As we have in the past, we would like to take a moment during this Memorial Day holiday to remember and thank all our service members over the years. We truly appreciate all that you have done. We would not be where we are, doing what we do, without you. You have our gratitude and respect.
It was wonderful to once again get a chance to spend time with so many of you at the annual IMUA meeting. We are always pleased to get a chance to show you what it means to have the CAB Advantage. Tiana was even more excited to be on the team that won second place in the golf tournament! Once again it was an outstanding event.
FROM CAB'S LAB™ - In keeping with our commitment to provide you the best and most up-to-date tools possible, our coffee drinking, doughnut guzzling, sugar and caffeine juiced up techies here at CAB are constantly working through the night to bring you the latest features and enhancements to our already feature-laden premium web site. Sometimes the enhancements work behind the scenes, speeding up and optimizing the information provided on the site. Sometimes new features are seamlessly rolled into the website. To help facilitate effective communication and keep you up to date with all the new options available, we are introducing this new section into our monthly Bits & Pieces newsletter in which we will report the latest developments. Our User Guide which can be downloaded from the 'About Us' tab that is available when logged in to the Subscriber Site, is always updated to reflect any updates we've rolled out to the site.
This past month we added in to the Submission Report™ the date that the US DOT number was first assigned to the relevant entity as well as the date the entity's US DOT number was set to Inactive if relevant. The "First Assigned" date is particularly helpful in verifying how long the entity was really in business - a critical piece of information for underwriting. We also added in the option for Subscribers to set up alerts on the Submission Report™ if the motor carrier's inspections show it travelling beyond a designated radius mileage threshold. Additional custom alerts that were added are alerts if the motor carrier's inspections show it travelling in states or counties that have been flagged by your company as "Hot Zones ". Lastly, we added in a new Radius Distribution section to the "Radius of Operation" tab of the Submission Report™. As a subscriber, you have the option to define Radius Buckets™, which are mileage zones such as 0-100, 101-250, 251+ (these numbers can be completely customized) and we will display a chart and graph showing what the distribution of inspections across those zones is. (Please note that these new alerts and section will not show up by default. Each individual subscribing company must first define the specifications.) Contact us to set these features up for your company.) Look out for this section every month to stay up to date on all of our latest developments here in CAB's LAB™.
This month we report:
CARRIER SHUT DOWNS - The FMCSA continues to step up efforts to shut down problem carriers. This month BM & L Trucking LLC, of Athens, AL, Judson Mobley Logging Inc. of Girard, GA, and Denny Mekenye, doing business as Demco Express and/or Demco Trans, Inc of Texas were ordered to cease operations immediately. For BM&L, the FMCSA ordered the shutdown after an investigation of the company uncovered “violations of the FMCSRs so widespread as to demonstrate a continuing and flagrant general disregard for compliance.” The carrier was unable to meet the minimal step of providing the FMCSA with the “number of commercial vehicles it owns, leases or otherwise operates, and drivers it employs or uses.” The company also failed to monitor its drivers’ hours of service, did not require drivers to submit records of duty status, and did not have a vehicle maintenance program to ensure the vehicles were maintained. Judson Mobley Logging was deemed an “imminent hazard” to public safety, allegedly having ignored prior FMCSA’s orders to cease operations. The FMCSA previously ordered the company to cease operations on Jan. 30, 2012, after an on-site investigation in November 2011 turned up numerous safety violations. They continued to operation until a crash on April 30. As for Demco, it is the employer of a driver being held in Mexico on charges of arms smuggling after crossing into Juarez with a load of surplus ammunition destined for Phoenix. They also found that the company falsified drivers’ records of duty status; allowed its drivers to operate with commercial driver’s licenses that had been suspended, revoked, or disqualified; and did not conduct proper controlled substances testing of its drivers. In addition, within the last 12 months, 10 of Demco’s drivers have been placed out of service for not being licensed to drive. FMCSA shut down Demco following an extensive review of the company’s operations that uncovered multiple federal safety violations in the areas of drivers’ hours-of-service compliance, driver qualifications, and drug testing requirements.
ANTI INDEMNITY LAWS - Alabama has joined the ranks of states prohibiting indemnity clauses in trucking contracts. The Alabama law invalidates the provisions in contracts that provide for shippers to be indemnified for losses caused by their own negligence and making those clauses void and unenforceable. The law was effective immediately. Michigan appears to be next, with a pending bill designed to invalidate the indemnity clauses. Here is link to a site which maintains a list of the anti-indemnification statutes which have been passed.
CARGO THEFT - Do you remember the $76 million dollar theft of pharmaceuticals in March 2012? The FBI has now arrested 11 members of a cargo theft ring. The ring is also alleged to be responsible for multiple truck hijackings of products including cigarettes, liquor and cell phones worth $20 million. Hopefully this will get some of the bad guys off the street.
NAFTA - The cross border program may be in trouble. Mexican trucks have entered the United States only 33 times under the program. This has limited the ability of the DOT to obtain sufficient data to evaluate Mexican carriers’ safety. Only three Mexican trucking companies have sent a total of three drivers and three trucks across the border.
ELECTRONIC STABILITY CONTROL SYSTEMS - The National Highway Traffic Safety Administration has now proposed a federal motor vehicle safety standard that will require electronic stability control systems on large commercial trucks, motorcoaches, and other large buses. Data indicates that the new technology could prevent up to 56 percent of rollover crashes each year—and another 14 percent of loss-of-control crashes. The rule would take effect sometime between two and four years after the standard is finalized, depending on the type of vehicle.
RESEARCH STUDY - The American Transportation Research Institute (ATRI) released its findings from the first phase of a three-part research project looking into mitigating costly large truck rollovers. ATRI’s first phase resulted in a database of locations with the highest frequency of large truck rollovers, using over 50,000 crash records from a nine-year period. The database covers 31 states. The full report, state-specific summary reports and an online interactive map are available on the ATRI website or can be viewed here.
CVSA ROADCHECK 2012 - The CVSA annual 72 hour inspection blitz is scheduled for June 5-7. The inspections, sponsored by CVSA utilize participation of the Federal Motor Carrier Safety Administration, Pipeline and Hazardous Materials Safety Administration, Canadian Council of Motor Transport Administrators; Transport Canada, and the Secretariat of Communications and Transportation (Mexico). Approximately 14 trucks or buses are being inspected, on average, every minute from Canada to Mexico during the check.
TRUCK SALE CANCELLATION - Bloomberg North American reports that heavy duty truck orders have cancelled at an alarming rate. The rate of cancellations rose from 6.1% last month to 9% this month, the highest since 2010.
TRUCKING FAILURES - While truck sales may have gone down, overall the industry is reported to be in good shape. Avondale Partners reports that fewer trucking companies failed in the first quarter of 2012 than at other times in recent years. 160 companies with an average fleet size of 13 trucks went under in the first quarter of this year. That is well below the 295 companies that failed in the first quarter of 2011. 2,110 trucks left the roadway this quarter.
TANKERS - The FMCSA released a guidance on the expanded definition of “tank vehicle” which confirms that it includes vehicles hauling an aggregate of 1,000 gallons in containers of 119 gallons or larger. The FMCSA says individual states must adopt the definitional change by 2014. In the guidance, the FMCSA advised “The new definition is intended to cover (1) a vehicle transporting an IBC or other tank used for any liquid or gaseous materials, with an individual rated capacity of 1,000 gallons or more that is either permanently or temporarily attached to the vehicle or chassis; or (2) a vehicle used to transport multiple IBCs or other tanks having an individual rated capacity of more than 119 gallons and an aggregate rated capacity of 1,000 gallons or more that are permanently or temporarily attached to the vehicle or the chassis.”
The FMCSA also confirmed that the definition of tank vehicle does not cover the transportation of empty storage tanks that are not designed for transportation and have a rated capacity of 1,000 gallons or more, that are temporarily attached to a flatbed vehicle.
CSA COMMENT PERIOD - The FMCSA announced a 60-day extension of the time that motor carriers have to comment on proposed improvements to the agency’s Safety Measurement System. During the extension, FMCSA will conduct further outreach to carriers to encourage them to review how proposed enhancements will affect their SMS score and take action to correct potential safety problems before the changes are implemented.
The Superior Court in Connecticut upheld a one year suit clause in a yacht policy. While Connecticut has recently passed a minimum limit of 18 months for a suit clause the court held that provision applicable only to fire insurance policies. The court also addressed the difference between inland marine and marine insurance. (Simeone v. Middlesex Mutual Assurance Co., 2012 WL 1356333)
In reviewing the law in Michigan, the 6th Circuit Court of Appeals held that the owner of a trucking company would not be absolutely liable for an injury caused when a trailer was improperly loaded by other parties and resulted in the cargo striking the overpass. The Court held that they could not be liable to the exclusion of companies responsible for loading, hiring the trucking company and obtaining permits. (Roquemore v. E.R. Express, 2012 WL 1662474)
The preemptive effect of the Carmack Amendment extends to freight charge claims by a motor carrier against a broker and shipper, including any claims for fraud. The Court in the District of New Jersey also held that all claims were subject to the 18 month time limitation contained in the Interstate Commerce Act. (Louisiana Transportation v. Cowan System, 2012 WL 1664120)
The Southern District in Ohio upheld the 2 year suit clause in an inland marine cargo policy. In an action by the judgment holder, the court held the judgment holder was all subject to the terms of the policy and that the two year suit clause commenced from the date of the transportation loss, and not the date of declination or the date of judgment against the motor carrier. (Stevens Transport v Great American Ins. Co., 2012 WL 1564207)
The District Court in New Jersey held that when a motor carrier accepts a shipment under a bill of lading which requires that it protect the cargo from freezing the motor carrier will not be liable for loss simply because the shipper’s agent failed to properly secure temperature recorders to the inside of the trailer. As the customer was unable to validate the temperature for the whole shipment it contended that the shipment was unfit. Interestingly enough the court held that the shipper could not show delivery to the carrier in good order and condition under that theory as the damage would have to be deemed to have occurred as soon as the recorders where not attached. (Sompo Japan v. A. Duie Pyle, Inc., 2012 WL 1554647)
Failing to disclose a prior cargo loss, and the fact that a prior policy was cancelled for misrepresentation was sufficient to allow one cargo insurer to rescind a policy after a cargo loss. The Southern District of Mississippi, applying Alabama law, reached that conclusion. The also held that the insurer would not be estopped to deny coverage because it went and salvaged cargo after a loss. The few day delay between notice of the loss and salvage did not mean that the insurer failed to properly salvage the goods. (Eagle Transp v. Scott, 2012 WL 1712352)
Who was responsible to indemnify whom? The Appellate Division in New York held that the seller of chemicals did not contribute to an injury caused during the delivery of cargo after it was removed from the truck and was inside a building. The shipper was not obligated to indemnify the motor carrier for its liability to the plaintiff. (Cahn v. Ward Trucking Co., 2012 WL 1537636)
There was no second bite at the apple for plaintiffs in the District Court in North Carolina. In an earlier state court action a Court had ruled that an insurer was not obligated to increase policy limits to meet federally mandated limits and the obligation to meet the statutory requirements rested with the carrier and not the insurer. Plaintiffs’ attempts to re-litigate the issue in Federal Court were unavailing. (Armwood v. North Carolina Farm Bureau Mutual Insurance Co, 2012 WL 1424177)
The Second Circuit Court of Appeals considered whether an insurer was obligated under the MCS-90 for a bus accident which occurred during an intra-state move when there were arguments that the bus might have, or should have been, used in a interstate move. The Court rejected the argument concluding that the transportation at issue was purely intra-state. In addition, this case indicates the importance of analyzing a carriers operation to really understand the nature of the move. This particular bus routinely traveled from one place in New York to another place in New York through a very small stretch of Connecticut. If the accident had occurred on that move, the MCS-90 would have been triggered. (Lyons v. Lancer Ins. Co., 2012 WL 1813673)
One insurer who was compelled to issue payments under the endorsement for unscheduled vehicle losses sought recovery against the insurance agent who failed to schedule the vehicles. After obtaining a default judgment against the agent it sought recovery under the claims made E&O policy issued to the agent. The District Court in South Carolina concluded that, at least as to one of the claims, which was made after the policy was cancelled; an insurer could not be liable for bad faith based upon an argument that the agent might have purchased tail coverage when it closed down its operations if the insurer had offered it. The court did, however, leave open the possibility of coverage for a second claim, concluding that there was a question of fact whether a reasonable insurance agent would have assumed that a claim was being made and therefore more timely notice given. (National Specialty Ins. Co. v. National Union Fire Insurance Co., 2012 WL 1825370)
Another insurer’s efforts to recover from an agent also failed, this time in the Middle District in Pennsylvania. An insurer contended that it was required to pay approximately $1 million in UM/IUM coverage because the agent had failed to obtain a valid and effective write-down for the coverage. In that case the Court concluded that the insurer was time barred from bringing the action as the statute of limitations had run before suit was commenced. The Court held that the cause of action accrued when the error was committed, not when the insurer paid the claim. (Lincoln General Ins. Co. v. Kingsway America Agency, 2012 WL 1801984)
Paying attention to the statute of limitations was also addressed in the Court of Appeals in Kentucky. The court held that a 2 year statute of limitations applied to a physical damage claim against a third party. The trucking company’s efforts to characterize the claim as one for trespass to chattel, and therefore subject to the 5 year statute of limitations, was not accepted where there was no allegation that the accident was intentional on the part of the other driver. (Ingram Trucking v. Allen, 2012 WL 164909)
A motor carrier who maintained insurance with a $1,000,000 deductible was not permitted to recover from an owner/operator under the lease agreement for that deductible payment. The Middle District of Tennessee concluded that to allow a carrier to do so would constitute an unlawful and hidden insurance obligation which violated the Truth-In-Leasing Regulations when the $1,000,000 deductible was never disclosed to the owner/operator when he agreed to indemnify the motor carrier for losses not covered by insurance. (Jones Exp. Inc. v. Watson, 2012 WL 1717312)
See you next month. Enjoy the start of summer.