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Bits & Pieces

Volume 14, Edition 3

We would like to start this month by welcoming our newest addition to the CAB family.  We extend a big welcome Tiana Cain who joins us as our Assistant Vice President of Business Development.  Tiana comes to us with tremendous experience in transportation insurance and brings to CAB your point of view, the end user of our services.  We look forward to all she will do as CAB continues to focus on its changing operations.  Don’t be surprised if you hear from her soon. And if you do not have the CAB advantage in your underwriting process contact Tiana to arrange for a demonstration. She can be reached at tcain@cabfinancial.com.

She is already moving us forward.  We are now on Facebook and Twitter! Please make us feel good by “liking” us on Facebook and following us on Twitter.  We promise that tweets will be worth reading and not reports on what we are having for lunch.

BMC-32 ENDORSEMENT – What a mess this last month has been with the termination of the cargo endorsement for certain carriers.  Many insurance carriers began to cancel their filings, effective on the scheduled end date.  Unfortunately the government failed to stop their automatic notice process and motor carriers began receiving notices that their operating authority would be revoked.  CAB got involved and was able to assist in getting a formal response that the letters were sent in error and that motor carrier authority would not be revoked.  We would also note that the FMCSA has now changed the licensing and insurance page to indicate that no one needs filings, which is in fact incorrect as household good carriers and forwarders still need the filing.  In other news a last ditch effort by some organizations to stop the cancellation of the endorsement did not work but steps may be in the works to try and legislate the endorsement back into existence.

CARGO NET CARGO THEFT REPORT – Our friends at Cargo Net have released their 2010 Cargo Theft Report. Many cargo insurers have joined forces with Cargo Net to help combat cargo theft and recover stolen cargo.  A copy of the report can be viewed here. Inside this excellent report you will find information on stolen commodities types, locations, time trends as well as a wealth of additional material which will help you evaluate this exposure. The Cargo Net program can be reviewed at cargonet.com.

NAFTA – Lots of news on the Mexican border front.  Under a proposed agreement between Mexico and the U.S., the U.S. would phase in a program to allow Mexican carriers into the country and in exchange Mexico will stop the imposition of the severe tariffs which it has placed on imports from the U.S.  In order to protect the traveling public, the U.S. has agreed to pay for and install EOBR’s in all of the Mexican trucks, to the growing dismay of U.S. carriers who may be required to pay for and install their own EOBR. Political lobbying in underway to attack this proposal.

CSA 2010 – CSA 2010 continues to change the landscape in trucking. Reports indicate that many owner operators are being forced into obtaining their own operating authority so that violations are counted against the owner operator and not the company for whom they are hauling. By using our VITAL search engine, however, subscribers to our service are quickly able to identify and link violations cited on a specific vehicle even if the violations were cited against a different operating authority. The FMCSA also settled its dispute with various organizations, once again making changes to the program.  The term “Alerts” has been discontinued, replaced with a yellow triangle with an exclamation point and there is now a revised disclaimer which indicates that the public should not take the symbol to imply any safety rating.

HOURS OF SERVICE – The comment time for hours of service ended this month.  Over 20,000 comments were filed, many objecting to the proposed modifications to the newest set of rules, which already took years in the making. There are serious concerns about the impact of the new rules – from increasing costs, slowing the movement of freight to increasing the number of violations for carriers as inspectors and drivers try to learn a new protocol.  The ATA has indicated that it may file suit if the new rules are put in place.

TRANSPORTATION INSURANCE PRICING – NIP released the results of its 3rd quarter 2010 survey on transportation insurance. A copy of the results can be viewed here. While they report that rates are still soft, there is an indication that the bottom may have been hit as certain lines begin to stand up against further rate reductions.

NTSB HEARINGS – In light of the number of bus accidents this month the NTSB has announced that it will hold a public forum in May to address driver safety, government oversight, carrier operations and road safety and analyze new ways to improve safety on the roadways.  Senator Lautenberg, hailing from New Jersey, has announced hearings on the pace of the needed changes, demanding quicker action to protect passengers.

CARRIER/BROKER FRAUD – A father and his sons were sentenced to jail time and repayment of amounts in excess of $1 million dollars.  The individuals set up State Transport as a carrier, using that company to obtain loads from brokers.  In turn, using another name, they brokered the actual work out to another carrier.  The first broker paid State who, of course, never paid the truckers for the services undertaken. Watching fraud is critical in all aspects of transportation insurance and having the CAB advantage can help you to detect fraudulent brokers and carriers before you get hit with losses.

HAZARDOUS MATERIALS – A new federal rulemaking will authorize regulators to conduct enhanced inspections, opening packages suspected of being non-compliant or undeclared hazardous materials.  When faced with such cargo, inspectors will now be permitted to require a motor carrier to transport the package to a facility for inspection.

CURRENT CASES

CARGO

The 9th Circuit held that a cargo owner need not be identified on the bill of lading in order to pursue a claim for loss or damage under a bill of lading. The Court also addressed the Hughes standard for limitations of liability, holding that a motor carrier that had a schedule for increased valuation met the obligations necessary to limit its liability.  (One Beacon Ins. Co. v. Haas Industries, 2011 WL 802048)

The Southern District of New York refused to grant summary judgment to CH Robinson in its quest to dismissal a Carmack action asserted against it.  The court detailed the various operations of CH Robinson and how they could ultimately be found to raise CH Robinson to the status of a carrier.  The decision sets forth the various factors which will be considered in these cases and should be carefully considered by underwriters who need to understand the operations of their insureds.  (Nipponkoa Ins Co. v. CH. Robinson, 2011 WL 671747)

The next step in the never ending saga of the COGSA limitation is continuing.  The Southern District of New York held that a rail carrier who picks up a shipment in the U.S. is subject to Carmack Amendment requirements in order to limit its liability and can not necessarily rely upon a COGSA limitation in the international bill of lading. However the court went on to hold that under the Stagger’s Act, rail carriers could limit their liability provided the shipper is given the right to select a Carmack level of liability.  The court also held that the steamship line’s request for indemnity from the rail carrier was premature when liability had not yet been determined.  (American Home Assurance Co. v. Panalpina, 2011 WL 666388)

Who gets the $$?  That was the question that the Southern District in Texas considered this month after an insurer deposited the proceeds of a first party cargo policy into the court.  The assignee of the cargo owner sought to collect the proceeds of a policy of insurance obtained by Logistics Group who procured the insurance. The logistics group was owed substantial monies from the company which engaged it to arrange for the movement into Mexico and sought to recoup its loses with the insurance proceeds. The court held in favor of the cargo owner assignee as they were the only party with an insurable interest in the property, which was the subject of the policy. The court held that such a policy must be for the benefit of the cargo owner.  (Amlin Corporate Member, Ltd. v. Logistics Group International, 2011 WL 1044048)

AUTO

In a coverage dispute between a general liability and an auto insurer, the Appellate Division in New Jersey ruled in favor of the general liability policy.  When a driver was injured while attempting to guide another driver’s operations as he backed toward a container the court held that there was a sufficient nexus to the use of the auto to find coverage under that policy.  (Harleysville Insurance Co. of NJ v. Dray-Con Transport, 2011 WlL798688)

Radius limitations were held invalid in a motor carrier’s auto policy by the Supreme Court in Georgia. The Court held that the Motor Carrier Act permitted a direct action by an injured plaintiff and was applicable despite the fact that the motor carrier did not have the proper authority, and the policy did not have a Form F endorsement.  The court also held that any radius limitation was invalid because it reduced or negated the responsibility of the insurer to the public.  (Sapp v. Canal Insurance Co., 2011 WL 680853)

UPS was granted summary judgment on a claim asserted against it for punitive damages stemming from an auto accident.  The Court ruled that as a matter of law punitive damages were not warranted simply because UPS permitted its drivers to go home early if they finished all deliveries early.  The court in Southern District of Indiana also said that ordinary negligence would not warrant imposition of punitive damages.  (Powell v. UPS 20111 WL 836949)

The Court of Appeals in Georgia reversed a grant of summary judgment in favor of a motor carrier and a shipper. The court held that there were questions of fact on whether the driver was a borrowed servant of the company that engaged the carrier’s service and that a driver’s deviation for lunch may not be enough to defeat vicarious liability on the part of the carrier.  (Coe v. Carroll & Carroll, Inc., 2011 WL 1087104)

The Eastern District of Pennsylvania permitted a suit to continue against a driver and various possible employers stemming from an accident in which the motor carrier driver was alleged to have caused personal injury.  The court held that other than allegations of recklessness which were unwarranted, the plaintiff had at least alleged sufficient facts against each party. The court also held it is reasonable, when pursuing a vehicle owner for negligent entrustment, to allege that the owner knew or should have known of the driver’s inaptitude.  (Perez v. Bardo, 2011 WL 941380)

A truck driver’s efforts to obtain compensatory and punitive damages from a rail carrier failed in the Supreme Court of Alabama.  The court held that where there sufficient evidence that the driver of the truck failed to properly stop and evaluate the risk before crossing tracks the rail carrier would not be liable for injuries he suffered and would also be entitled to recover its own property damages stemming from the incident.  (Norfolk Southern Railway Co v. Johnson, 2011 WL 835060)

The Northern District of Iowa held that a general liability insurer had no obligation to indemnify its insured under a general liability policy.  The court held that a pick up truck used only to obtain fuel for refueling equipment while on a salvage yard was still an “auto”  and therefore subject to the auto exclusion under the general liability policy. The court addressed in great detail the impact of the facts surrounding the use of the vehicle and the attached equipment and how it did not change the fact that it was still an auto.  (Baker v. Caitlin Specialty Ins. Co., 2011 WL 573734)

In the Missouri Court of Appeals, an insurer was not obligated to continue to pay for the costs of the defense of a law suit when it settled with one plaintiff and exhausted its policy limits. The court held that the settlement by the insurer was in good faith. (National Beef Packing Company v. Zurich American Insurance Co., 2011 WL 864933)

A shipper was held to owe a duty to third parties to exercise reasonable care, including a duty to warn of known dangers stemming from the manner of loading.  The court remanded an action to determine if the improper loading was reasonably connected to the injuries suffered by the plaintiff in the Appellate Division in Arizona.  (Moro v. Thomas, 2011 WL 662926)

What law applies? All depends on how you fit into the accident scheme when you’re an insurer.  In the Southern District in New York, the court considered a multitude of different policies, determining that New Jersey law applied to some, while New York law applied to others. The court, under New Jersey law, invalidated a loading and unloading exclusion and an exclusion for liability of third parties.  Under New York law the court considered whether a crane accident, caused during unloading arose from the use of the auto for the purpose of coverage under other polices. (Certain Underwriters at Lloyds of London v. Illinois National Insurance Co., 2011 WL 723544)

MISCELLANEOUS

Be careful when complying with Rule 26 requirements or it may cost you a large sum of money.  In an action in the Southern District in Florida the failure to disclose a principal witness to the loading of cargo until right before trial was held to be a violation of Federal Civil Procedure. Plaintiff was sanctioned and required to pay all of the defendant’s travel time and expenses related to the production of the witness.  (Cardinal Health v. Delivery Specialist, 2011 WL 845915)

The Northern District of Texas hammered a motor carrier, imposing sanctions so strong that the carrier’s pleadings and defenses were dismissed and also allowing the plaintiff to amend the complaint to assert a punitive damages claim against the carrier. In a 25 page decision the court went through the various actions of the motor carrier which resulted in the spoliation of evidence critical to the plaintiff’s action.  (Aston v. Knight Transportation, 2011 WL 734282)

Timely service of a suit against the motor carrier was held valid in the Southern District of Texas, while service against the driver was determined to have occurred after the statute of limitations ran. The plaintiff filed suit days before the statute of limitations ran.  Although in both cases service was completed after the statute run, there was sufficient evidence of due diligence to effect service on the motor carrier that the court permitted the suit to continue. The same was not true for the driver. (Grant v. C.R. England, 2011 WL 835880)

I am looking forward to seeing some of you in April at the IMUA regional meeting in Chicago and the NTHECC at the end of the month.  Stop up and say hi!  Welcome to Spring.

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