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 11, Edition 6 (posted 6/30/2008)

Welcome to another summer and another edition of the Bits and Pieces of the trucking industry.  Summer is here and the news is short. Virtually every report and news article focuses on gas prices.  We all recognize that there is no need to report on this crisis as emerging news.  Consider the impact on your own wallet and magnify it a hundredfold and you will know what the trucking industry is focusing on.  In other news we report:

DRIVER TURNOVER - At least one thing in the industry moved in the right direction this quarter.  Driver turnover at large truckload carriers (more than $30 million in revenue) declined to 103%, the lowest rate in 5 years.  Small truckload carriers also saw a small decrease, down to 80%.  Unfortunately, if the economy picks up the rate is anticipated to rise again.  Basically if it is not one thing it is another!

LOGISTICS SPENDING -  One study has concluded that costs for logistics have risen to their highest number, in part as transportation costs, including fuel, skyrocket.  Costs reached $1.4 trillion, or 10.1% of gross domestic product. Trucking accounts for 77% of that number

CVSA SAFETY CHECK -  We reported last month that the CVSA would be undertaking its safety check early this month.  Preliminary reports indicate that the motor carrier’s were not as bad as prior years. There was a 23.9-percent out-of-service rate for U.S. and Canadian inspections (Mexico is not yet known).  67,931 inspections were conducted during the event. The most common equipment violation was brakes which composed 52.6 percent.  5.3 percent of drivers were placed out of service, 55.6 percent for hours-of-service violations. All of the numbers were lower then in prior years.

WEIGHT LIMITS -  A bill has been introduced which would allow trailers weights to be increased with the price of diesel, specifically allowing 100,000 pounds when the diesel price is over $3.50. The bill is titled the Commercial Truck Fuel Savings Demonstration Act of 2008.

NAFTA - While Mexican carriers continue to seek damages for the refusal of the U.S. to open the borders, the FMCSA has indicated that the low participation in its pilot program may require it to extend the one year program.  Although the program anticipated 100 carriers, as its approaches its termination, only 21 Mexican carriers, with 62 trucks, and 9 U.S. carriers with 50 trucks have been involved in the program.  Litigation over the program continues and court rulings are expected soon.

EMERGENCY DRUG TEST REGULATION -  The DOT issued an emergency rule which would allow carriers to notify state agencies if a driver fails to refuses a drug test. 

WAREHOUSE OPERATIONS -  Understanding all of your insured’s operations is critical to insuring that the proper coverage is purchased.  Many trucking operations have expanded into providing additional logistics services.  A recent study released by Armstrong & Associates indicates that U.S. commercial warehousing is at $37.5 billion. There are 8,000 commercial warehouses with 1.3 billion square feet of space.  Commercial warehousing is one-third of total U.S. warehousing and many truckers have taken on that additional exposure. 

CURRENT CASES:

In the District Court in New Jersey a longshoreman was injured in an accident with a tractor which was pulling a container and chassis. The longshoreman obtained a large judgment and brought suit against the insurer of the chassis asserting coverage under the policy and the MCS-90.  The policy contained an arbitration provision which mandated  all disputes under the policy be arbitrated in London, England. The court enforced the arbitration provision finding that even the US plaintiff had to arbitrate his MCS-90 claim in London England. (Szczepanik v. Through Transport Mut. Ins. Ass'n, Ltd., 2008 WL 2166193)

In the Middle District in Georgia Progressive Insurance issued a policy to a trucker in Florida.  The plaintiff sought to recover under an MCS-90 which was not on the policy nor requested by the insurer.  The application indicated the insured’s radius of operation as 300 miles, which would have permitted the insured to operate in Georgia. The insured did not request the policy contain an MCS-90 endorsement.  The court, relying on another decision in which our own Ira Lipsius testified as the expert, Brewer v. Maynard, 2007 WL 2119250, held the mere possibility that Miller may have occasionally traveled out of state after the inception of the policy was insufficient to create MCS-90 coverage where no request was made by the insured to add the endorsement to the policy. (Waters v. Miller 2008 WL 2357752)

As you know, the scope of the MCS-90 extends to payment for damages for pollution and environmental restoration, even if otherwise excluded by the policy. In the District Court in Puerto Rico the insurer paid $1,322,132.44 to comply with an order from the Puerto Rico Environmental Quality Board to clean up the spill and sought reimbursement from the insured. The insured disputed the demand for reimbursement claiming that the insurer had not been presented with a judgment before payment. The court found the insurer was entitled to reimbursement, but, that reimbursement was limited $ 1,000,000 as the MCS-90 endorsement required Royal to pay only up to the policy limit-$1,000,000.00 per occurrence. (Real Legacy Assur. Co. v. Santori Trucking, Inc., 2008 WL 2376470  2008)

Even the Guaranty Fund is not exempt from the impact of the MCS-90.  In Louisiana a plaintiff sought recovery against the Louisiana Insurance Guarantee Association for a claim which it had against Reliance Insurance Company under its MCS-90 endorsement. The Court held that the action could proceed and that the Guarantee Association was also subject to the state direct action provisions.  (Rideau v. Edwards, 2008 WL 2186325)

Indiana, as well as a number of other states, by statute, determines the priority of policies where there is an accident covered by multiple polices. In a case which was argued and briefed by Ira S. Lipsius, President of Central Analysis Bureau and a partner in Schindel Farman, Lipsius, Gardner and Rabinovich, LLP, a shipper contracted with a trucker to haul freight using the trucker’s tractor and the shipper’s trailer. The trucker had a primary policy and numerous excess policies.  The shipper also had coverage for the trailer. The shipper claimed, based upon the shipping contract, as well as other documents, and an Indiana statute which provided that the terms of the policies are ignored and insurers are bound by the contracts entered into by insureds, that the all of the trucker’s insurance, primary and excess, had to be exhausted  before its policy was exposed.  The Indiana appellate court found the statute did not apply to excess policies. (Old Republic Ins. Co. v. RLI Ins. Co., 2008 WL 2313375)

The Court of Appeals in Indiana also addressed the obligations of a timber business to pay for a fatal accident caused when a truck driver hauling logs collided with another vehicle.  Although the driver hauled loads almost exclusively for the timber company, and had even placed their logo on his truck, the court determined that the trucker was an independent contractor and relieved the timber company of liability for the loss.  (Walker v, Martin, 887 N.E.2d 125)  A similar decision was reached in the Western District of Kentucky where recovery was sought against a shipper when a carrier’s driver dropped a pallet on the plaintiff. While the court held that the trucker was an independent contractor it still allowed a claim to proceed against the shipper on the basis that the shipper may have given the driver apparent authority to act on its behalf.  (Crunk v. Dean Milk Co., 2008 WL 2473662)

The question of who bears the responsibility for damages caused by improper loading was considered by the court in Michigan this month. The trucker driver sought damages from the shipper when a box, loaded by the shipper, fell and injured the driver. The court held that the shipper had the duty to stack the cargo in the proper manner once it undertook to load the shipment.  The case was remanded, however, as there were questions as to whether that duty had been breached where the driver subsequently moved the boxes around during later stops.  (Lobdell v. Masterbrand Cabinets, 2008 WL 2224094)

In the 5th Circuit Court of Appeals, the court interpreting Wisconsin law, found the mechanical device exclusion (the standard ISO policy excludes "Bodily injury" or "property damage" resulting from the movement of property by a mechanical device (other than a hand truck) unless the device is attached to the covered "auto")  was not enforceable. The court further found, remanding the matter for trial, that where the shipper moved the trucker’s trailer between its own facilities in order to load the trailer for the long-haul and mixed freight that would not be ultimately carried by the trucker on the long-haul, the shipper would not be covered by the insurer of the trailer, as a result of the commingling of freight,  if it was not using the trailer in accordance within the scope of the permission granted. (Gulf Underwriters Ins. Co. v. Great West Cas. Co., 2008 WL 2150022)

New York courts have found the ISO non-trucking use (“bob-tail”) endorsement  violates public policy.  The court found that despite a “savings clause” in the policy which provides coverage up to the minimum amounts the financial responsibility law requires, in the event the exclusion is held invalid, the court voided the endorsement up to full policy limits. The decision also addressed an additional issue of concern to insurers regarding late report of claim. New York is a no-prejudice state, an insurer need not prove prejudice in order to deny coverage for the insured’s failure to promptly report a claim.  The appellate court remanded the trial court’s determination that a five month delay in reporting the claim was late as a matter of law. The court held that if there was a good faith belief in non-liability the insured could be excused for the late reporting. (National Union Fire Ins. Co. of Pittsburgh, PA v. Connecticut Indem. Co. 2008 WL 2342121 (N.Y.A.D. 1 Dept.))

Evaluating fatal truck accidents is a often a difficult analysis for insurers and with statutory obligations to effect prompt settlement of claims, insurers face serious exposure if they breach these responsibilities.  In the Superior Court in Massachusetts the court considered the obligations of a primary and excess insurer in failing to promptly try to settle a fatal accident. The court found, in a detailed analysis of the steps taken by each insurer, that the excess insurer failed to settle the claim promptly after a final judgment was entered, resulting in a large additional award to the plaintiff which was then trebled as a punitive measure to the insurer.  (Rhodes v. AIG Domestic Claims, Inc. 2008 WL 2357015)

Will they ever learn?  A plaintiff’s efforts to avoid Carmack preemption failed in the Western District of Oklahoma. The court gave short attention to plaintiff’s arguments that all of the other cases missed the point.  (Potts v. OK Transfer & Storage, Inc. 2008 WL 2404758)

The Eastern District of Pennsylvania would not permit a direct action against the insurer of a carrier who damaged the plaintiff’s goods. The plaintiff, a service member, sought the right to pursue the motor carrier’s insurer directly under the government bill of lading.  (Baugh v Reliance Insurance Co., 2008 WL 2456704)

Another motor carrier was successful in determining what jurisdiction would decide a limitation of liability case. The motor carrier made a preemptive strike against the cargo owner’s insurers and filed a declaratory judgment action seeking to enforce its limitation of liability. Efforts by the insurers to move the action to a jurisdiction which might be more responsive to arguments against the limitation failed.  (Annett Holdings v. Certain Underwriters at Lloyds, 2008 WL 2415299)

Evaluating the result of vehicle and driver inspections which a motor carrier has been subjected to is something an insurer needs to consider even after a loss occurred.  In an action in the District Court in Utah the court held, among other things, that prior vehicle violations during inspections could be used as evidence that a motor carrier might be subject to punitive damages for failing to comply with certain safety regulations.  (Clark v. Wilkin, 2008 WL 2405042).  CAB, with a premium subscription service, can provide you with all of the detail on the inspections, something to be considered by all claims departments in evaluating liability in any loss

We like to report on cases involving experts in the transportation industry, as it is good to know who is out there testifying. In an action in district court in Oklahoma the court addressed the testimony of Cecil Lane, who was proffered as an expert on motor carrier standards and regulations.  The decision precluded certain testimony of Mr. Lane.  (Wofford v. Bonilla, 2008 WL 2368726)

C.H. Robinson was back in court defending a claim that it was liable for an accident involving a trucker operating under a C.H. Robinson contract. While the court held that C.H. Robinson would not be vicariously liable for the actions of the trucker it spent considerable time evaluating the obligations of C.H. Robinson to check the safety rating and Safestat scores of  the motor carrier and ultimately allowed an action against C.H. Robinson to proceed.  Speaking of experts, CH Robinson produced Annette Sandberg, former head of the FMCSA as their expert.  (Jones v. C.H. Robinson, 2008 WL 2350898)

Defending without a reservation of rights is a risk which can impact coverage questions. In an action in Arizona, the Appellate Court held that a general liability insurer who defended for 10 months without a reservation of rights that the claim against its insured arose out of the use of an auto could be precluded from later denying coverage if prejudice was established.  The initial triggering claim was a claim against the insured only as a negligent broker and later changed to assert carrier status.  (Penn-America Ins Co. v. Sanchez, 2008 WL 2426760)

In the cargo claim world the fight over the impact of  Kirby and Sompo continue.  Once again the question was raised as to whether the liability of an inland carrier operating under an ocean bill of lading was required to comply with the Carmack Amendment in order to limit its liability or seek enforcement of suit clauses. The District Court in New York concluded that the two decisions were not inconsistent and determined that inland carriers would still have to meet Carmack requirements in order to reap the benefits of provisions in an ocean bill of lading.  (Swiss National Insurance Co. v. Blue Anchor Line, 2008 WL 2434124)

Volume 11, Edition 5 (posted 5/30/2008)

Hope you all enjoyed the recent Memorial Day holiday.  We are all really looking forward to the warm weather and the summer season.   Here is this month’s report:

GREEN TRUCKING - The ATA has moved toward a greener trucking industry under a new program, Trucks Deliver A Cleaner Tomorrow. The organization’s recommendations for a greener America are on its new web site – www.trucksdeliver.org  If followed, they could eliminate the CO2 generated by 9.6 million Americans for one year!  Good news for the environment and perhaps things we should all consider, if applicable to you.

CHANTIX - The Federal Motor Carrier Safety Administration has issued a warning to medical examiners that they can not certify any driver who is currently taking Chantix, the smoking cessation aid. The Federal Aviation Administration banned the drug for pilots and air traffic controllers after a study linked Chantix to seizures, dizziness, heart irregularities and diabetes.

TRUCKING REPORT - According to a recent New York Times report, more vehicles have been taken out of service since last year than at any time since deregulation, apparently more than 45,000 vehicles — about 3% of the U.S. trucking fleet. The report cited America’s Commercial Transportation Research Co., based in Columbus, Ind. for the information. A large portion of the vehicles are being shipped abroad for sale. The report also notes that 935 larger trucking businesses shut down this first quarter. Jevic Transportation, one of the larger LTL carriers, shut its doors this month because of high costs and shortly thereafter filed bankruptcy. Yet another example of the importance of accessing the financial condition of a carrier based upon current financial information before renewal or the issuance of a quote.

HARRY PORTER, I.T., AND TRUCKS – What do they all have in common?  Apparently a most interesting transport, as one motor carrier was engaged to transport the book before its release and keep it safe and secure until available to sale.  Check out the article from computerworld.com which details the high level security utilized to monitor the load, with a pretty cool link to an interactive image of the future high tech truck (http://www.computerworld.com/action/article.do?command=viewArticleBasic&articleId=9085018)

NEW DRIVER STUDY - The American Transportation Research Institute (ATRI) report on the relationship between entry-level driver training and safety outcomes was released this month.  The study examined the overall duration of new entrant driver training, the instructional environment and curriculum topic areas and how it impacts the safety of new driver performance. The driver training report is available on ATRI’s website by clicking here. 

WEIGHT LIMITS  - A bill has been introduced into Congress to lock in the current weight limit of 80,000 pounds and to establish a maximum 53 feet length for tractor trailers.  It also seeks to extend the current weight limit and freeze on triple trailers to the entire 160,000 mile National Highway System.

CVSA ROADCHECK - Be on the look out next week. The CVSA will send out 10,000 inspectors to 1,000 locations for its annual roadcheck enforcement blitz. Inspectors will focus on seat belt violations, as well as hour of service violations and equipment problems. We will report the results when released.

DRUG TESTING - The Government Accountability Office released its report on the FMCSA’s drug testing program.  The report found that trucker’s can easily overcome drug test issues, noting that only 2% of the reports are reviewed by any governmental agency – either state or federal.   It has proposed that Congress consider adopting legislation to ban subversion products, require states to suspend CDL’s for those who fail or refuse drug testing and grant greater authority to the FMCSA to enforce regulations.

FUEL CHARGE - A second bill seeking to mandate 100% pass through for fuel surcharges was introduced in Congress.  The Fairness in Trucking Transactions Act also seeks treble damage penalties for those middlemen who fail to comply with the legislation, damages which would be payable to the government, with an additional triple damage penalty payable to the carrier.

HIGHWAY WATCH - The ATA lost its grant for the Highway Watch program, a $15.5 million dollar loss.  Until this cut, the program has received $57.3 million in trucking security grant funds.  The ATA has apparently advised all of its partners to stop further training in the program at this time.

CURRENT CASES:

The Louisiana courts were busy this month.  As you may recall, a few months ago we advised you about a decision in which a Louisiana district court held that an auto liability policy covered a cargo claim.  After consultation with Larry Rabinovich at Schindel, Farman, Lipsius, Gardner & Rabinovich, LLP, a motion for reconsideration was filed with the court.  Thankfully the court has reconsidered its position, acknowledging that the policy does not cover the damage to the cargo, or any consequential damages stemming from the loss.  (Barry Concrete, Inc. v. Martin Marietta Materials, 200 WL 1885326)

Claim filing requirements in a warehouse receipt were enforced in federal court in Louisiana this month. Plaintiff attempted to avoid the impact of the claim filing requirements by seeking to have the court extend claim filing requirements for Hurricane Katrina and Rita losses. The court held that the reason for extending suit time against insurers were far different and refused the plaintiff’s request.  (Sasol Wax Americas, Inc. v. Hayes/Dockside, Inc. 2008 WL 2067007)

An finally, the Appellate Court in Louisiana held that federal law governing interstate transportation would not preclude the enforcement of a state law which voided any pre-accident waiver agreements. The plaintiff, the wife of a driver, had executed such an agreement in order to be permitted to drive with her husband. The motor carrier argued that the court’s ruling would effectively prohibit it from operating within the state.  (Ryes v. Home State County Mutual, 2008 WL 2038819)

The right of a motor carrier to pursue recovery against a construction company which failed to place proper notice of lane narrowing was considered by the court in Texas.  The court held that when a motor carrier paid a cargo loss it could be entitled to equitable subrogation and therefore not subject to joint tortfeasor rules which would have prohibited the recovery. The court correctly noted that the carrier’s liability for damage to cargo was strict and negligence irrelevant.  (Bennett Truck Transport v. Williams Brothers Construction, 2008 WL 2130424)

A double brokered load?  How can you expect such a thing?  In an action in the Court of Appeals in Arizona a motor carrier who brokered a load to a company which then brokered the load to another motor carrier was held primarily liable to the plaintiff. The carrier was not permitted to pass the buck.  (Tremco Inc. v, General Transport & Consultants, Inc., 2008 WL 2102456)

The Supreme Court in Michigan has ruled that the Michigan Motor Carrier Safety Act is not an exception to the $1 million cap on property damages which was established by the Michigan No- Fault Act.  (Department of Transportation v. Initial Transport, Inc. 2008 WL 2066578)

If you are interested in reading the standards for carrier liability in Canada, consider the decision issued by the court in Connecticut this month. Although the court was considering the issue of whether its jurisdiction was an inconvenient forum, the court did analyze the potential for recovery for a cargo loss if the case was transferred to Canada.  (Prime Materials Recovery v. Martin Roy Transport, 2008 WL 2095550)

One re-insurer was successful in defeating a claim against its policy when it was able to establish that the failure of the agent to follow its directives on trucking risks entitled it to rescind coverage.  The re-insurer considered trucking a high risk and would not permit automatic coverage. When the underlying insurer failed to properly disclose that the risk was a trucking risk when seeking to purchase reinsurance, it lost the right to recover for a serious loss.  (Scottsdale Insurance Co. v American Re-insurance Company, 2008 WL 2001750

A homeowner’s effort to defeat a limitation of liability in a household goods bill of lading was unsuccessful in District Court in Montana.  The plaintiff argued that it believed that it was purchasing insurance and not limiting the carrier’s liability to the declared value. The court rejected the position, noting the various statements concerning carrier liability on the bill of lading. (Pepe v. Bekins Van Lines, 2008 WL 2039258)

A truck driver who left the scene of a fatal accident, with knowledge that he had struck the deceased, was found liable for punitive damages in Ohio. The Appellate Court held that the motor carrier would not be liable for punitive damages absent evidence that the company acted with malice or otherwise authorized, participated or ratified the driver’s actions.  (Estate of Beavers v. Knapp, 2008 WL 1886307)

A number of months ago we reported on a favorable cargo decision where the court would not permit the unilateral determination by a shipper to reject a shipment where the motor carrier could establish that the cargo had value, holding that the issue should be presented to the jury.  The case went to trial and the jury held that the shipper failed to exercise reasonable care and mitigate damages by refusing to take back and re-sell the shipment after an accident.  The court also noted the obligation on the part of the motor carrier to under take to salvage the goods following rejection for the account of the cargo owner.  (Land O’Lakes, Inc. v. Superior Service Transportation of Wisconsin, 2008 WL 1969592)

In the District Court in Indiana, an insurer was permitted to withdraw from providing a defense once it tendered its limits to the court without any retention of a right to any proceeds. The policy permitted the duty to defend to end when the limits were exhausted by payment of judgment or settlement.  Although the cases had not gone to judgment or settlement the court permitted the withdrawal because liability was admitted. (Carolina Casualty Insurance Co. v. Estate of Studer, 2008 WL 2077994

Although state law claims will be preempted by the Carmack Amendment, the Carmack Amendment itself will not transform state law claims into a federal cause of action for the purposes of removal to the federal court in Florida.  (Pemstar, Inc. v. NAC Group, Inc., 2008 WL 1819423)

The pursuit of transportation brokers for personal injuries caused by a truck driver has become more common in the last few years.  This month the Court of Appeals in Georgia refused to permit a claim against the broker where there was no evidence that it controlled the actions of the motor carrier or had any reasonable basis to ascertain the safety of a driver.  (McLaine v McLeod, 2008 WL 190335)

An automobile policy, and not a homeowner’s policy was held to account for injuries to an individual who fell onto a car jack that was being used by the insured while he was working on a vehicle outside his home. The New Jersey court held that the injuries were directly connected to maintenance of a covered auto.  (Penn National Ins. Co. v. Costa,  2008 WL 1862321)

The Northern District in California considered the applicability of limitations of liability and questioned who was the proper party to present a cargo claim.  The carrier had already issued payment to a party named in the bill of lading for its asserted limitation of liability. Unfortunately, the court did not specifically determine whether one who is not a party to the bill of lading can sue on the contract because it determined that there still remained issues on the reasonableness of the limitation.  (OneBeacon Insurance Co. v. Haas Industries, Inc., 2008 WL 1847182)

Volume 11, Edition 4 (posted 4/28/2008)

What a great month.  We started off with the IMUA seminar, which, as usual, was exciting and informative.  It was great to see everyone again.  The following week was our annual seminar.  I must say that all of the attendees this year were raring to go, making this truly an amazing and informative seminar.  Thanks so much for your support and continued attendance each year. 

The IMUA is hosting a webinar this Wednesday, April 30, 2008 on a Beginner’s Guide to Transportation Insurance for those interested in inland marine motor truck cargo and transportation insurance.  Frank Oleskiewicz and I will present this informative session. You can learn about cargo insurance without ever leaving your desk.  Check out the info on the IMUA website if you are interested.

We are pleased to see the strong favorable response to our newest service – the on-line ability to get the submission report. This report is fast becoming a critical part of every underwriter’s analysis of a risk.  For those who have not yet signed up for this premium service, or are interested in a trial run, please contact Shuie Yankelewitz, at 212-244-6575 ext.  225 or e-mail him at syankelewitz@cabfinancial.com to sign up.

This month we report the following:

PROFITS DOWN - As we all struggle in this economic downturn, industry analysts anticipate lower profits reports for truckers in the first quarter.  Those carriers which publicly report profits have already indicated that profits are down, dramatically for some. This will be mirrored for all truckers, with small truckers struggling under the burden of increased diesel costs.  At least one analyst indicates that bankruptcies are on the rise.  625 carriers closed their doors in the last quarter of 2007 and more are expected this year. We remind you how important it is to review the financial stability of each carrier.

FREIGHT COSTS - After many years of stable or downward costs, freight costs are on the rise.  A recent U.S. Department of Commerce report indicates that cost of managing, moving and storing goods is 9.9 percent of the U.S. gross domestic product. The report also confirms that the transportation infrastructure has not kept pace with the growing transportation industry.  A complete copy of the report can be viewed at here

FUEL COSTS - This month legislation was introduced on fuel surcharges. The "Truthful Reliable Understanding of Consumer Costs" act or TRUCC Act will require that 100 percent of fuel surcharges levied on shipping customers be passed directly through to the entity which pays for the fuel – often the owner operator. The legislation is, as expected, supported by owner operator organizations. 

SLEEP APNEA - The Medical Review Board of the Federal Motor Carrier Safety Administration has recommended that CDL drivers with a BMI of 30 or higher be referred for sleep apnea testing. We will follow to see if the FMCSA acts on the recommendation.

CURRENT CASES:

The Southern District Court of New York reversed itself, in response to a request for reconsideration and found that the New York statutes and regulations which mandate that certain provisions must be contained in auto liability insurance policies do not apply to umbrella and excess policies. (Harco National Insurance Co. v. Arch Specialty Insurance Co., 2008 WL 1699755)This case was successfully argued by one of the partners at Schindel, Farman, Lipsius, Gardner & Rabinovich, LLP.

Choice of law was a critical issue in a case involving the business use exclusion in a non-trucking policy.  Although the accident occurred in New York, and the injured party was a New York resident, the court held that New Jersey law would be applied in a dispute between insurers concerning the applicability of coverage. The business use exclusion is permissible in New Jersey and not in New York.  (Moper Transportation v, Norbet Trucking Corp., 943 A.2d 873)

The fact that a motor carrier fails to comply with even the minimal standards for employing a driver will be insufficient to support a cause of action against that motor carrier in the absence of any evidence that the violations caused or contributed to the accident.  The District Court in Indiana also held that such failure would not support a claim for willful misconduct.  (King v. Fierro Trucking, Inc., 2008 WL 833150)

The Seventh Circuit considered the novel issue of the right to set off payments by others in the transportation chain in a cargo loss.  The Court held that an air carrier was entitled to set off any recovery which the plaintiff received from the trucker and freight forwarder, but that the amount would be offset against the claim, not the carrier’s limited liability.  (Sompo Japan v. Nippon Cargo, 2008 WL 1021939)

The Court of Appeals in Georgia denied a plaintiff’s efforts to reform an auto policy to increase limits to the $5 million limit required for the carrier by the federal insurance requirements.  The plaintiff, a passenger, was injured in an accident while being transported within the state of Georgia.  (Turner v. Gateway Insurance Co., 2008 WL 879856)

In February’s Current Cases, we reported on three separate decisions from the District of Missouri involving plaintiff’s efforts to seek recovery from a trucking company and its holding company.  Apparently it is still not over.  The holding company, which was denied summary judgment on the question of its liability for the actions of one its companies, sought reconsideration of the denial.  The Court rejected the decision, setting forth a detailed analysis of the various factors which would permit plaintiff to pursue the holding company.  (Garrett v. Albright, 2008 WL 920310)

In Tennessee the court determined that Georgia law would not permit a driver’s suit against a shipper for improper loading of a shipment.  As the driver had evidenced displeasure with the loading, the court determined that the driver assumed the risk and that the driver had the obligation under federal rules to properly secure the cargo.  (Herring v. Coca-Cola Enterprises, 2008 WL 787871)

Preemption and removal seem to go had in hand.  This time it did not work for the motor carrier. In an action in which the motor carrier was impleaded as a third party defendant for a cargo loss, the court held that the Carmack Amendment does not transfer state law claim into a federal action for the purposes of removing the case to Federal Court. The motor carrier was sent back to state court by the District Court in Florida.  (Pemstar v. NAC Group, 200 WL 1819423) Preemption was also once again upheld in a household goods action in District Court in Florida. (Casamassa v. Walton P. Davis Co., Inc., 2008 WL 879412)

In Kentucky the court also sent a motor carrier back to state court in an action for damage to cargo. While the court acknowledged that the state law actions were preempted under Carmack, plaintiff’s claim for damage was under the jurisdictional $10,000 minimum.  The court did not consider the claim for return of freight charges to be recoverable under Carmack and therefore denied jurisdiction.  (Briscoe v. Price-Coomer Relocations, Inc., 2008 WL 1771924)

A District Court in Kentucky allowed a claim for punitive damages to proceed against a motor carrier and its driver based upon alleged violations of the hours of service rules.  The court also permitted a negligent entrustment claim to proceed against the motor carrier based upon the motor carrier’s knowledge of the driver’s log book violations.  (Osborne v Pinsonneault, 2008 WL 1730165)

An insurer need not obtain the insured’s consent to settlement of a claim presented under the Form F filing in order to obtain reimbursement from the carrier.  The District Court in Oklahoma also held that the principles of the motor carrier corporation were personally liable for the reimbursement after the corporation ceased operation.  (Scottsdale Insurance Co. v. Oklahoma Transit Authority, 2008 WL 896639)

A motor carrier’s quick response with a motion to dismiss based upon Carmack may have been too quick.  As is permitted under Federal Court rules, a defendant can file a motion to dismiss before answering the complaint. However as the plaintiff can then re-plead the action before the answer is filed, a quick thinking plaintiff did so in District Court in Montana, rendering the motor carrier’s motion moot.  (Crown Parts & Machine v. Con-Way Freights, Inc., 2008 WL 1734769)

Issues concerning the “U-Pack” type moves for household goods shipment are making their way through the legal system. The District Court in Illinois upheld the limitation of liability on a carrier’s bill of lading despite the plaintiff’s protestations that there was an oral agreement to increase valuation. The court held that the parol evidence rule did not permit it to consider that argument. The court addressed this claim solely under the rules for general commodities and not for household goods as this new type of movement does not get the same protections. (Hoover v. ABF Freight Systems, Inc. 2008 WL 1820937)

The simple fact that a motor carrier has 48 state authority and transports goods throughout the country will not support jurisdiction over a motor carrier outside the state where the accident occurred, according to the District Court in Delaware. The plaintiff will still be required to establish that the motor carrier systematically did business in the state.  (Kee v. Blue Line Distributing, Inc., 2008 WL1805808)  A similar result was also reached in the Eastern District in Pennsylvania. (Landreville v. Joe Brown Trucking, Inc.  2008 WL 910009)

The difficulties which a plaintiff can face in establishing a prima facie claim for recovery was exemplified in a decision in the District Court in Ohio.  The claim arose from the theft of a sealed container of goods. When it came time to try the case the court determined that the burden of proof for a sealed container was high.  As plaintiff failed to produce any direct evidence, relying only on paperwork from others who were not involved in the actual loading, the court denied recovery to the shipper.  (Limited Brands v. Flying Cargo, 2008 WL 859013)

The Montreal Convention, which governs the international transportation of cargo, extends its benefit beyond the scope of the actual air carrier. The Southern District of New York concluded that the air carrier’s ground handler, who moved the cargo within the confines of the airport, would be entitled to the benefit of the mandated two year suit clause.  (American Home Assurance Co. v. Kuehne & Nagel, 2008 WL 793620)

An insurer sought recovery from its general agent and local insurance agency for amounts paid in settlement of uninsured/underinsured motorist claim in West Virginia.  The court held that the insurer paid the claim in error.  The insurer had made payment on the premise that the insured had failed to reject the statutorily recommended limit in accordance with the statute and therefore was entitled to the higher limits. The court held that the requirement that an insurer reject the higher limits was limited to new and not renewal policies.  (Canal Insurance Co v. Lebanon Insurance Agency, 2008 WL 1699799)

The Supreme Court in Kansas has reconsidered the standard for the application of the intentional acts exclusion. The court has raised the bar for insurers, requiring that the insurer now establish that the insured intended both the act and also to cause some kind of injury.  The intent to cause the injury can be actual or inferred from the nature of the act.  (Thomas v. Benchmark Insurance Co., 179 P.3d 421)

An insured in Texas was denied the right to recover under UM coverage when struck by an axle-wheel assembly which had broken loose from the tractor trailer.   The court held that the axle-wheel assembly was not a motor vehicle within the definition of the UM statute, which required a collision with a motor vehicle for coverage to be triggered.  (Nationwide Insurance Co. v. Elchehimi, 2008 WL 821039)

A truck driver’s efforts to avoid the exclusive remedy of worker’s compensation failed in New Jersey this month. The driver contended that his employer had actual knowledge that the location for unloading cargo at a certain destination was unsafe and would lead to injury for the driver, which, of course, it did. The court held that that set of facts was insufficient to establish the necessary intent to defeat the sole remedy of worker’s compensation.  (Dadura v. Yum Brands 2008 WL 926634)

Insurers with pending declaratory judgment actions should be careful when settling an underlying claim as they may face additional costs from the insured.  The 11th Circuit held that when an insurer filed a declaratory judgment action against its insured trucker, but then went forwarded and settled the underlying tort action, the insurer would be responsible for the fees incurred by the insured in defending the declaratory judgment. The court held that the insurer’s action in settling the underlying claim constituted a confession of judgment.  (Canal Insurance Co. v. SP Transport, Inc., 2008 WL 981821)

Volume 11, Edition 3 (posted 2/28/2008)

Welcome to Spring.  I will be heading off to the IMUA annual meeting in another week and look forward to getting a chance to see many of you this year. This is always an exciting and informative event.  Our annual seminar will also be this coming month and once again we look forward to providing a unique insight into this industry for old and new friends.  This month we report the following “Bits and Pieces”

DOT ISSUES FRAUD ALERT - The Pipeline and Hazardous Material Safety Administration, a division of the DOT, has advised that once again contractors and and/or potential contactors are receiving letters which appear to be issued by the DOT requesting the recipient submit financial information.

NAFTA - The cross-border program continues to be a bone of contention with various organizations, while we know that NAFTA has become a political hot potato in the Democratic primary. While the DOT initially indicated that it would stop the program in September, a subsequent release by the DOT reminds Congress that the DOT has the authority to continue the program for 3 years.  Various organizations in favor of opening the border have sent a letter to Congress warning that the Mexican government could impose serious tariff penalties on goods if the borders are not opened. The newest list of approved Mexican and U.S. Carriers operating under the cross border program, released on March 10, 2008, can be viewed at http://www.fmcsa.dot.gov/cross-border/cross-border-carriers.htm

TRUCK STRIKE - A small grass roots movement is underway and various truckers, estimated at 1,000, have committed to a strike on April 1, 2008, to protest the high cost of fuel.  News agencies are picking up on the proposed strike, raising the possibility that more will agree to be involved.  We will let you know next month whether their voices were heard, The ATA reports that the trucking industry is expected to spend $35 billion on diesel fuel this year, $22 billion more than last year.

HIGHWAY CRASH COST - AAA has released a report indicating that traffic crashes cost American motorist $64.2 billion per year, which is nearly 2½ times the cost of congestion.  In large urban areas crash costs were nearly double congestion costs.

TRANSPORTATION OUTLOOK - FCC Equipment Financing, a subsidiary of Caterpillar Financial Services, issued its "FCC 2008 Economic Insight: An Annual Outlook on the Transportation Industry," It contains various information on the current and future economic issues for the transportation industry.  The report concludes that the U.S. economy will grow only 1.5 percent in 2008, with freight down 1% in 2008.  On the issue of equipment purchase, a subject they are most interested in, heavy duty sales will increase slightly, but will be for replacement and not new growth of vehicles and demand for midrange trucks will be down.  The full report can be downloaded in pdf format at http://www.fccef.com/CAT-Economic-Newsletters/Current-Transportation.pdf.

FAMILIES FIRST PROGRAM - Those of you who underwrite military household goods carriers may be aware of the Families First Program being implemented by the Department of Defense to insure the safe movement for the goods of armed service members. The plan calls for replacement value for lost or damaged property, among other changes.  The plan was expected to role out March 31. However a coalition of carriers and forwarders has filed a protest with the DOD claiming that the DOD has filed to comply with its own rules.  The federal government is the largest shipper of household goods, at 20% of all goods shipped.

A LITTLE HUMOR - Sometime you just need a good laugh. The Onion, the on line fake newspaper recently posted a news article on a DOT program for new highway lanes – never mind HOV lanes, or truck only lanes, these lanes are solely for the crazy drivers we all encounter every day!  Check it out and get a quick laugh. http://www.theonion.com/content/news/dot_creates_new_lane_for_reckless

CURRENT CASES:

The issues which are raised when motor carrier hire brokers to arrange the transportation which the motor carrier agreed to undertake was considered briefly by the Superior Court in Connecticut.  While the court did not address the technical problems with these steps, it did hold that the broker would not be liable for any loss caused by the ultimate carrier in the absence of any evidence of negligence on the part of the broker.  (A&P Trucking v, MKM Transportation Services, Inc., 2008 WL 725183)

In what is likely one of the last cases on the subject, the Third Circuit held that an air carrier could not limit its liability when it failed to specify all of the agreed stopping places for a shipment on the airway bill.   1999 amendments to the Warsaw Convention have removed the obligation of “agreed stopping places” at least for the domestic portion of the transportation.  (Warner Lambert Company v, LEP Profit International, 2008 WL 509167)

A word of warning for any subrogation department which seeks to pursue a government agency for a defective highway which contributed to an accident.  In an Appellate Court decision in Connecticut a trucking company was prohibited from pursuing a claim for damages to its tractor-trailer because it failed to present a notice of claim to the state in a timely manner.  The fact that the driver had filed his notice of claim for personal injuries he suffered was insufficient to protect the trucking company.  (Salgado v,. Commission of Transportation, 2008 WL 706933)

The 7^th Circuit addressed a dispute between CH Robinson and a motor carrier concerning the withholding freight charges and cargo claims.  The court held that the claim by the motor carrier was not preempted by the Carmack Amendment, but ultimately held that the motor carrier was obligated on the cargo loss and permitted the offset by CH Robinson. It was interesting insofar as the motor carrier was the last in the line of 3 shipments and it appeared that the loss did not occur on its line, yet CH Robinson was permitted to take the offset.  (REI Transport v. CH Robinson, 2008 WL 731614)

Preemption, preemption, preemption – it is always being considered by the courts.  This month the Northern District of California determined that a claim under COGSA (Carriage of Goods By Sea Act) preempts any state law claim for cargo loss.  (Continental Insurance Co. v. Kawasaki Kisen Kasha, 2008 WL 512708) The Eastern District of Arkansas supported a preemption defense by a motor carrier, while permitting a state law negligence claim against a broker.  (Corbin v. Arkansas Best Crop., 2008 WL 631275)  In the Eastern District of California the court graciously granted a claimant even more time to amend its cross-claim after an initial grant of a motion to dismiss with leave to replead a Carmack case.  The claimant had failed to timely amend the cause of action.  (United Van Lines v. Edwards, 2008 WL 686840)

Apparently the court in the Western District of Missouri finally had it with a trucking company which failed, repeatedly to produce all relevant discovery and allegedly attempted to avoid its obligations to produce documents and records on its operations for a variety of reasons. One motor carrier’s answer was stricken and another compelled to pay $30,000 in sanctions.  (Garrett v. Albright, 2008 WL 681766)  In a related decision on the same case, the court considered summary judgment motions filed by two of the related companies within a bag of companies involved in transportation services, a common occurrence today with holding companies. The court denied summary judgment to a holding company which may have acted as an agent for the trucker in procuring the services of the driver, while granting judgment in favor of another company which had no direct relation to the transaction.  (Garrett v Albright, 2008 WL 681762). Finally, in a third decision, the expert testimony needed on the standards necessary to qualify a driver was addressed. The plaintiff sought to admit the testimony of an expert whose qualifications included trucking insurance underwriting and truck driving, among other qualifications. This is an interesting read on what can be commented on by an expert in this field, and what backup is needed to establish credibility for a final expert opinion in this field. (Garrett v. Albright, 2008 WL 697590)

Inland marine insurers often have to figure out exactly when losses occur.  In the Southern District of Ohio the court addressed that question when considering a claim for theft by false pretense under an equipment dealers form.  In this case the court determined that a loss occurs when an insured buys items under false pretense, not when the goods are taken from the insured because of the false actions of the seller.  (Employers Mutual Casualty Co. v. Interstate Equipment Sales & Rentals, 2008 WL 545017)

A trucking company sought dismissal of claims for negligent hiring and entrustment stemming from a trucking fatality.  The District Court in South Carolina held that South Carolina state law did not limit negligent entrustment cases to injuries arising out of operation of a vehicle by an intoxicated and also ruled that a trucking company’s acceptance of liability for the actions of a driver would not preclude a separate tort liability for negligent hiring or entrustment.  (Becker v. Estes Express Lines, 2008 WL 70138)  The Federal Court was apparently correct in its interpretation of South Carolina law as the Supreme Court in South Carolina held a plaintiff could pursue a claim for negligent hiring, training supervision or entrustment even after the trucking company accepted responsibility for the actions of the driver.  (James v. Kelly Trucking Co., 2008 WL 4986126)

When is delivery complete?  The Ninth Circuit determined that ordinary standards for delivery of cargo can be changed by contract.  In this case the contract required that the goods be tendered to the consignee, which the court determined was more than simple delivery to the location.  (Menlo Logistics v. Western Express, 2008 WL 682308)

It is interesting to see that parties still try and defend carrier cargo cases on the theory that negligence on the part of the carrier was not established. The Court of Appeals in Iowa rejected the trucker’s efforts to require the plaintiff to prove negligence and concluded that negligence is not an issue in determining liability. If the plaintiff can establish that the goods were delivered in good order and condition and damaged at delivery a cause of action is successfully pled.  ( M.B. Construction v. Mid-States Express, Inc., 2008 WL 508478)

The ability to utilize through international bills of lading was considered in the Southern District of New York this month in more than one decision.  In one case, court held that a rail carrier was entitled to the benefit of a through ocean bill of lading. However as the ocean bill of lading contained a provision which looked to the rail carrier’s tariff, that tariff would determine the liability of rail carrier. The court also accepted that the plaintiff’s action was time barred as suit was not brought within the time limits of the tariff, spending considerable time considering the issue of when a mailing is effective.  (BASF Corp. v. Norfolk Southern Railway Corp., 2008 WL 678557)  In another, the court held that a rail carrier would not be entitled to the benefit of the package limitation as the ocean bills of lading did not provide an opportunity for the shipper to ship under  full Carmack Amendment protection, addressing in considerable detail the impact of various statutes on rail carriage contracts.   (Sompo Japan Insurance Co. v. Norfolk Southern Railway Co. See 2008 WL 732011)

A similar issue was addressed in the Southern District of Texas where the court sought to determine whether an ocean bill of lading was a through bill of lading which would encompass a loss which occurred after a shipment was discharged from the vessel. Unfortunately for the inland participants the bill of lading was determined not to be a through bill of lading and delivery under the bill of lading had been completed, resulting in loss of the limitations of liability. This is a good decision to read as it details the steps undertaken to determine whether a bill of lading is a through bill of lading. Suzlon Wind Energy v. Shipper’s Stevedoring Company, 2008 WL 686206)

Cancellation of a trucker’s auto policy was considered in New Jersey law in a decision in the Eastern District of New York in which the court also addressed the issue of the effectiveness of mailing. The court reviewed all of the mandatory requirements for serving notice of cancellation in New Jersey. After determining that the cancellation was not proper, the court also considered whether the cancellation was in compliance with the FMCSA rules. The court held that the cancellation of the endorsement, which was accepted by the FMCSA was untimely because it was not received by the insured.  The court also held that failure to remit premium after cancellation will not necessarily invalidate the cancellation, but may simply hold the insurer liable for additional penalties. (Luizzi v. Pro Transport, Inc., 2008 WL 525433)

In August, 2006, we reported on a decision in the Federal Court in Minnesota in which an insured was arguing that there was no coverage under his own policy! The insured had a $500,000 self-insured retention and the insurer sought to recover that retention for payments made in settlement of a loss in which coverage was an issue.  The Court of Appeals agreed that the insurer was correct and coverage was provided by the policy for the third party who fell within the definition of an insured. The court also held that the actions of the insurer, in not disputing coverage, was not in bad faith or self-serving, while recognizing that the insurer must consider the interests of the insured when settling a claim with a large retention.  (Stan Koch v. Great West Casualty Co., 2008 WL 516537)

A shipper which failed to pursue a motor carrier for cargo damages for over 3 years was not prevented from seeking its day in court. The court properly determined that while any claim for negligence for this intra-state loss would be time barred under the statute of limitations, a general action against a motor carrier sounds in contract which, in New York, stays alive for 6 years.  (Masterpiece International Ltd v. Elite Systematic Arts & Ace Crating, 2008 WL 725526)

A question that plagues cargo adjusters was addressed in Ohio this month. The plaintiff purchased an oven from Ebay for $1,525 and contended that it was damaged at delivery. Plaintiff sought either $16,240 to repair the oven or between $75,000 and $100,000 to replace the oven. The court granted partial judgment to the motor carrier, holding that the shipper was only entitled to what he paid for piece, concluding that even if he got a “really really good deal” the motor carrier would not be obligated to pay more than his purchase price.  (Houmani v. Roadway Express, 2008 WL 731497) Keep this decision handy.

The Court of Appeals considered a release and indemnity agreement in a contractor agreement between a motor carrier and a driver. In this particular case the agreement waived any claim against the trucking company for a claim by a driver injured by a collision with a fellow driver of the same company. The court upheld the provision and released the trucking company and its insurer from any claim. (Coleman v. B-H Transfer, 2008 WL 755918)

See you next month.

Volume 11, Edition 2 (posted 2/29/2008)

A short month and hopefully a short report.   However, we do have an urgent seminar bulletin.  We have discovered that due to a computer server issue, there were some who registered for our upcoming seminar and the registration did not reach us. This problem is primarily with registrations sent through the web in late January. Although you may have received a confirmation that the registration went through, if you have not received an e-mail confirming your attendance at the seminar, please contact Blima Levine right away so that we can ensure that your seat is reserved. Blima can be reached at blevine@sfl-legal.com; or 212-563-1710 ext 217.

DOT BUDGET - The President’s 2009 budget was unveiled this month.  The DOT’s breakdown of the budget items indicated that its share would decrease from $69.246 billion to $63.422 billion. Some of the freight transportation departments facing the biggest budget cuts would be the Federal Railroad Administration declining from $1.561 billion to $1.091 billion and the Federal Highway Administration, with funding dropping from $41.241 billion to $35.514 billion. On the positive side is funding for the Federal Motor Carrier Safety Administration possibly bumping up from $530 million to $541 million, and the Federal Maritime Administration increasing annual funding from $306 million to $314 million. 

TEAMSTER CONTRACT - Union members ratified the 5 year National Master Freight Agreement with the large LTL carriers.  All sides agree that the new contract, which runs until 2013 will allow the carriers more flexibility to find ways to reduce expenses in a time when income is down considerably.

TRUCKING BANKRUPTCIES - Credit Suisse reports that trucking bankruptcies declined 65.7 percent last November, compared to the prior year. However that was still a sequential three month increase, the first time that has occurred in over 7 years.  In an economic state where even the country’s largest carrier took an $800 million write down this month, bankruptcies are expected to continue in the next few months as tax bills and license payments become due.  We remind you that monitoring your motor carrier’s financial stability is critical to “knowing your insured”.  We are at your disposal to review and rate all motor carrier financial reports.

FHA VEHICLE MILEAGE NUMBERS - The FHA vehicle mileage figures reveal that large truck-involved fatal crashes, the fatality rate and the fatal crash rate for large trucks each declined to its lowest ever recorded level.  The 2006 fatal crash rate for large trucks was 1.93 crashes per 100 million vehicle-miles-traveled. The large truck-involvement rate fell to 2.12 per 100 million vehicle miles traveled while the fatality rate declined to 2.24 per 100 million vehicle-miles-traveled.

TRUCKING KICKBACK AWARD - SC Johnson was awarded 147 million against a trucking firm, JMP Intermodal and other individuals, for transportation kickbacks. The company and the individuals are alleged to have defrauded the company of millions. Additional trials against other motor carriers are expected.

APPROVED CROSS BORDER CARRIERS - In case you are interested, the DOT has now released the list of approved Mexican carriers operating under the pilot program. The list can be viewed at http://www.fmcsa.dot.gov/cross-border/cross-border-carriers.htm.  Arguments in the lawsuit seeking to halt the program were heard this month and we will let you know what happens.

COMPREHENSIVE SAFETY ANALYSIS 2010 - The FMCSA has announced that it will test its new oversight program for the next 30 months in Colorado, Georgia, Missouri and New Jersey.  The proposed program is designed to increase safety and will provide for increasing penalties and will reduce safety ratings to two - satisfactory and unsatisfactory.  John Hill, head of the FMCSA, has indicated that he is looking for a better way to assign safety rating and to figure out a way to assign fault in many of these crashes. At the current time a carrier’s rating including all crashes, whether the carrier is at fault or not.

CURRENT CASES:

Last month we reported on a decision in West Virginia in which the court determined that a physical damage policy which did not cover tow bills would be obligated to indemnify and defend an insured for a tow and storage bill. Shortly after that decision the insurer sought reconsideration from the court.  Unfortunately the court rejected the request for reconsideration and let stand its original order.  (Spurgeon v Certain Underwriters at Lloyds, 2008 WL 360562)

In another decision difficult to understand, the Middle District in Louisiana determined that an auto liability policy would respond to a cargo loss which was excluded under the cargo policy. The court, ignoring the multitude of cases to the contrary, held that the cargo was not in the care, custody and control of the trucker when it was contaminated with sugar residue in the truck during transit.  (Barry Concrete v. Martin Marietta Materials, Inc., 2008 WL 246231)

Establishing good order and condition is always a problem in household goods cases.  The Southern District of Texas granted summary judgment to a mover after determining that the plaintiff failed to establish the condition of the goods given to the motor carrier or the exact amount of items lost or damaged.  (Fraser-Nash v. Atlas Van Lines, 2008 WL 346381)

Unfortunately many motor carriers believe that if the shipping contract requires a certain level of insurance that the carrier’s liability will be limited to that insurance.  The Eastern District of Arkansas refused to permit such a result, holding that a requirement of insurance is not a limitation of liability. The court noted that the carrier was free to specify that its liability was limited to insurance if that was its intent.  (Delta Express v. NYK Line, 2008 WL 450376)

The failure to comply with the cargo securement regulations is often used to establish negligence per se against a motor carrier.  The same does not hold true for a shipper who loads the cargo. The driver was injured when the load shifted, allegedly as a result of improper loading by the shipper.  The court held the regulations inapplicable to a shipper.  (Spence v. ESAB Group, 2008 WL 450436)

The Supreme Court in Arkansas addressed the factors to be considered when determining if a shipper would be held liable for the actions of a motor carrier which resulted in injury to a third party.  In this particular action the court held that as the shipper took some control over how the product was transported, and the motor carrier operated exclusively for the shipper, there was sufficient factual support to conclude that the shipper was responsible for the actions of the driver.  (Conagra Foods v. Draper, 2008 WL 383644)

All too often the bill of lading is not issued at origin, and is used primarily as a delivery receipt.  In the Southern District of Iowa the court held that a motor carrier would have to establish that it issued the bill of lading prior to the start of the transportation in order to meet the test to enforce the limitation of liability.  (MidAmerican Energy Company v. Start Enterprises, 2008 WL 391239)

The preemptive effect of the Carmack Amendment also continues to be litigated.  The Southern District of Texas held that despite the many state law causes of action asserted by the plaintiff, all would be dismissed and preempted by the Carmack Amendment. The court also held that attorney’s fees were not recoverable under Carmack.  (Schoenmann v. BSNF Railway Company, 2008 WL 336296)

In the Federal Court in South Carolina the court upheld the preemptive effect of the Carmack Amendment, leaving open the question of whether the motor carrier had established enough factual evidence to sustain its burden that it gave the shipper notice and opportunity of the limitation of liability contained in the bill of lading.  (Hansa Meyer Trasport GMBH v. Norfolk Southern Railway Corp., 2008 WL 341541)

Life on the road can be difficult for a driver.  The obligations of a motor carrier when dealing with a sick driver were addressed in great detail in Washington.  The court held that the actions of the motor carrier, once it was aware of the problem, created a legal duty under the voluntary rescue doctrine to assist a sick and disabled driver.  (Johnson v. Golden Eagle Express, Inc., 2008 WL 450384)  In Massachusetts the court held that a shipper was not obligated to provide a safe station for a driver to tarp a load prior to leaving the shipper’s facility.  (Sargent v. Casella Waste Management of Ma., 870 N.E.2d 1279)

The Federal Courts have been indicating an unwillingness to hear insurance company declaratory judgment actions.  In the Middle District of Pennsylvania the court dismissed a declaratory judgment action on a trucker’s policy on the basis that insurance coverage issues were better addressed in the state court.  (Great West Casualty Co. v. State Nation Insurance Co., 2008 WL 360861) In a different matter in NJ, the court, on its own, transferred a declaratory judgment action to the state where the loss occurred on the basis that related actions were pending and the court wanted it all decided in one place.  (United States Fire Ins. Co. v. World Trucking, 2008 WL 413310)

The technical requirements for removal of an action to Federal court routinely allow the Federal court to reduce its docket. In the Northern of Texas a defendant’s removal of a case to Federal court was rejected where the defendant relied solely upon the Carmack Amendment to remove an action, despite the fact that the diversity jurisdiction also existed.  Once it was determined that the action was not one government by Carmack, the case was sent packing back to the state court.  (Astroworld v. Jones Motor Co., 2008 WL 281547)  In the Southern District of New York the court denied a defendant’s efforts to remove a case when Carmack was raised as the defense to the suit.  (Santos v. InterTrans Insurance Services, Inc., 2008 WL 344701)

In New Jersey the court held that an insured that has one insurer defend and settle a claim has no standing to bring an action against another insurer who had refused to participate. The court did hold that the second insurer had a right to pursue the claim for contribution, noting, however that the analysis for coverage would be different when the action was brought by the second insurer.  In this case the court allowed the action to be amended to substitute the second insurer for the insured. It bears noting that the court could have rejected that position, leaving the second insurer to re-litigate all of the issues.  (Marshall v. Raritan Valley Disposal, 2008 WL 382631)

A nine month claim filing requirement is not unconscionable in California.  The warehouse/motor carrier sought to deny a claim which was not presented within nine months after the customer was made aware of the loss of many items.  The shipper sought to avoid the effect of the claim filing requirement by contending that the requirement was unconscionable and that the motor carrier was aware of the loss and therefore there was substantial compliance with the requirement. The court rejected both arguments.  (Gray v. Mon Van Moving Services, 2008 WL 332332)

The Court of Appeals in Tennessee upheld an “unattended vehicle” exclusion in a cargo policy.  In addition, the court rejected the motor carrier’s argument that the BMC-32 endorsement created an obligation on the part of a cargo insurer to defend actions which were not otherwise covered by the policy.  (Western Express v. Lexington Insurance Co., 2008 WL 465263)

A forum selection clause in an ocean bills of lading was upheld in the Southern District of New York.  In evaluating an inland cargo loss involving prior or subsequent ocean transport we remind you that it is important to review the ocean bill of lading. There are defenses which you may utilize to resolve the claim, such as forum selection clauses.  (Indemnity Insurance Company of North America v. M/V Easline, 2008 WL 418910)

The Graves Amendment, which precludes liability on the part of a vehicle owner engaged in the business of renting vehicles, was upheld by the Federal Court in New York despite plaintiff’s efforts to seek the Amendment declared unconstitutional.  The court also upheld the long standing rule that a rear end collision constitutes negligence per se.  (Berkan v Penske Truck Leasing Canada, 2008 WL 441955.) The Appellate Division in New York also considered the issue, holding that the Federal Government had the right to regulate the liability of rental companies, and hat the Graves Amendment preempted vicarious liability imposed under New York law.  (Graham v. Dunkley, 2008 WL 269527)

The New York Courts were busy this month. In two decisions the New York Court of Appeals held that commercial property owners can pursue insurers for consequential damages if the insurer breaches the insurance contract.  The damages can be extra contractual and exceed the policy limit if they are foreseeable and natural result of the breach.  (Bi-Economy Market, Inc. v. Harleysville Insurance Co of New York, 2008 WL 423451) and (Panasia Estates, Inc. v.  Hudson Insurance Company, 2008 WL 420014)

In today’s diversified corporate worlds, many motor carriers are owned by a parent company.  In Missouri the court allowed a plaintiff to pursue a claim against the parent company on the theory that it had an obligation to insure that the motor carrier complied with safety rules. The court did refuse to permit the plaintiff to pierce the corporate veil on the theory of undercapitalization, accepting the rule that a motor carrier which meets the necessary financial responsibility rules is not undercapitalized. (Garrett v. Albright, 2008 WL 268993)

See you next month.