|Trucking Legal Update - June 2009
Courtesy of Jean Gardner with Schindel, Farman, Lipsius, Gardner & Rabinovich, LLP and the Central Analysis Bureau.
UNIFORM CARRIER REGISTRATION - The FMCSA has rejected a recommendation by the UCR Board to increase registration fees next year. Because there has been very limited focus on collection, many carriers have not paid their existing fees, resulting in a serious shortfall. The Board sought to double the fees, essentially impacting those who are already being responsible and paying their fees. More focus will be put on getting the existing fees paid by carriers.
BAD DRIVERS - We hate to admit this, but the GMAC Insurance National Drivers Test survey was released this month and New Yorkers were found to be the worst at knowing the rules of the road, with New Jersey a close second to the bottom. Apparently over 20.1 percent of licensed Americans, about 41 million folks, could not pass the written exam. The lowest average test scores are in the Northeast, with the Midwest having the highest. Males squeak over females and older drivers have better scores. Before you get cocky about where you live, or your age you can take the test at www.nationaldriverstest.com and see how you fair.
NAFTA - U.S. Secretary of Transportation Ray LaHood has announced that he will seek to open the border as early as next month. He is proposing a permanent program with new safety guidelines. The Motor Carrier Safety Advisory Committee has submitted its proposed principles for creating a new cross border operation. The report includes 38 guiding principles broken down into four sections — program design, enforcement data, collection/information exchange and education/outreach. The full report can be viewed here.
ROAD SAFETY - Bad roads increase the cost of vehicle operation by an average of $335 per year, according to the American Association of State Highway and Transportation Officials. Poor-quality or deteriorated pavement affects vehicle maintenance, tire wear, fuel consumption, insurance premiums and other operating costs. California tops the list, with increased costs over $700 per year. (At least New York did not top this study) The state with the lowest percentage of roads considered in good condition was Hawaii, followed by California and Rhode Island. The national average for arterial highways was 13 percent poor, 20 percent mediocre, 16 percent fair, and 51 percent good. The best roads are found in Nevada, Alabama and Tennessee. The study can be viewed here.
RAILER REGISTRATION - Pay attention to the condition of your insured’s fleets. Apparently registration of new trailers has dropped 65.5% in the first quarter. Trailer manufacturers are expected to make only 70,000 new trailers this year, the lowest level since 1975.
HOUSEHOLD GOODS MOVES DROP TO LOWEST LEVEL - The Census Bureau has report that the national mover rate has dropped to 11.9% in 2008, an extremely low level. As housing prices stall, people are not moving and the household industry is continuing to feel the pinch. Military moves continue to prop up the industry.
HAZARDOUS MATERIALS - The U.S. House Committee on Homeland Security approved an amendment to the Transportation Security Administration authorization bill. The amendment, named the SAFE Truckers Act, would repeal the Patriot Act’s requirement that all hazmat haulers undergo federal background checks and require only those truckers who haul security-sensitive materials to undergo background checks. Security sensitive materials would include only about 5 percent of the materials currently considered hazardous materials. The second amendment directs the Transportation Worker Identification Credential program to process TWIC cards within 30 days “to the greatest extent possible.”
As we have been reporting in Bits and in the various cargo seminars given throughout the year, identity theft is ever present in the motor carrier industry. Copper and other metals seem to be a big target. This month the court refused to allow a carrier out of a suit in which the carrier contended that it had not been hired to haul the shipment and that someone had apparently stolen its identity. The Northern District of Indiana held that there would be a question of fact as to whether it was reasonable for the shipper to believe it was dealing with the motor carrier. (Northern Indiana Metals v. Iowa Express, Inc., 2009 WL 11139986)
Once again a court held a cargo claimant’s feet to the fire, holding that the shipper could not simply rely on paperwork to establish what was in a stolen container. The Court of Appeals in Georgia held that when the shipment was a sealed container the burden rested with the shipper to provide direct evidence of the contents. (Transport Solutions, Inc. v. St. Paul Mercury Insurance Co. 2009 WL 1299043)
In the Southern District in Florida the court held that a carrier would not be liable for a shortage in a sealed container when the shipper had not introduced any specific evidence that all of the cargo had been loaded into the container. The court held that the carrier was bound by the weight listed on the ocean bill of lading, as that was easily determinable. However with discrepancies on the actual weight of the transporting conveyance it was insufficient to show what was in the container. The court also held that while the carrier would be bound by the weight on the bill of lading, the shipper would be required to establish that it weighed the container at release or at a minimum that it was short while in the possession of the carrier. (Channa Imports v. Hybur, Ltd., 2009 WL 1308910)
It seems that every month someone tries to come up with another argument on why a claim against a motor carrier would not be preempted by Carmack. This month the District Court in Arizona held that the simple fact that a carrier did not issue a bill of lading would not defeat pre-emption. While the court held that the carrier may not have properly limited its liability, that liability would still be analyzed under the Carmack Amendment, (Taylor v. Allied Van Lines, 2009 WL 1148582)
The Southern District of Texas also upheld the preemption doctrine and more importantly held that a carrier will not be liable for consequential damages when the carrier is not put on notice of the damages before shipment. (Shuttle v. Landstar Inway, Inc., 92 Cal Rptr. 3d 639)
The Western District of Pennsylvania also upheld the preemption doctrine. In a case addressing the removal of a Carmack cause of action, the court remanded the case as the removal was untimely. It is important to remember that the 30 day rule for removal is strictly enforced and is determined from the date that the first document, not necessarily the complaint, reveals that the damages bring the action to the jurisdictional level for removal. In this case the plaintiff’s deposition was sufficient to trigger the start of the 30 days. (Rehman v. Basic Moving, 2009 WL 1392149)
The Northern District of California held that under Hague Rules a limitation of liability would be determined based upon the weight of the entire shipment where the damaged piece resulted in a loss of value to the whole shipment. The court also held that the cargo owner would be entitled to attorney’s fees under the shipping contract as the prevailing party. The court held that defendant’s continued refusal to acknowledge liability would permit plaintiff to be the prevailing party, even when recovery was limited. (Nissan Fire & Marine Insurance Co. v. BAX Global, Inc., 2009 WL 1364870)
Sometimes it seems that you just can’t get rid of a case. In the Eastern District of New York after settling with the plaintiff, one carrier attempted to dismiss his cross-claim against a co-carrier, without prejudice. The co-defendant opposed the dismissal seeking a with prejudice dismissal and fees because the co-defendant did not pursue its claim for indemnity. Thankfully the court rejected this motion and ended the matter, with rights to bring the cross-claims again some day. (Continental Insurance Co. v. Morrison Express Corp., 2009 WL 1269701)
If someone wrongfully takes a piece of equipment with the intention of return it, only to have it destroyed before he can do so, does that result from an act of infidelity and therefore not covered by an inland marine policy? The Eastern District of Michigan held that it would be a question of fact and if he really intended to return it the policy could be ambiguous. The court also addressed in detail the standards for denying coverage for misrepresentation in Michigan. (Aqua Group, Inc. v. Federal Insurance Co., 2009 WL 1383320)
Speaking of misrepresentation, the Northern District of Mississippi set forth the standards for misrepresentation under an inland marine policy in Mississippi. The court held that an insurer’s statements that it may not have insured a part if it had been aware of prior losses and cancellations constitutes a material misrepresentation allowing coverage to be denied. (Mann v. Nationwide Mutual Fire & Casualty Ins. Co., 2009 WL 1155400)
The Ninth Circuit upheld the application of the forum selection clause to an agent of the ocean carrier, in this case the vessel. The Court held that all agents, servants and sub-contractors of the carrier would be entitled to the benefit, even if not specifically named. (Mazda Motors of America, Inc. v. M/V Cougar Ace, 2009 WL 1259382)
We are often questioned by cargo underwriters as to how government shipments work. It is not often that decisions are issued on that type of transportation. This month the U.S. Court of Federal Claims defined how the operations work and it is an interesting read for those who underwrite carriers working under government bills of lading. In a case involving a motor carrier’s attempt to recover shipping costs from the government, the court rejected that request. The motor carrier was not the entity operating under the government Tender of Service and therefore had no privity of contract with the Department of Defense. (Central Freight Lines v. United States, 2009 WL 1262382)
Wrecker services continue to be a problem for insurers and so we like to report on any decisions which address their operations. The Court of Appeals in Kansas held that a wrecker yard complies with notice requirements before selling a vehicle when it checks with the state division on vehicles on the owner and lienholder. In this case it sold a Mustang, valued at approximately $11,000 to itself for $500! This can be a problem for trucks, which are often registered out of state. However, the court did throw a bone to the lienholder and held that the wrecker yard would still have to show that it complied with constitutional guarantees of due process. The lienholder argued that CARFAX is a reasonable way to establish ownership of the vehicle. (Citifinancial Auto, Inc. v. Mike’s Wrecker Service, Inc., 206 P. 3d 63)
Motor carriers are required by federal regulations to have an agent for service of process in every jurisdiction in which it operates. In Louisiana that may be enough to confer jurisdiction, even where the accident occurs in another state and the carrier does not appear to have any other significant contacts with the state. Although the court was going to allow some discovery on the issue, it did state that have an agent for service of process would be enough to confer jurisdiction. (Herbert v. C.R. England,2009 WL 1323038)
The United States District Court in Utah held that listing an agent for service of process in accordance with FMSCA rules would be sufficient to confer jurisdiction in that venue unless the carrier could establish that the exercise of jurisdiction was a violation of due process. The motor carrier was unable to show that it was severely disadvantaged by the venue. (Ayers v. Tanami Trading Corp., 2009 WL 136402)
On the other hand, The Appellate Division in New York held that a case would not stay in that state simply because the motor carrier was a regulated motor carrier. The accident and all other significant events occurred in S. C. The court required that the action be transferred to that jurisdiction. (Turay v. Beam Brothers Trucking, Inc., 2009 WL 2253328)
In a continuing effort to let you know about experts in trucking cases, the Middle District of Pennsylvania admitted the testimony of the plaintiff’s expert, Mariusz Ziejewski. The doctor was an expert in the field of biomechanics and was permitted to testify as to whether the force on the plaintiff when struck by the tractor-trailer was sufficient to cause the injuries. (Burke v. TransAm Trucking, Inc., 2009 WL 1423407)
In case you happen to be the relevant insurer, the District Court in Florida entered a default judgment against Flawless Transportion and its principle, both for its actions in failing to have adequate insurance, and for its vicarious liability for the actions of the driver. (Dubose v. Flawless Transportation, 2009 WL 1393487)
The First Circuit Court of Appeals in Louisiana reversed a lower court decision and held that the Louisiana UM statute would not apply to an accident which occurred outside the state and involved a policy not issued in the state. The court also held that the Louisiana anti-stacking provision would not apply to determine whether an injured party was entitled to return an unconditional tender by one insurer to pursue higher recovery under another policy. (Triche v. Martin, 2009 WL 1270304)
The Southern District of New York held that an insurer was estopped from relying on its late notice defense because its disclaimer letter to the putative additional insured did not set out the basis of the defense with sufficient specificity. The court, however, drew a distinction between conditions (such as prompt notice) and exclusions, finding that Progressive could rely on its employers liability exclusion even though the exclusion was not mentioned in the disclaimer letter at all. (Progressive Northern Insurance Co. v. Beltempo, 2009 WL 1357947)
The California Supreme Court, responding to a certified question from the federal 9th Circuit, held that a motor carrier that leases trailers to its subcontractors qualified as a company “engaged in the business of renting or leasing motor vehicles without operators,” and, accordingly, the policy issued to the carrier was excess over other applicable policies pursuant to (former) California Insurance Code Sec. 11580.9(b). (Sentry Select Ins. Co. v. Fidelity & Guaranty Ins. Co., 205 P.3d 1084)