This has been a busy month. It was fun catching up with some of you at the AAIS annual meeting and addressing the continued need for financial underwriting of motor carriers in the post BMC-32 world. Financial underwriting remains as critical a part of the underwriting process as motor carrier operations diversify. Underwriters need to ensure that they are aware of the risk they are undertaking and pricing it correctly. We are happy to talk to you about it if you would like information on the subject. I also had the opportunity to speak at the IMUA Midwest Regional meeting this month and meet many old and new friends and discuss these very topical issues.
I am heading out to Dallas this week to speak at the National Truck and Heavy Equipment Claims Council meeting to assist that notable organization in making sure that the industry has adjusters who can properly handle the complexity of cargo claim work. Anyone interested in becoming a member can take a look at their website at www.nthecc.org. They would also be pleased to provide you with their most current book containing information on licensed adjusters in this field. If you would like a copy, simply e-mail email@example.com and they would be happy to send you one.
The IMUA annual meeting is coming up quickly and we look forward to seeing many of you in Chicago. This year I will be joined by Tiana Cain, who will have a table in the vendor area so that she can meet all of you and show you all of the new items which you should be using on a daily basis as you underwrite your risks. Stop by the table and say hello. You won’t be disappointed.
This month we report:
INSURANCE SCAM – A California licensed insurance agent, Paul Daniel Cornejo, has been arrested and charged with collecting premiums from long-haul carriers and never actually obtaining the policies. His company apparently serviced the Inland Empire area under the name Tatemas Truck Insurance Services and Royal Insurance Group Services, Inc.
TRUCK ACCIDENT REPORTS – The DOT has announced that the number and rate of traffic fatalities in 2010 fell to the lowest levels since 1949. According to the National Highway Traffic Safety Administration’s (NHTSA) early projections, the number of traffic fatalities fell three percent between 2009 and 2010, from 33,808 to 32,788. Since 2005, fatalities have dropped 25 percent, from a total of 43,510 fatalities in 2005. They also project that the fatality rate will be the lowest recorded since 1949, with 1.09 fatalities per 100 million vehicle miles traveled, down from the 1.13 fatality rate for 2009. The decrease has even greater significance when we recognize an estimated increase of nearly 21 billion miles in national vehicle miles traveled. A regional breakdown showed the greatest drop in fatalities occurred in the Pacific Northwest states of Washington, Oregon, Idaho, Montana and Alaska, where they dropped by 12 percent. Arizona, California and Hawaii had the next steepest decline, nearly 11 percent. You can view the NHTSA’s latest statistical projections of traffic fatalities in 2010, including regional estimates here.
NEW MEXICO LEGISLATION – New Mexico has passed legislation which we hope will assist in reducing cargo losses, something the government was not considering when passing this legislation. Effective July 1, 2011, there will be special permits given to operate overweight trucks for certain reducible loads within six miles of a port-of-entry facility on the state’s border with Mexico. Trucks weighing up to 96,000 pounds will be affected. This will prevent some commercial reducible loads from being partially offloaded before crossing through border ports of entry, a place where cargo loss can occur. The new law is intended to eliminate the offloading/reloading process and allow affected loads to be delivered directly to warehouses, processing facilities and logistics yards near the border.
NAFTA – Speaking of Mexico, the DOT has released the details of its 3 year pilot program to open the borders. They indicate a target goal of 4,100 inspections on Mexican trucks. There will a 28 page application for operating authority and any carrier considering operations will be required to pass an 11-step safety check. A summary of the proposed rulemaking can be viewed here.
BROKERS AND CARRIERS – Are transportation brokers losing some ground? Transport Capital Partners, LLC (TCP), in their first quarter report, indicate that 87% of the carriers they surveyed indicated that they are using broker services less with 40% indicating that broker freight services account for less than 5% of their revenues and 35% indicating that the percentage is less than 15%. Only one quarter of carriers rely on brokers for more than 16% of their revenues. The survey also indicates that rates are going up, which will help underwriters as receipts will go up and impact gross receipts reporting. You can contact them for a complete copy of the report at www.transportcap.com.
TRUCK CRASH CORRELATION DATA – An American Transportation Research Institute study indicates, to no surprise, that truck drivers with poor driving records are likely to have more accidents. They analyzed information on more than 582,772 U.S. truck drivers over a two-year time frame and located certain driver behaviors that raise a driver’s risk of being involved in a truck crash by more than 50 percent. Improper or lack of signaling was the leading problem. Apparently drivers convicted of this offense were 96% more likely to have a future crash. Other critical behaviors were past crashes, improper passing, improper turn, improper or erratic lane, improper lane/location, failure to obey traffic sign, speeding more than 15 mph over the limit, and reckless/careless/inattentive/negligent driving.
CSA 2010 – The numbers are in for the first quarter and the FMCSA is on a role. They completed compliance reviews on more than 75% of high-risk carriers. They reported that they conducted nearly 86 percent, or 2,443 reviews on 2,849 high-risk carriers during the quarter ended March 31, 2010, and 1,947, or almost 82 percent, of 2,382 carriers in that category during the period ended June 30. It completed close to 91 percent, or 1,912 reviews, on 2,111 high-risk carriers between July 1 and Sept. 30 of last year.
As you can see by the following cases, federal jurisdiction over cargo related cases was a big issue this month. The District Court in New Jersey refused to remand a suit filed against Federal Express. Apparently plaintiff’s attorney had sent a fed ex package to the court containing a notice of claim. When it was not timely delivered plaintiff was time barred from pursuing its claim. Plaintiff sought damages for fraudulent misrepresentation, detrimental reliance, breach of guaranty and warranty, false representation, willful, wanton and reckless conduct and consumer fraud. The court agreed that the action was amenable to resolution in the Federal Court as the claim was governed by principles of federal common law applicable to shipments made in interstate commerce. (Acevedo v. Federal Exp. Corp., 2011 WL 1467197 (D.N.J.))
The Middle District in Tennessee remanded a case back to state court when there was no evidence that the transportation involved interstate transport. The motor carrier’s argument that it was entitled to Federal Court jurisdiction because it was a regulated carrier failed. (Norton v. Fox Moving & Storage, 2011 WL 1322777)
The Southern District of Texas remanded a case where the shipments involved were in interstate commerce. However since each of the claims were for amounts of less than $10,000 each, the court did not have jurisdiction to hear the case. (French Gourmet v. FFE Transportation Services, 2011 WL 1230212)
The Western District of Texas also remanded a case involving the withholding of freight charges between brokers when there was a cargo loss involved. The court held that as that action against the broker was not subject to the Carmack Amendment and the motor carrier, who was also a defendant on the cargo loss, was located in the forum state, the case could not be removed on diversity. (Morrice Logistics, Ltd. v. Intransit, 2011 WL 1327397)
Broker or carrier? Always a question. The Southern District of Texas denied a plaintiff’s request for remand contending that its claim against defendant was a claim based upon brokerage actions. The Court held that the defendant was a carrier and therefore jurisdiction was permitted and also dismissed a claim for deceptive Trade Practices as preempted under the Carmack Amendment. (Harang v.Delta Moving Services, 2011 WL 1103650)
C.H. Robinson faired well in an action commenced against it for cargo damage to a shipment of apple juice, unlike the decision discussed in the auto section of this month’s Bits. In the Eastern District of Washington the court held that CH Robinson would not be liable for damages caused by the motor carrier, simply because it was listed as the carrier on shipping documents. In the absence of any evidence that the motor carrier was acting as the agent of the broker, summary judgment in favor of the broker was appropriate. (SunOpta Global Organic Ingredients, Inc. v. C.H. Robinson Worldwide, Inc. 2011 WL 1532063 (E.D.Wash.))
In a case followed in earlier Bits and Pieces, the Ninth Circuit affirmed a lower Court decision addressing the newest limitations of liability applicable for household goods carriers. The Court held that replacement value under a bill of lading meant $4.00 per pound or minimum of $5,000.00 when a shipper did not declare value for shipment. The Court also held that an originating carrier, who was liable for a greater value, was limited to recovering the $4.00 a pound limitation when it failed to declare a value to the delivering carrier, but was entitled to all of its fees and expenses under the apportionment provision of the Carmack Amendment. The Court held that fees would not be apportioned based upon the split in the monies owed on valuation. (Pacific Indem. Co. v. Atlas Van Lines, Inc., 2011 WL 1486069)
Even though two parties suffered cargo losses as a result of the same event, the parties were not permitted to litigate together. One cargo claimant sought to intervene in the suit by the other cargo claimant. However the Texas District Court held that the actions each involved the interpretation of limitations of liability under the respective bills of lading and therefore should not be litigated together. (Nipponkoa v. Port Terminal Railroad Association, 2011 WL 1103584)
According to the District Court in New Jersey there is no need to set forth a specific sum when filing a claim as long as the amount is determinable by other means. The Court also held that the 2 year and one day time for filing suit first requires clear evidence that that the claim was declined. Finally the Court declined to extend the material deviation doctrine, which is used in admiralty cases to void limitations, to interstate commerce. (Holtec International Corp. v. Preferred Metal Technologies, 2011 WL 1401664)
Speaking of claim notice issues, the Southern District in Florida dismissed an action for damage by a household goods carrier for failure to file a claim within nine months. Plaintiff’s arguments that she never signed a second bill of lading, used for delivery was not accepted as a reason to waive the claim requirement where there was evidence that she received the first bill of lading. (Rodenbeck-Clark v. American Van Lines, 2011 WL 1195613)
As those of you who have been present at the various presentations which we have given this year are aware, we can not stress again how important it is to have an understanding of a carrier’s financial information when calculating gross receipts. This month the Northern District of Ohio considered an insurer’s action against a trucking company seeking recovery for unpaid premium based upon incorrect gross receipt reporting. The court held that the insured had in fact incorrectly reported the premium but was unable on the papers, to determine what was in fact owed. It is important to monitor this information throughout the policy period. We can help. (Carolina Casualty Insurance Co. v. P.B. Express, 2011 WL 1135948)
The Appellate Court in Florida reversed a lower court decision which had held that an umbrella policy issued to a tractor owner provided coverage for an entity to which the vehicle was leased. The case was litigated by Ira Lipsius of Schindel, Farman, Lipsius, Gardner & Rabinovich, LLP. The court held that the policy excluded losses caused using vehicles under lease to others and the limited exception to the exclusion extended only to the owner, who was not a party to the suit. (Harco National Insurance Company v. Adrienne D. Hammond 2011 WL 1486094)
A primary and excess insurers’ decision to settle a claim against a driver for policy limits, leaving the named insured exposed to excess liability, was held permissible in the Northern District of Texas. The court held that the insurers were permitted to withdraw from the defense of the motor carrier as the settlement on behalf of the driver was reasonable. (Pride Transportation v. Continental Casualty Co., 2011 WL 1197306)
Corporate shareholders beware. Shareholders of a trucking company were sued individually for a truck accident. The direct cause of action against the shareholders was based upon allegations that corporate formalities were not complied with. The Eastern District of California held that the auto liability insurer has no obligation to defend the individual shareholders and that the named insured definition which extended to anyone liable for the actions of an insured would not be extended to provide coverage for these individuals. (GBTI, Inc. v. Insurance Company of State of Pa., 2011 WL 1332165)
Recovering proper premium for the risk insured was addressed by the Appellate Division in New York this month. The court considered the evidence necessary to establish how premium was calculated, along with ISO rating structure. The court denied the plaintiff’s motion for summary judgment concluding that submission of ISO filed rate tariff and company affidavits on premium computation was insufficient. (Seneca Insurance Co. v. Certified Moving & Storage, 2011 WL 1162380)
Factual issues were held to exist in an action against a truck driver, its employer and the contractor who hired the driver for work in the Court of Appeals in Georgia. The court returned the case back for trial on the issues of whether the driver was a borrowed servant of the contractor, whether his employer was liable for an accident which occurred when the driver took a detour for lunch and finally whether having 2 speeding violations made the driver incompetent. (Coe v. Carroll & Carroll, 2011 WL 1087104)
As we noted in the cargo section, C.H. Robinson did not fair well in the Appellate Division in Illinois in a decision upholding a $23.5 million verdict in a liability case. This time the Court affirmed the decision that that the motor carrier was in fact acting as the agent of C.H. Robinson, rendering the broker liable for the actions of the carrier. (Sperl v. CH Robinson, 2011 Ill App Lexis 307)
Defending a trucking company and the driver, whose interest may be adverse, is often tricky and care is needed to protect both parties. The District in Nevada disqualified the defense counsel retained by the one insurer at the request of a second insurer, who was represented by Larry Rabinovich of Schindel, Farman, Lipsius, Gardner & Rabinovich, LLP. Defense counsel had expressed his own concern about the ability to represent both parties and the Court held that the second insurer, who was involved in coverage litigation over the claim, was entitled to assert the claim for disqualification because of the substantial possible adverse interest to that insurer. (Sentry Select Insurance Co. v. Meyer, 2011 WL 1103333)
The Court of Appeals in Louisiana refused to permit a plaintiff to continue an action against a motor carrier’s insurer where there was no coverage for the scheduled vehicle. The Court held that the MCS-90 and the BMC-90 conferred no benefit when the carrier was operating intra-state. (Newman v. State Farm Mutual Auto Ins., 2011 WL 1303264)
Untangling business operations when various companies operate at the same location and inter-twine their daily operations can be difficult. The Appellate Court in Illinois was asked to consider the obligations of a trucking entity to ensure the safety of a vehicle owned and operated by another company. The truck entity was located at the same place as the trucker, handled most of the shipping instructions and may have agreed to help make sure that the third party service garage looked at the vehicle. While the court held that the defendant was not responsible and had not undertaken any duty to ensure that the vehicle was properly maintained, this reflects an increased risk when more than one operation runs out of the same location. We remind underwriters to utilize our service to check all operations at any one location. (Lewis v. Chica Trucking, 2011 WL 1227836)
A trucking company which leased a vehicle sought indemnity under the terms of a lease. The court held that the simple fact that the lessee agreed to have insurance as required by the DOT regulations did not preclude it from seeking indemnity from the lessor. In addition the court held the Truth In Leasing regulations do not preclude a regulated carrier from requiring the lessor to indemnify the motor carrier for loss. However as the lease held the lessor liable only for the first $500 of a liability payment the court interpreted the indemnity clause to be limited to that amount, as well as expenses incurred in settling and defending an action. Ultimately the court held there was a question of fact as to whether the indemnity, although permissible, was triggered in this case where liability of the lessor had not been established. (Jones Express v. Watson, 201ll WL 1303164)
A general liability policy was held not to provide coverage for a trucking company who was sued for injuries suffered when cargo fell from a trailer the day after it had been left at the destination for unloading. The Appellate Court in Illinois held that the claim against the trucker arose out of the use of the auto, an excluded peril. The court also held that coverage was not available under the auto policy under the completed operations exclusion. In the quirk of events which often occurs with severability of insureds, the shipper was entitled to coverage under the trucker’s auto policy as those exclusions did not apply to the shipper. (Great West Casualty Co v. Terminal Trucking, 2011 WL 1085006)
Have a great Spring. Looking forward to seeing you in Chicago at the IMUA.