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Bits & Pieces

Volume 14, Edition 11

Have you dug your way out of the turkey fog? Are you ready to move onto the next holiday?  I am, and hope you are too.  Hopefully things start to wind down as we move into the end of the year mode.  Of course, we all have that end of the year rush and the government, with its proposed regulations, is no different. This month we report:

CELL PHONES – The FMCSA has banned all hand-held cell phone use by commercial truck and bus drivers while operating their vehicles. Drivers who violate the restriction will face federal civil penalties of up to $2,750 for each offense and disqualification from operating a commercial motor vehicle for multiple offenses. Companies whose drivers violate the law will face a maximum penalty of $11,000. In September 2010, FMCSA had banned text messaging.

FMSCA CRACKING DOWN ON BAD CARRIERS – The FMCSA shut down three companies this month, ATA Trail Inc., Gunther Transport and Clock Transport.  The FMCSA issued an imminent hazard out-of-service order against ATA and Gunther following a comprehensive review of their compliance with federal safety standards.  The FMCSA also moved to shut down a chameleon carrier ™, Clock Transport LLC that opened shortly before Gunther was shut down, operating at the same address. In addition, the FMCSA had a nationwide crackdown on unsafe bus operators, during which federal, state and local police conducted 8,300 surprise safety inspections of motorcoaches, tour buses, school buses and other commercial passenger vehicles over a two-week period. The unannounced inspections were part of FMCSA’s annual National Passenger Carrier Inspection Strike Force, which resulted in 902 unsafe buses or drivers being placed out of service.  The DOT has asked Congress to increase the penalty for operating illegally from $2,000 a day to $25,000 per violation, and to close loopholes that allow bus and truck companies that have been shut down to recreate themselves under a new name.

ACCIDENTS – The FMCSA has released its report for fatal truck-involved crashes and the numbers are good, at least for accidents between 2007 and 2009, the most recent years with available crash data.  During that time crashes fell 31% to 3,215 from 4,633, with the fatal crash rate for large trucks dropping to 27%.  Since 2000, the fatal crash rate has fallen to 1 crash per 100 million miles.  80.5% of the time the driver error was with the passenger vehicle and not the truck. A copy of the report can be viewed here.

MEDICAL CERTIFICATIONS – Under new regulations, truck drivers will have to provide proof of medical certification to their state licensing agency. The state agency must electronically tie the medical certification to the commercial driver’s license, which should allow roadside law enforcement to electronically confirm valid medical certification. Once the driver takes this step he will no longer be required to carry the certification with him. However because of delays in getting everything implemented the rule was slightly modified to continue to require drivers to retain the medical certificate for proof on the roadside during an inspection until 2014.

CSA STUDY – The ATRI has released its study on the impact of CSA on motor carriers.  Those carriers who acknowledged having one or more BASICS above acceptable standards indicated that it had a negative impact on its relationship with brokers and shippers. The survey included 695 motor carriers and the results can be viewed here.

EOBR RULES – The FMCSA has withdrawn the rule which required motor carriers with serious hours-of-service compliance violations to install electronic logging devices by June 1, 2012, after the rule was vacated by the court. The FMCSA has advised that it will concentrate on writing its broader EOBR rule.

NEW REGISTRATION PROCESS – The FMCSA now proposes to streamline the registration process as a means to help identify our aptly named “chameleon” ™ operators. The new proposed rule would combine the Department of Transportation’s identification number system, the single state registration system, and financial responsibility system into a single online federal system and would raise registration fees to $300. The MC number would no longer be used. The notice can be viewed here.

CASES:

AUTO:

The District Court in Florida held that an insurer could not rely upon the auto exclusion in a general liability policy.  In the action against the insured, the plaintiff sought recovery for alleged negligent supervision of a trucking company the insured hired whose employee was in an accident. The court held that the exclusion was applicable only to autos owned, operated, rented or loaned to an insured. As the insured had no such connection to the vehicle the exclusion was inapplicable.  (Category 5 Management Group v. Companion Property & Casualty Ins. Co., 2011 WL 5561246)

Sometimes it actually goes the defendant’s way. In the Court of Appeals in Texas the court upheld a limited judgment in an action against a motor carrier for a rear end action. While finding the motor carrier 70% liable for the accident, it accepted the driver’s testimony that this was a simple slow rear end collision and that the injuries claimed were simply not justified by the loss. No money was awarded for pain and suffering or future losses.  (A.B. Mansfield v. Russell, 2011 WL 5005820)

In the 4th District Court of Appeals in California the court held a policy’s exclusion for loss resulting from “the movement of property by a mechanical device (other than a hand truck) unless the device is attached to the covered auto,” inapplicable when the accident was not caused by the movement of property to or from the covered dump truck. In this case employee of an additional insured under an automobile policy struck the cab of the insured’s dump truck with the bucket of an excavator being used to load broken asphalt into a different vehicle.  The property was not being moved to or from the covered dump truck which it hit. (Palp, Inc. v. Williamsburg Nat. Ins. Co., 200 Cal.App.4th 282, 132 Cal.Rptr.3d 592, 11 Cal (Cal.App. 4 Dist.,2011.))

When is a car really just cargo?  The 9th Circuit Court of Appeals upheld the denial of insurance coverage under an auto policy for vehicle owners when they were sued for an auto accident in which their vehicle was being towed by a tow company. The court held that the car was simply passive cargo and therefore the car was not being used for it inherent nature.  (Barber v. Encompass Indemnity Co., 2011 WL 5438907)

Unloading pipe always has the risk of resulting injury.  In the Middle District of Pennsylvania the court held that a consignee had a duty to use reasonable care in unloading a shipment of pipe and therefore was not entitled to summary judgment in the action brought by the truck driver for injuries.  (Kelley v. National Pipe and Plastics, Inc., 2011 WL 5878375)
4978756
The Court of Appeals refused to permit the introduction of a plaintiff’s testimony regarding a dream he had about his trucking accident. The court held that such testimony as not admissible as “recovered memory”.  The plaintiff had no memory of the accident and therefore could not testify as to the events which caused his traumatic injuries.  (Ladd v Bowers Trucking, Inc., 2011 WL 4978756)

The Northern District in Indiana Ohio held that a worker who was filling pot holes when struck and killed was not occupying the nearby dump truck which contained the materials being used to fill the holes.   Applying the common understanding of the terms “in, upon, getting in, on, out or off,” the Court concluded that the worker could not be an occupant of the dump truck for uninsured motorist coverage, nor was he using the vehicle.  The Court also held that commercial umbrella policies are not required to provide UM coverage. (Ohio Cas. Ins. Co. v. Herring-Jenkins, 2011 WL 5835827 (N.D.Ind.))

MISCELLANEOUS:

The Middle District of Florida permitted an insurer to continue its declaratory judgment action even while the personal injury action continued in the State Court. We have seen a number of decisions to the contrary this year.  This time the court held that the coverage issues would not be resolved as part of the state action and therefore the differing interests justified a second action which the court would take jurisdiction over.  (Northland Ins. Co. v. Top Rank Trucking of Kissimmee, 2011 WL 5428558)

Insurers beware. The Supreme Court of Appeals in West Virginia held that an insurance carrier for a party defendant, in this case a bankrupt trucking company, is considered a party to a court-ordered mediation and can be sanctioned for failure to attend and participate fully in the mediation. In an interesting case, in which sanctions were not imposed, an insurer representative was present for the initial mediation; however he was not fully authorized to settle the case.  Full decision making discretion must rest with the party attending the mediation. (Casaccio v. Curtiss, 2011 WL 5531050)

Unfortunately an interpleader does not always resolve the case for an insurer.  In the Western District of North Carolina the court stayed an insurer’s interpleader action, in which the insurer tendered its policy limits of $1 million stemming from a truck accident. The court held that the interpleader should be stayed pending resolution of the underlying liability claims, which presumably means that the insurer has to continue to defend.  (Great West Casualty Co. v. Fredrics, 2011 WL 5326236)

If an insured purchases a 3 year fixed premium policy does that mean that the insurer can not cancel in accordance with policy cancellation provisions? The 5th Circuit Court of Appeals held that the two terms were not inconsistent and the insurer of the motor carrier could exercise its rights to cancel. The Court also dismissed any claim for fraudulent misrepresentation, as the insured claimed it would not have purchased the coverage if it was not insured for the entire 3 year deal.  Absent specific allegations of fraud the action would not stand. (KLLM Transport Services v. Marsh USA, Inc., 2011 WL 5838706 (C.A.5 (Miss.))

CARGO:

Oh what a tangled web we weave.  The Northern District in California addressed claims by a household goods customer whose goods were destroyed in a warehouse during storage in transit for an interstate move.  Apparently the goods were not placed in the state of the art facility which the mover represented it operated.  While the court dismissed all causes of action other then the Carmack claim against the mover, the court left open the opportunity for the plaintiff to allege a basis for a claim for injunctive relief and restitution under Consumer Fraud statutes. (Gummer v. American Choice Van Lines, LLC, 2011 WL 5599854)

Chalk one up for our side.  A year or so ago we reported on a suit that had been brought by a carrier and its insurer alleging fraud by a shipper who presented an alleged contract for sale of his yacht, the cargo, to support his claim for greater monetary damages.  The District Court in Conn upheld the fraud verdict against the shipper, agreeing that the claim was fraudulently presented.  (Ensign Yachts, Inc. v. Arrigoni, 2011 WL 5325174 (D.Conn.))

I am excited to report on a decision on a contingent cargo policy, something we very rarely see. In an action in which I, with local counsel, represented the insurer, the court in Ohio held that a contingent cargo policy did not apply when the broker was defrauded by an individual purporting to act as a motor carrier.  The court held that the goods were not in the possession of the motor carrier hired by the broker at the time of the theft.  FST v. Essex (2011 Ohio Misc. LEXIS 487)

I generally do not report on property decisions, however once in a while I see a case which I know has some impact for other coverages, specifically inland marine coverages, that I like to pass along. This month the District Court in Kentucky held that when parties invoke the appraisal process in the claims adjustment the appraisals are entitled to determine not only the loss but the value of the property at the time of the loss. In addition, the court held that coinsurance penalties will still apply when there is an occurrence limit as everyone understands that the occurrence limit is subject to all valuation provisions. (Bachelor Land Holdings v. Chubb Custom Insurance Co., 2011 WL 5389197)

Criminal cases are also not generally part of the bits.  I had an interesting read, however, in this case from the Appellate Court in Georgia which detailed the scheme of setting up a trucking company to sell stolen cargo and the way that this is in fact a big business.  (Robinson v. State, 2011 WL 5830464 (Ga.App.))

We hope you have some wonderful holiday times in the coming weeks.  Enjoy the festivals!

Jean Gardner

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