issue a bill of lading would not defeat pre-emption. While the court held that the carrier may not have properly limited its liability, that liability would still be analyzed under the Carmack Amendment, (Taylor v. Allied Van Lines, 2009 WL 1148582)

The Southern District of Texas also upheld the preemption doctrine and more importantly held that a carrier will not be liable for consequential damages when the carrier is not put on notice of the damages before shipment.  (Shuttle v. Landstar Inway, Inc., 92 Cal Rptr. 3d 639)

The Western District of Pennsylvania also upheld the preemption doctrine.  In a case addressing the removal of a Carmack cause of action, the court remanded the case as the removal was untimely. It is important to remember that the 30 day rule for removal is strictly enforced and is determined from the date that the first document, not necessarily the complaint, reveals that the damages bring the action to the jurisdictional level for removal. In this case the plaintiff’s deposition was sufficient to trigger the start of the 30 days.  (Rehman v. Basic Moving, 2009 WL 1392149)

The Northern District of California held that under Hague Rules a limitation of liability would be determined based upon the weight of the entire shipment where the damaged piece resulted in a loss of value to the whole shipment.  The court also held that the cargo owner would be entitled to attorney’s fees under the shipping contract as the prevailing party. The court held that defendant’s continued refusal to acknowledge liability would permit plaintiff to be the prevailing party, even when recovery was limited.  (Nissan Fire & Marine Insurance Co. v. BAX Global, Inc., 2009 WL 1364870)

Sometimes it seems that you just can’t get rid of a case.  In the Eastern District of New York after settling with the plaintiff, one carrier attempted to dismiss his cross-claim against a co-carrier, without prejudice.  The co-defendant opposed the dismissal seeking a with prejudice dismissal and fees because the co-defendant did not pursue its claim for indemnity.  Thankfully the court rejected this motion and ended the matter, with rights to bring the cross-claims again some day.  (Continental Insurance Co. v. Morrison Express Corp., 2009 WL 1269701)

If someone wrongfully takes a piece of equipment with the intention of return it, only to have it destroyed before he can do so, does that result from an act of infidelity and therefore not covered by an inland marine policy?  The Eastern District of Michigan held that it would be a question of fact and if he really intended to return it the policy could be ambiguous. The court also addressed in detail the standards for denying coverage for misrepresentation in Michigan.  (Aqua Group, Inc. v. Federal Insurance Co., 2009 WL 1383320)

Speaking of misrepresentation, the Northern District of Mississippi set forth the standards for misrepresentation under an inland marine policy in Mississippi. The court held that an insurer’s statements that it may not have insured a part if it had been aware of prior losses and cancellations constitutes a material misrepresentation allowing coverage to be denied.  (Mann v. Nationwide Mutual Fire & Casualty Ins. Co., 2009 WL 1155400)

The Ninth Circuit upheld the application of the forum selection clause to an agent of the ocean carrier, in this case the vessel.  The Court held that all agents, servants and sub-contractors of the carrier would be entitled to the benefit, even if not specifically named.  (Mazda Motors of America, Inc. v. M/V Cougar Ace, 2009 WL 1259382)

We are often questioned by cargo underwriters as to how government shipments work. It is not often that decisions are issued on that type of transportation.  This month the U.S. Court of Federal Claims defined how the operations work and it is an interesting read for those who underwrite carriers working under government bills of lading.  In a case involving a motor carrier’s attempt to recover shipping costs from the government, the court rejected that request.  The motor carrier was not the entity operating under the government Tender of Service and therefore had no privity of contract with the Department of Defense.  (Central Freight Lines v. United States, 2009 WL 1262382)

Wrecker services continue to be a problem for insurers and so we like to report on any decisions which address their operations. The Court of Appeals in Kansas held that a wrecker yard complies with notice requirements before selling a vehicle when it checks with the state division on vehicles on the owner and lienholder. In this case it sold a Mustang, valued at approximately $11,000 to itself for $500!  This can be a problem for trucks, which are often registered out of state.  However, the court did throw a bone to the lienholder and held that the wrecker yard would still have to show that it complied with constitutional guarantees of due process. The lienholder argued that CARFAX is a reasonable way to establish ownership of the vehicle.  (Citifinancial Auto, Inc. v. Mike’s Wrecker Service, Inc., 206 P. 3d 63)

Motor carriers are required by federal regulations to have an agent for service of process in every jurisdiction in which it operates. In Louisiana that may be enough to confer jurisdiction, even where the accident occurs in another state and the carrier does not appear to have any other significant contacts with the state.  Although the court was going to allow some discovery on the issue, it did state that have an agent for service of process would be enough to confer jurisdiction.  (Herbert v. C.R. England, 2009 WL 1323038)

The United States District Court in Utah held that listing an agent for service of process in accordance with FMSCA rules would be sufficient to confer jurisdiction in that venue unless the carrier could establish that the exercise of jurisdiction was a violation of due process.  The motor carrier was unable to show that it was severely disadvantaged by the venue.  (Ayers v. Tanami Trading Corp., 2009 WL 136402)

On the other hand, The Appellate Division in New York held that a case would not stay in that state simply because the motor carrier was a regulated motor carrier.  The accident and all other significant events occurred in S. C. The court required that the action be transferred to that jurisdiction. (Turay v. Beam Brothers Trucking, Inc., 2009 WL 2253328)

In a continuing effort to let you know about experts in trucking cases, the Middle District of Pennsylvania admitted the testimony of the plaintiff’s expert, Mariusz Ziejewski.  The doctor was an expert in the field of biomechanics and was permitted to testify as to whether the force on the plaintiff when struck by the tractor-trailer was sufficient to cause the injuries. (Burke v. TransAm Trucking, Inc., 2009 WL 1423407)

In case you happen to be the relevant insurer, the District Court in Florida entered a default judgment against Flawless Transportion and its principle, both for its actions in failing to have adequate insurance, and for its vicarious liability for the actions of the driver.  (Dubose v. Flawless Transportation, 2009 WL 1393487)

The First Circuit Court of Appeals in Louisiana reversed a lower court decision and held that the Louisiana UM statute would not apply to an accident which occurred outside the state and involved a policy not issued in the state. The court also held that the Louisiana anti-stacking provision would not apply to determine whether an injured party was entitled to return an unconditional tender by one insurer to pursue higher recovery under another policy.  (Triche v. Martin, 2009 WL 1270304)

The Southern District of New York held that an insurer was estopped from relying on its late notice defense because its disclaimer letter to the putative additional insured did not set out the basis of the defense with sufficient specificity.  The court, however, drew a distinction between conditions (such as prompt notice) and exclusions, finding that Progressive could rely on its employers liability exclusion even though the exclusion was not mentioned in the disclaimer letter at all. (Progressive Northern Insurance Co. v. Beltempo, 2009 WL 1357947)

The California Supreme Court, responding to a certified question from the federal 9th Circuit, held that a motor carrier that leases trailers to its subcontractors qualified as a company “engaged in the business of renting or leasing motor vehicles without operators,” and, accordingly, the policy issued to the carrier  was  excess over other applicable policies pursuant to (former) California Insurance Code Sec. 11580.9(b). (Sentry Select Ins. Co. v. Fidelity & Guaranty Ins. Co., 205 P.3d 1084)

Volume 12, Edition 4 (posted 4/30/2009)

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 lroberts@cabfinancial.com 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 Transport, 2009 WL 890275)

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 v. Federal Insurance 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 Insurance 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 v. Seaboard Marine, 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 Casualty 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 Insurance Co. 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 Insurance 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. United States Fire Insurance 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 Insurance Co., 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 Insurance 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. Millers, 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, 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 Insurance Co. v. Kwik Cargo, 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, 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, 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 Insurance 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 Insurance 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.

Volume 12, Edition 3 (posted 3/31/2009)

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 v. Air Express, 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, 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, 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 v. Leviton Manufacturing, 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., 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. , 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 v. Certain Underwriters 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 Casualty Insurance 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 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 Insurance 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 v. Nobel Cargo Systems, 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, 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 Transportation, 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, 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 Company, 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 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, 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 Insurance 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. 

Volume 12, Edition 2 (posted 2/27/2009)

It was a pleasure meeting with so many of you at the Pacific Coast IMUA seminar.  We extend a special welcome to the many who asked to be put onto this mailing list and invite you to view all that CAB offers to the industry.  Hope you enjoy this report and find it informative.  Once again we remind you that this is a forum for all of you.  Information which you believe should be shared with the industry is welcomed.  I get tired of finding all of this information and writing this all by myself!  I am happy for contributions.

Now on to the news:

ON BOARD RECORDERS - As so it begins.  A new administration - new plans.  The FMCSA proposal on electronic onboard recorders has been pulled while the new administration contemplates other uses for the program. Current reports indicate that the Obama administration will look to require the recorders on more trucks than before.

FOURTH QUARTER RESULTS - As all we hear is bad news on the economy it is good to report that eight of the publicly traded transportation companies were able to maintain their earnings in the 4th quarter.  Although revenues were substantially reduced, most reported that they found ways to lower costs.  If the trucking industry, which operates on such a small margin, can find ways to cuts costs, we can only hope that it bodes well for the rest of the country.

CARGO THEFTS - Business Insurance reported this month that truck load thefts rose 13% in 2008. In a report released by Freight Watch International (USA), Inc., which has begun monitoring thefts, the majority of the thefts come from unattended vehicles and occurs within the first 200 miles of transport.   Overall the estimate is that $15 to $30 billion in cargo is stolen every year.

JOB LOSSES - Every day we hear reports on loss of jobs in various industries.  According to Department of Labor statistics, the trucking industry lost 24,900 jobs in January, the largest loss since the early 1990’s. 

FREIGHT FACTS AND FIGURES - The Federal Highway Administration released their “Freight Facts and Figures” report. The report can be viewed on the FHA website by clicking here.  Take a peek as it has some really interesting facts on various issues which impact underwriting, whether auto or cargo.

TRUCK FATALITIES - Included in that report, the Federal Highway Administration indicates that truck-involved fatality rates declined in 2007, down 5.8 percent to 2.12 per 100 million miles from 2.25 per 100 million miles in 2006.  Since the new hours of service rules the percentage has dropped 10%.   The truck-involved fatal crash rate and the truck-occupant fatality rate also declined from 2006 to 2007. The truck-involved fatal crash rate declined 4.5 percent to 1.85 per 100 million miles, and the truck-occupant fatality rate declined 1.98 percent to 0.35 per 100 million miles.

CURRENT CASES:

The Eastern District of Missouri permitted a plaintiff to remand a Carmack case to state court.  While the sole remedy for the plaintiff was under Carmack, the fact that the plaintiff alleged only a state law claim forced the court to remand the action back to state court as the complaint did not assert a basis for federal jurisdiction.  (Edwards v All My Sons Moving & Storage, 2009 WL 259737)

If any of you out there insure Never Stop Trucking, a default judgment was entered against them in the Eastern District of New York this month.  The judgment arises from a cargo loss of $366,112. The cargo was stolen when left at an unsecured lot and the allegations were sufficient to permit entry of judgment when the carrier defaulted on the complaint.  (Fireman’s Fund Insurance Co. v. Never Stop Trucking, Inc., 2009 WL 249765)

An action based upon allegations of wanton actions by a truck driver was dismissed this month in the Middle District in Alabama. The court held that in the absence of any specific evidence of anything other than inadvertence on the part of the driver a cause of action for wantonness would not exist.  The court, while it dismissed the action, did hold that the cause of action was subject to a 6 year statute of limitation, unlike the claim for negligent entrustment, which was dismissed as it was commenced more than 2 years after the loss.  (Murry v. Hodges Trucking Co., 2009 WL 270259)

The workmen’s compensation protection afforded to employers who are sued as a joint tortfeasor by third parties was explained in detail in the 7th Circuit Court of Appeals in an action whose arose when a shipper’s employee was crushed by a tractor-trailer while it was backing into the loading dock.  The court confirmed that employers may prevent their contribution liability under Illinois law, which caps an employer’s contribution at the amount of its worker’s compensation liability.  An employer can also waive its workmen’s comp lien to avoid a contribution claim.  (Baltzell v. R&R Trucking Co., 2009 WL 249981)

In the 5th Circuit a plaintiff was unable to recover from Wal-Mart Transportation when the plaintiff could not identify the tractor which was pulling a Wal-Mart trailer and injured plaintiff.  As the defendant was able to establish that it routinely hired independent motor carriers to transport its trailers the plaintiff could not establish vicarious liability.  (Bonilla-Torres v. Wal-Mart Transport, LLC, 2009 WL 301849)

Once again a federal court has rejected an insurer’s effort to have a coverage issue decided in its court. In an action between the general liability and auto liability carrier the court in the Eastern District of Pennsylvania held that the action, which would be decided under state law, would be best addressed in the state court which was hearing the tort action.  (Scottsdale Insurance Co. v. Broaddus, 2009 WL 349697)

A breach of the Federal Motor Carrier Safety Regulations was sufficient to establish negligence per se in the Eastern District of Tennessee.  The driver failed to secure a load of paper rolls in the trailer which caused the load to shift and prevented the driver from stopping and avoiding impact with the plaintiff. (Fortner v. Tecchio Trucking, Inc., 2009 WL 200278)

We know that you all love tow companies and so when we see cases involving those companies we like to bring them to your attention.  In this case a trucker objected to the tow and recovery charges of a wrecker yard.  Although the decision ultimately allowed the wrecker yard to go back and fight an order requiring it to reimburse the trucker for paid fees, the decision does address the ways to fight those charges, at least in Texas.  (Cannon v. TJ Burdett and Sons Recycling, 2009 WL 276797)

A plaintiff actually sought to list defense counsel as a witness in a trucking case!  Counsel, representing the trucking company, was present during the accident reconstruction undertaken by the state police and plaintiff contended that counsel could then be called as a witness. The court not only soundly rejected the argument, but also held that sanctions would be imposed on the plaintiff for taking such a position.  (Aberkalns v. Blake, 2009 WL 310709)

A shipper who accepted a bill of lading with a limitation of liability, and which also purchased increased coverage with a motor carrier, still sought to recover additional sums from the motor carrier. The shipper contended, without any admissible evidence, that the motor carrier must have stolen the cargo since it could not explain what happened to the shipment of I-Pods. The court in California rejected the shipper’s position and granted judgment to the carrier.  (E&S International Enterprises v Yellow Freight System, Inc., 2009 WIL 202030)

The Middle District of Florida held that a tractor-trailer lessor was not liable for the negligence of the lessee in failing to maintain the vehicle or failing to insurer the vehicle. The Graves Amendment precludes the action where there is no evidence that any ownership interest was maintained by the lessor.  (Dubose v. Transport Enterprise Leasing, 2009 WL 210724)

The Middle District of Florida also refused to grant summary judgment to a motor carrier when a consignee was injured while unloading a trailer of cargo.  The driver, believing all cargo to have been unloaded, moved the trailer forward to close the doors.  Unfortunately at the time the plaintiff was leaning on the door while pushing the last box onto the loading platform.  The court held that there were sufficient factual issues which could only be resolved before a jury.  (Tackett v. Fryer Creek Trucking Co., 2009 WL 248248)

Addressing the issue under the Montreal Convention, as it involved international transportation, the court in the Southern District of New York held that Federal Express, in its service rules, could mandate where claims needed to be filed. In this case the cargo owner had simply sent the claim to a local Federal Express office and not to the claim department. Plaintiff’s action was dismissed.  (Meteor AG v. Federal Express Corp., 2009 WL 222329)

Causes of action for negligent entrustment and negligent retention of a driver were permitted to proceed in an action against a trucking company in the District Court in Kansas.  The court held that the simple fact that the tractor was owned by the driver, and not the trucking company, did not preclude a negligent entrustment claim.  The court also held that compliance with Federal Motor Carrier Safety Regulations on hiring practices is not enough to defeat a claim of negligent retention where a jury could find that the motor carrier failed to exercise reasonable care in selection of its drivers.  Fortunately the court did dismiss any claim against the carrier for punitive damages.  (Stallings v. Werner Enterprises, Inc., 2009 WL 412995)

In December 2008 we reported that a Michigan Federal Court limited the rights of a claimant under the MCS-90, holding that a default judgment did not establish that the loss arose from the negligence of the motor carrier and therefore a plaintiff was still required to prove its case before recovery against the insurer.  That decision, decided by a Magistrate Judge, was vacated by the District Judge, who held that in fact the default judgment was a decision on the merits.  (Hawthorne v. Lincoln General Insurance Co., 2009 WL 304742)

The never ending saga of the impact of the Carmack Amendment on a through bill of lading was addressed by the 9th Circuit this month. The Court determined that Carmack would apply even to forum selection clauses in a rail loss. The court held that a carrier providing non-exempt transportation can enter into contracts which waive the remedies of contract without providing full Carmack protection.  Those carriers which are providing exempt transportation must, however, first offer full Carmack protection before contracting out of the provisions of Carmack. Although this decision was addressing rail carriage, similar arguments exist for motor carriers. (Regal-Beloit Corp. v. Kawasaki Kisen Kaisha, 2009 WL 251949)

In the 3rd Circuit the court also addressed the impact of contract carriage, such as was discussed in Regal-Beloit. The court held that 49 U.S.C. 14709, the rail carrier’s contract carrier statute would not have to be specifically referenced in order to defeat the effects of the Carmack Amendment. The court held that the fact that the contract specifically deviated from Carmack provisions was sufficient to establish the intent of the parties.  (Babcock & Wilcox v. Kansas City Southern Rail Way Company, 2009 WL 385416)

A little early, but Happy St. Patty’s Day!  See you next month.

Since you are all, hopefully, spending time digesting the annual report which also went out this week we are going to keep the “Bits and Pieces” extra short.  There is not much news to report as the first part of the month was spent recapping last year and the second half of the month was consumed with the inauguration.  President Obama is now in charge and Ray H. LaHood is now the sixteenth U.S. Secretary of Transportation. Change is on the way.

We also remind you that our annual seminar is now open for registration. The seminar is generally oversubscribed and we recommend that you register as soon as possible. You can get to the registration and program information by clicking here.

HOURS OF SERVICE - As one of his last actions before leaving the office at the FMCSA, John Hill rejected the appeal filed opposing the final hours of service rules. Mr. Hill indicated that the FMCSA data has not revealed any increase in accidents since the implementation of the rules in 2003. Don’t think that this is the end of the story. It is expected to be brought before the new governing body at the FMCSA.

CARRIER BANKRUPTCIES - According to one analyst, only 375 carriers failed in the fourth quarter of 2008.  There were 1,905 in the first half of 2008 and 785 in the third quarter.  The reduction in the number of carriers ceasing operations is believed to have been assisted by the drop in fuel prices. The drop in fuel costs, which is one of the largest components of a carrier’s operation, helped stave off bankruptcies for some carriers operating on the edge.

ELECTRONIC ON-BOARD RECORDERS - It appears that it is back to the drawing board for rule making on electronic on board recorders. The outgoing FMCSA was unable to get proposed rulemaking into place before end of the Bush Administration. With the order out to stop any proposed Bush Administration regulations which were in the works, this one may take a while.

In conjunction with the directive that all regulations be placed on hold, the Obama Administration has held up any of the final rules which were put into place. As we previously reported, three new regulations were published at the end of last year, including the regulations for intermodal chassis, driver medical certifications and new entrant safety assurance. The final rules, which had not gone into effect, will be delayed for 60 days and another open comment period for 30 days will be provided.

DRUG TESTING TASK FORCE - A task force created by Congress has recommended the creation of a central data base for drug and alcohol test results. The panel was established under the current highway bill to study commercial licensing.  This should be an issue for the Obama administration.

CURRENT CASES:

The Eastern District of Kentucky considered the application of primary/excess provisions in two polices.  One insurer provided coverage for the scheduled vehicle involved in the accident, although its insured did not own the vehicle, while the second insurer covered all owned vehicles for the actual owner.  The court held that both insurers provided primary coverage and both were obligated to defend the personal injury action.  (Zurich American Insurance Co v. Westfield Insurance Co., 2009 WL 78369)

Permissive users and the issue of when use is incidental to business operations was the subject of a summary judgment in the Western District of Pennsylvania.  The court determined that the insurer did not provide coverage where the driver of the vehicle took it from his employer, a tow operator, without permission and was not performing any employment operations at the time.  (State Auto Mutual Insurance Co. v. McCutcheon, 2009 WL 36446)

The Maryland Court of Appeals was asked to decide whether the Maryland Port Authority and its terminal operator were responsible for the negligence of a trucking company and its driver when the driver killed a longshoreman.  The court held that they did not exert enough control over the act of connecting containers to trucks to make them responsible.  (Appiah v Hall, 2008 WL 5413167)

In an interesting turn of events a carrier actually sought to increase the damages sought by a plaintiff.  Defendant has removed the case to federal court under the Carmack Amendment and the plaintiff sought to remand the case to state court, alleging that its damages were less than $10,000. Defendant argued that the plaintiff’s pre-suit demand of $15,000 was enough to establish the jurisdictional limit for suit in federal court.  (DWC Company, Inc. v. CSX Transportation, 2009 WL 150671)

In an interesting case a shipper of automotive parts sought damages when it could not certify a shipment with its quality assurance, even though there was no evidence that all of the parts suffered physical damage. The court held that the Carmack Amendment did not preclude recovery for damages because the goods could not be certified for use. The court held that this could be a reasonably foreseeable consequential damage.  That raises an interesting question for coverage under a cargo policy if this is a consequential damage.  (Zurich North America v. Triple Crown Services Co., 2009 WL 127754)

Efforts by a motor carrier to enforce its tariff limitation were ineffective in the 9th Circuit this month.  The court held that as neither the tariff, the bill of lading nor the carrier’s  pricing agreement offered a choice of rates the limitation would be invalid.  (Shielding International v. Oak Harbor Freight Lines, Inc., 2008 WL 5401446)

A driver sought to recover from a logistics services provider when she was injured by an improperly loaded pallet.  All parties were aware that the pallet was improperly loaded prior to commencing transport. The court considered whether the logistic provider, who was also a licensed motor carrier, would be required to met the standards of the federal motor carrier safety regulations for loading, and concluded  it would not. The court also held that the driver could not pursue the logistics provider for being part of an improper loading which the driver was fully aware of that the shipment was improperly loaded.  (Camp v TNT  Logistics Corp., 2009 WL 80242)

Plaintiff’s efforts to argue that a shipper was somehow liable under the Carmack Amendment for cargo damage to equipment which it purchased were thankfully unsuccessful in the Southern District of Texas.  The court also held that a broker had no direct liability under the Carmack Amendment.  (DM Best Co v. Summit Worldwide, LLC, 2009 WL 103595)

The 11th Circuit considered the application of a limitation of liability to a large cell phone loss. In this case the motor carrier had a contract with the transportation broker which limited its liability to $200,000.  The court held the shipper bound by the limitation entered into between the carrier and the intermediary.  (Werner Enterprises v. Westwind Maritime International, 2009 WL 57764) In the Eastern District of New York the court refused reconsideration of its decision in which it determined that a shipper was not bound by the limitations in a carrier’s contract with an upstream party.  (Trans-Pro Logistics v. Coby Electronics. 2009 WL 36824)

In Florida the issue was raised as to whether IUM coverage was in place with the insurer had not physically received the rejection until after the loss.  The court held that the rejection would be valid as long as it was actually executed prior to the loss.  The driver’s efforts to avoid its employer’s rejection of the additional coverage were unsuccessful. (Word v. Illinois Union Insurance Co., 2009 WL 152866)

A driver is not automatically deemed negligent simply because he was operating a tractor on a prohibited roadway. In Kentucky, that will simply be considered a factor to be weighed when determining the comparative fault of the parities.  (Brantley v. Asher, 2009 WL 126865)

Cargo falling off a trailer and striking a motorcycle following behind will not be considered a hit and run accident for UM coverage. In Wisconsin a motor carrier transporting sand lost some portion of the shipment, which struck and injured the plaintiff. The plaintiff was denied UM coverage as cargo was not considered part of the operating vehicle.  (Progressive Northern Insurance Co. v. Phillips, 2009 WL 88871)

Preemption under Carmack, even for fraud claims in the 9th Circuit.  Nothing more to say that has not already been said. (Gendler v. All Pro Van Lines, 2009 WL117970)

Short and to the point. Have a great month.