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Bits & Pieces

Volume 20, Edition 3

Welcome to Spring.  I am looking forward to the coming Annual IMUA meeting and the chance to catch up with so many of you.  It has been an interesting year and I appreciate having that time to find out firsthand what is happening with you.

I want to start this month Bits & Pieces with a story which is near and dear to me.  So many of you know that I focus my time and energy to find ways to reduce hunger in the country and to see what we, as an industry can do to help.   Everyday thousands of pounds of food is salvaged for pennies, or disposed of because of transit or warehouse events which may have impacted the grade of the product from the customer’s perspective.   Indiana now has a website to allow rejected food that is still edible to be donated to Indiana charities.  IndyFoodDrop.org is designed to help the trucking industry redirect any food rejected by local grocers and distributors from the landfills and into the hands of people in need. Midwest Food Bank, Gleaners Food Bank, Second Helpings and St. Vincent de Paul Food Pantry teamed with the Indiana Motor Truck Association on this initiative.   The insurance industry can join and help out. IndyFoodDrop.org provides drivers with access and information on where they can bring the food. Drivers will receive help unloading the truck and a tax-deductible receipt. Dry, frozen and refrigerated foods are all acceptable. However, product seals must not be broken, and ingredients and dating must be listed on the food products.  If you are aware of any other similar organizations please let me know as I will publicize that here.  If we all work together we can minimize waste and help feed those that are food insecure.  Humanitarian gestures and tax write offs can also benefit everyone.

SAFETY FITNESS DETERMINATION – Back to the drawing board?  The FMSCA has withdrawn the safety fitness determination (SFD) rulemaking issued in January 2016 and will also cancel plans to issue a supplemental notice of proposed rulemaking to help support the SFD effort.  We will wait to see what they decide following completion of the government mandated study from the National Academies of Science.

NAFTA DATA – NAFTA is in the news as the Trump Administration considers what steps it will take with respect to foreign trade.  The Bureau of Transportation Statistics arm of the USDOT has released North American Free Trade Agreement (NAFTA) data for 2016.  There was another loss.  Less freight was carried by 4 out of 5 modes and that included trucking.  You can read the report here.  Overall freight value for 2016 was $1.069 trillion, a 3.4 percent decline from 2015. Freight value decreased by 7.3 percent in 2015. Both 2013 and 2014 experienced yearly increases of 2.8 percent and 4.6 percent, respectively. Trucks carried $700 billion of NAFTA freight last year, the smallest decrease across all modes at 1.65 percent, and accounted for approximately 65.5 percent of total NAFTA freight.

HOS RESTART – I do believe that I started writing about the HOS changes a million years ago and we are still waiting to see if they get it right.  Apparently the DOT study has now determined that the changes to the voluntary 34-hour restart that added two mandatory overnight periods and limited its use to once every seven days did not benefit driver safety, fatigue or health. The rules were suspended and will, perhaps, now be withdrawn entirely.

ENGINEER INFRASCTRUCTURE REPORT – The American Society of Civil Engineers, gave the US infrastructure a D+ concluding that there are too many outdated bridges, roadways and tunnels which cannot handle what we give to say nothing of the many problems with mass transit (something we here in the Tri-State area deal with daily). $4.5 trillion is needed to achieve significant improvements in the transportation grid.  Bridges were graded C+, improving from a D in 2013. Rail got better, raising to a B grade.   Ports received a C+ and roads a D. Four years prior, they were graded C+, and C, respectively.  You can see the full report here.

CASES

CARGO

The District Court in Maryland concluded that a plaintiff’s claims for loss or damage to freight were preempted by Carmack even when the motor carrier only performed an intra-state leg of an international move.  As the plaintiff always intended the goods to move internationally Federal Court jurisdiction existed and a motion to remand was denied. The Court reframed the state law causes of action under Carmack and also allowed a claim for excessive fees to remain, concluding that the claim was outside the scope of Carmack.  (Monga v. ABS Moving & Storage, 2017 WL 749236)

Fed Ex was successful in having its bill of lading limitation applied when the shipper’s agent prepared the bill of lading which incorporated a tariff limitation. The Southern District of Florida also held that a small limitation for a reconditioned engine was not unreasonable when the plaintiff could have selected and paid for a higher valuation.  Of note was the fact that the Court also addressed what was necessary to establish a prima facie case for recovery when the plaintiff only submitted an affidavit in support of its burden.  The Court held could it could be reliable circumstantial evidence.  (Eastern Air Express v. FedEx Corp., 2017 US DIST 29010)

Is a cargo insurer responsible when the insurance broker fails to notify the insurer that the trucker has added vehicles to its fleet?   The insurer had denied coverage because the loss occurred on a non-scheduled vehicle.   The Court of Appeals held that there was a question of fact on whether the broker was the agent of the insurer, whether it had the authority to bind the insurer and whether notice from the broker to the producer constituted notice of the additional vehicle to the insurer.  (Kaplan Trucking Co. v. Grizzly Falls, Inc.,  2017 Ohio App. LEXIS 902)

Over in Atlanta, the Court allowed a default judgment against a motor carrier in a subrogation action brought by the contingent cargo insurer. Interestingly the Court held that the plaintiff’s affidavit that a breach of the load’s integrity was sufficient to declare it contaminated because of a possible risk of contamination. The matter was not litigated on its merits but it is another decision where the carrier was found liable without evidence of physical loss.  The Court rejected the claim for attorney’s fees. (Travelers Property Casualty v. ASF Intermodal, 2017 WL 894445)

A truck broker who had obtained default judgments against two motor carriers involved in a cargo claim was unable to collect from the insurer for either motor carrier.  The Western District of Arkansas found that one insurer was permitted to decline coverage because the motor carrier did not notify the insurer of the suit until a default was entered.  The second insurer was also permitted to walk away from the suit because the applicable state law did not permit a direct action against a policy not issued in the state and because the policy only permitted a direct claim after a judgment was entered against the motor carrier following a trial.  A judgment by default was insufficient to allow a direct action. (BNSF Logistics, LLC. V. Pennsylvania Mfg. Association, 2017 WL 707494)

Is a trucking company who self-insured certain business losses, including cargo losses, prohibited from seeking recovery from the insurer of a trucking company who caused the loss?  The Southern District of Mississippi held that the answer was no, at least in the 5th Circuit– the plaintiff motor carrier  was permitted to recover and the Court held that it was not akin to a suit between two insurers over who would pay for claims that were covered under both policies. (C.R. England v. Hallmark County Mutual Ins. Co., 2017 US Dist LEXIS 37081)

We do not generally see the Courts actually split cases and transfer only part of a suit to another jurisdiction even when the bill of lading or contract of carriage permits it.  The Eastern District of Louisiana held that the carrier with the master bill of lading would be entitled to have the action commenced against it transferred to another venue, leaving the downstream carriers to fight it out in the home venue and the plaintiff to fight two battles.  (Royal Smit Transformers v. Versus HC BEA-Luna, 2017 US Dist. LEXIS 29506)

The Northern District of Court granted a default judgment against a defunct motor carrier on a household goods claim.  The Court noted that in the household goods arena a homeowner was entitled to opine on the value  of his own property.  The Court accepted his valuations, but refused to allow additional costs for postage, shipping, handling, etc.  The Court also refused to allow attorney’s fees under the federal statute as the plaintiff had failed to file a claim within 120 days.  (Prussin v. Bekins Van Lines, 2017 WL1092332)

AUTO:

A non-trucking use insurance carrier was granted summary judgment declaring that coverage was not afforded when the driver was in the business of a motor carrier at the time of the accident. The driver had not been released to go home, but was on standby to pick up an empty trailer and was taking a federally mandated break at the time of the accident.  That was sufficient to trigger the exclusion.  (Williams v. Great American Insurance Co., 2017 WL 914064)

An insured was not afforded coverage for claims for racially discriminatory practices under the terms of its general liability or umbrella policy, The Northern District of Alabama concluded that the allegations of the complaint asserted intentional acts, which did not constitute an occurrence or accident under the policy.  Neither a defense nor indemnity was required. (Auto-Owners Insurance Company v  McMilan Trucking Co., 2017 WL 992181)

WORKER’S COMPENSATION:

Did you ever consider how much data is available through CAB to evaluate owed premium under Worker’s compensation insurance? The District Court in New Jersey permitted an insurer to proceed in its collection efforts to recover unpaid premium for owner operators utilized by the trucking company. The Court denied a motion to dismiss and a cross-motion for summary judgment, concluding that there were questions on whether the owner operators were employees and whether the hired auto endorsement applied.  CAB can assist you in your efforts to correct proper premium for the worker’s compensation risk you are underwriting.  Give us a call and we can show you how.  (LM Insurance Corp v. Kobys, 2017 WL 1073352)

Volume 20, Edition 2

We have to start this month’s Bits and Pieces with a big cheer to Tiana. For those of you who did not hear Tiana got married this month!  Mrs. Schowe.  We wish her and Ben a wonderful life together!

Short month, short report this month.  We report:

BTS STATISTICS – The BTS reports that the Transportation Services Index for freight rose 3% in 2016. That is good news for trucking since 2015 was a down year.  The Transportation Statistics Annual Report (TSAR) was released and can be viewed here.  Some of the highlights include:

1 – More than 18 billion tons of goods valued at more than $19 trillion were moved in 2015, an increase of 6.5 percent and 8.2 percent from 2012, respectively.

2- Trucks carried more than 60 percent of both the weight and value of 2015 freight.

3 – In 2015, exports and imports made up more than 11 percent of all freight weight and 21.7 percent of the value.

4-Electronics accounted for the highest value, followed by motorized vehicles and mixed freight.

5- NAFTA accounts for nearly 30 percent of international merchandise trade. In 2015, U.S. imports from Canada and Mexico exceeded exports.

6 – Trucks carried 64.3 percent of the NAFTA export/import value and 25.6 percent of the tonnage.

7 – More than 8.3 million “combination trucks” were registered in 2014, up more than 200,000 from the previous year.

8 – Vehicle-miles-traveled by trucks also increased by nearly 1.4 billion miles in 2014.

There is a wealth of data in the report.  Give it a glance to see how it impacts your market strategy for the coming years.

CSA ATTACK – A coalition of organizations had requested that the new DOT Chief rescind and delay the proposed carrier safety fitness determination rule which is based on CSA data. The organizations contend that the data is flawed. It requested this delay in light of the study being done by the National Academies of Science, believing that reforms will be coming to the program in the coming year.

REGULATION DELAYED – In light of President Trump’s mandate to delay implementation of proposed rules which were not already effective, the FMCSA postponed the effective date of the entry level driving training rule.  It is now delayed until March 21st but will not be enforced for 3 years after its effective date.

BRIDGE REPORT – The ARTBA issued its report on deficient bridges.  1,900 bridges on the interstate shipment are deficient, with an average age of 67 years.  A bridge is classified as structurally deficient and in need of repair if its overall rating is four or below. 41% of the bridges have not had major reconstruction work. You can view the report here.

CURRENT CASES

CARGO

This was a unique and interesting issue.  The Fifth Circuit held that a trucker’s claim against a tank wash service was preempted by the Carmack Amendment. The Court concluded that the service of washing the truck, which was done incorrectly and resulted in a cargo loss, was an integral part of the transportation and was related to the interstate transportation.  (Heniff Transportation System v. Trimac Transportation Services, Inc., 2017 WL 405626)

The Eastern District in California denied a motion to transfer venue to the forum selected in a broker carrier agreement.  The Court rejected the request concluding that the underlying policy of the Carmack Amendment, which provides its own venue options, permitted the action to stay in the pending forum.  (Celtic International, LLC v JB Hunt Transport, 2017 WK 696017)

There is a new tariff provision which may impact subrogation recovery for a cargo loss. In a related case to the above decision, the Eastern District held that the plaintiff could not pursue the rail carrier who damaged 3 shipments of wine in a derailment.  The rail carrier was hired by JB Hunt (defendant in the case above) to perform the rail transport.  Under the terms of the rail carrier’s tariff only the party that engaged and paid the rail carrier was permitted to sue the rail carrier for damage.  The Court held that such a provision was not barred by the Carmack Amendment and granted judgment to the rail carrier.  (Celtic International, LLC v. BNSF Railway Co., 2017 WL 714379)

The Northern District of Texas allowed a plaintiff to amend its complaint to more properly allege its standing to sue a motor carrier for loss or damage to cargo.  At least one of the motor carriers was dismissed when the plaintiff could not support any factual basis for a claim against that carrier.  (Miramore Trust v. United Van Lines, 2017 WL661374)

When does transit end and carrier liability change to warehouseman liability?  That was the issue addressed in the Southern District in Florida.  The shipment was stolen while at the motor carrier’s warehouse.  The Court held that the bill of lading indicated that transit was not yet completed and the facts of the loss confirmed that the shipper fully intended the shipment to be held only until such time as the motor carrier could obtain a delivery appointment.  The Court dismissed the action, which alleged only state law causes of action against the carrier, concluding that the claims were subject to the preemptive effect of the Carmack Amendment.  (Starboard Holdings, LTD v. ABF Freight Systems, 2017 WL 696124)

Figuring out who the correct insurer is can be critically important as one motor carrier found out in the Central District of California.  The motor carrier sought to proceed on a bad faith claim under a cargo policy, alleging that the insurer did not do an adequate investigation on whether there was forced entry. However the motor carrier did not sue the issuing company and was denied a right to amend to add the correct party. The parent was not liable on the policy of insurance. (Freedom Transport v. Travelers Companies, 2017 US DIST Lexis 18744)

AUTO

The District Court in Maryland reconsidered a prior decision exonerating an insurer from liability under the MCS-90 endorsement.  The Court held that when determining the applicability of the endorsement the Court should examine the essential character of the shipment from the shipper’s intent at the time of the accident in order to determine whether the shipment was interstate in commerce. In that case, as the shipper asked the motor carrier to travel from its home location in one state to a location in a different state to transport an intra-state shipment, the MCS-90 endorsement applied.  (Titan Indemnity v. Gaitan Enterprises, Inc. , 2017 WL 660802)

Unloading material from a trailer is an activity encompassed by the unloading exclusion in a general liability policy.  The fact that the trailer may have been defective did not give rise to a separate claim. The 1st Department in New York held against the auto liability carrier who sought contribution under the general liability insurer for a settlement it reached on behalf of the insured.  (Country-Wide Ins. C. v. Excelsior Ins. Co., 2017 WL 439730)

The Middle District of Pennsylvania held that a repair facility could be subject to punitive damages when it failed to undertake the proper steps to repair a trailer and train its employees, sending the driver off in a trailer which caught fire.   Unfortunately, the driver died trying to put the fire out.   The Court held the facts sufficiently egregious to warrant possible punitive damages.  (Wilson v. TA operating LLC, 2017 U.S. Dist. LEXIS 18754)

A request for remand was denied to a plaintiff in the Eastern District of Louisiana.  The Court held that the defendant was not obligated to remove the case until it received sufficient paper work which supported damages in excess of the jurisdictional requirement.  The complaint did not allege a specific sum of damages.  The fact that the defendant received paperwork before the suit which indicated excessive damages was insufficient as the statute requires receipt of paperwork after the initial suit is filed.  (Wright v. National Interstate Insurance Co., 2017 U.S. Dist. LEXIS 9529)

When does the law of the case apply?  The Court of Appeals in Louisiana held that it did not apply to an interlocutory ruling by the Trial Court since they may always change the substance of its ruling.  Having made that finding the Court of Appeals went on to support the decision of the Trial Court that the driver was not acting in the business of the motor carrier at the time of the accident, which triggered coverage under the bobtail coverage for the driver.  The Court held that while there was presumption that a leased vehicle was in the business of a motor carrier such a presumption applies only when the claim is for an injured party, and not for UM coverage under the policy. (Guidry v. USA Agencies Casualty Ins. Co., 2017 WL 658735)

© 2017 Central Analysis Bureau