Bits & Pieces

Volume 14, Edition 7


Hello from the Green Mountains of Vermont.  I must say that it is difficult to focus on trucking issues while here in the mountains, away from the sweltering heat in NYC; but I guess I must.  I hope you are all taking some time to enjoy the summer.

This month we report:

NAFTA – As the battle lines continue to be formed over the opening of the border, the TSA issued its report on thefts in Mexico. According to TSA’s “Transportation Suspicious Incidents Report”, criminals in Mexico hijacked more than 10,000 commercial trucks last year – many of which likely included cargo.  In addition the TSA has reported that drug cartels and other highly organized criminal groups could be able to circumvent American border security by “cloning” trucks that have clearance through programs like the Customs-Trade Partnership Against Terrorism (C-TPAT) and Free and Secure Trade (FAST).  The FMCSA has also issued notice that it intends to proceed with its pilot program to open the border.  A copy of the notice of intent can be viewed here. The OOIDA immediately filed a petition to seek to stay the border opening which the FMCSA has rejected.  The borders are expected to open under the pilot program in the upcoming weeks.

TORT REFORM – Tennessee has signed into law legislation capping non-economic and punitive damages in personal injury actions. Subject to certain exceptions, non-economic damages can not exceed $750,000 and punitive damages can not exceed twice the total compensatory damages or $500,000 which ever is greater. The act goes into effect on October 1, 2011.  Special thanks to my colleague, John Anderson, Sr of Dickinson Wright, PLLC for passing this info along.  In Pennsylvania, joint and several liability has been eliminated, with each defendant responsible only for their own share of the damages.  Both legislative efforts are applauded by truckers and insurers alike.

SUIT AGAINST FMCSA – An action has been commenced against the FMCSA stemming from a fatal truck accident.  The plaintiff alleges that the FMCSA needs clearer guidelines for carriers with multiple violations so that they are taken off the road before accidents like this happen.  We will follow to see where this goes and expect it to be vigorously fought by the FMCSA.

BUS INSPECTIONS – It seems that every week we continue to receive reports of fatal bus accidents. The DOT has announced that in the last two years, it has made inroads into shutting down bad bus carriers and has issued as many imminent hazard orders, placing unsafe bus and truck companies out of service, as it has in the previous 10 years combined.   In the last 4 months, 8 bus operators have been placed out of service. Roadside inspections of motor coaches have jumped nearly 100 percent, from 12,991 in 2005 to 25,703 in 2010, while compliance reviews are up 128 percent, from 457 in 2005 to 1,042 in 2010. In addition, FMCSA has initiated a greater number of enforcement cases against unsafe passenger carriers.   Inspections of your bus carriers can be seen in the CAB Submission Report™  for premium subscribers. The DOT is also looking to help the public by unveiling a “Think Safety: Every Trip, Every Time” pre-trip safety checklist” that helps consumers review a bus company’s safety record, safety rating and U.S. DOT operating authority before buying a ticket or hiring a bus company for group travel. The checklist is available online at FMCSA’s Passenger Bus Safety Website.

2011 ROAD CHECK RESULTS – The CVSA has reported that the out-of service rates were the lowest on record. Vehicle compliance rate was 80.7% up from 80% and driver compliance rate was up to 95.8%.  According to the agency, 16 trucks or buses were inspected every 18 minutes during the 72 hour timeframe.

MOTOR CARRIER STRATEGIC PLAN – The FMCSA has issued its draft strategic plan for 2011-2016.  A key focus of the plan will be to engage and possibly regulate shippers, receivers, brokers and freight forwarders, since they can assist in influencing safety on the roadway.  They also seek to use safety and risk analysis to create better enforcement priorities. A complete copy of the report can be viewed here

CSA RATINGS REVIEW – The FMCSA is seeking to examine the severity weightings given during roadside inspections to determine if they are properly classified to predict a carrier’s crash risk.  Many carriers have argued that the weight scales for items, which do not correlate to increased safety hazard, often weigh down the carrier’s score.  The ATRI has also begun a survey of trucking companies to get a better idea of how the CSA results have impacted trucker’s operations over the last year.  Those results will be reported on when they are made public.

BROKERS SCAMMED – 3 individuals were indicted this month in New Jersey for scamming brokers out of $2.6 million in freight money in a load board scam. The 3 individuals set up sham shipping and trucking companies, first moving freight and establishing credibility and then set up the brokers to receive payments on loads never shipped or delivered.



The Ninth Circuit Court of Appeals considered the impact of a covenant not to sue on a domestic carrier under a through bill of lading.  The Court acknowledged that the last Supreme Court ruling held that the Carmack Amendment could not prohibit the covenant not to sue, but that the court would have to consider the impact of international laws on the bill of lading. The court held that the bill of lading validly extended the Hague Rules to displace the Harter Act and that the Hague Rules would permit the enforcement of the covenant not to sue. The shipper was prohibited from suing the domestic carrier. (Federal Ins. Co. v. Union Pacific R. Co., 2011 WL 2711314)

A similar ruling was issued by the Supreme Court in Ohio.  There the Court held that a plaintiff was precluded from suing a downstream carrier when the master bill contained a covenant not to sue. The Court held that as long as the plaintiff had a party to pursue, in this case the master carrier, there was no detrimental impact to enforcing the covenant.  (Nipponkoa v. Norfolk Southern Rail Company, 2011 WL 2620375)

Ocean bill of lading cases were addressed all over the country this month.

The Southern District of New York held that a claim against a steamship line for improper release of a shipment in the United States was subject to the forum selection clause of the through bill of lading.  Plaintiff had to go back to England to see recovery (KT Export v. Wolf Canyon of America, Inc., 2011 WL 2565694)

The District Court in Maryland held that a shipper had no independent tort claim against a driver stemming from a cargo loss.  The court held that there was no bailment relationship with the driver when the shipper hired the carrier and not the driver.  (Merchants Terminal Corp. v. L&G Transport, 2011 WL 2650700)

In the Eastern District of Louisiana a stevedore was sued for damaging a boiler which it was transporting it its yard for loading on to a vessel.  The stevedore sought contribution from the boiler manufacturer, contending that the manufacturer’s failure to label or instruct on proper loading was a cause of the loss.  The court held that the manufacturer did in fact owe a duty of care, but that additional factual discovery was needed to determine if the duty was breached.  (PT Rafinski v Coastal Cargo Co., 2011 WL 2712756)

The District Court in Connecticut would not allow a direct action by a shipper against a cargo insurer. Despite the fact that the plaintiff contended that it was supposed to be an additional insured on the liability policy (and you know what I think of that), the court held that absent explicit evidence that the insurer intended to create a third party beneficiary relationship there was no basis for the suit. The issuance of a certificate of insurance was insufficient to change the result.  (Ensign Yachts, Inc v. Arrigoni, 2011 WL 2899085)

Am I a carrier or simply a facilitator of transportation?  That is the question. The court in the Eastern District of Wisconsin held that when the answer to that question is so hotly contested, summary judgment is inappropriate against that entity. (Viasystems Technologies Corp., LLC v. Landstar Ranger, Inc., 2011 WL 2912763)

The Middle District in Maryland granted a default judgment to a broker in its claim against a motor carrier.  Of interest was the fact that the court allowed the broker to recover only because there was a contract. The court held that the broker had no Carmack Amendment claim when it had no right under the bill of lading and no assignment of the claim from the shipper. (Cowan Systems, L.L.C. v. Choctaw Transport, Inc 2011 WL 2791248)

The District Court in Nebraska refused to reconsider its enforcement of a limitation of liability. The court held that when distinct arrangements were made for separate portions of the transport, each carrier was a receiving carrier. The carrier on whose line the loss occurred was a receiving carrier and its tariff, which provided for a limitation of liability, was enforceable.  (Amlin Corporate Ins. Co. v Union Pacific Railroad Co., 2011 WL 2565245)

The Western District of Louisiana dismissed a motor carrier’s attempt to assert a counter-claim against a shipper who was seeking recovery for a cargo loss.  The motor carrier’s argument that the shipper’s negligence was a contributing factor to the loss was not sufficient grounds for a counter-claim, although the court did grant the carrier leave to amend the answer to assert any possible Carmack defenses which might exist.  (Two Guys Recycling, LLC v. Will Transport, Inc 2011 WL 2713739)

The Eastern District of Virginia considered the right of a broker to obtain a default judgment against a carrier under a broker/carrier agreement. While the carrier was clearly in default, the court held that a judgment could not yet be entered as all of the damages which would be incurred by the broker could not be known until the action by the shipper was resolved. (Hartford Fire Ins. Co. v. Sunteck Transp. Group, Inc., 2011 WL 2938466 (E.D.Va.))


When does a loss arise out of the use of an auto?  The plaintiff was injured when oil spilled from an oil tank while being unloaded.  The Western District of Texas held that “arising out of” was not ambiguous. The court followed the Texas Supreme Court directive that for an injury to fall within the “use” coverage of an automobile policy (1) the accident must have arisen out of the inherent nature of the automobile, as such, (2) the accident must have arisen within the natural territorial limits of an automobile, and the actual use must not have terminated, (3) the automobile must not merely contribute to cause the condition which produces the injury, but must itself produce the injury. The court held that when the valve of the oil pump malfunctioned, causing back pressure at the valve and a resulting rupture in the hose, any resulting injury arose out of the use of the auto – the oil pump. (Salcedo v. Evanston Ins. Co., 2011 WL 2532847)

The 7th Cir. refused to permit a plaintiff to recover against a non-trucking use policy.  In this case, as we often see, the parties are not clear on ownership of vehicles.  The tractor was owned by a wife, but the policy taken out by the husband. The trucking use exclusion applied when the vehicle was used in the business of one to whom it was rented.  The plaintiff attempted to argue that the husband, who was not the owner of the vehicle, could not have rented the vehicle to the regulated carrier.  The court concluded that it was apparent from all facts that everyone intended that this policy not apply with the vehicle was being used by the carrier and that it would not create an ambiguity where none really existed. (Clarendon National Ins. Co. v. Medina, 2011 WL 2714093)

The District Court in Kansas addressed the obligations of a carrier utilizing a leased vehicle and driver, concluding that questions of fact continued to exist as to whether the carrier was vicariously liable for the actions of the driver. The simple fact that the placard of the carrier was on the truck was insufficient to determine whether the carrier was exercising control when the driver was driving his vehicle home.  (Thomas v. Johnson Agri-Trucking, 2011 WL 2746734)

The Western District of Arkansas would not allow an insurer to utilize the employee exclusion under a liability policy for what appeared to be a helper engaged directly by the driver and not by the trucking company. The Court held that he was not hired to drive, load or unload or assist the driver (still have no idea what he was hired to do) and that the trucking company reputed the actions of the driver.  (Canal Ins Co. v. ML&S Trucking, 2011 WL 2666824)

The Supreme Court in Wisconsin held that a trucking insurer can be sued under the direct action statute even if the policy is not issued in the state, overruling prior court decisions. The court also held that a  corporate officer of the trucking company may be liable for non-intentional torts committed in the scope of his employment, however, where the actions are too remote to provide a basis for the liability the corporate officer will not be responsible.  (Casper v. American Intern. South Ins. Co., 2011 WL 2820530 (Wis.), 2011 WI 81)


The Southern District of New York considered the application of a one year suit clause under a first party transit claim.  In this case the policy required suit within one year of the date of the happening of the loss out of which the claim arose. The Court held that the provision was valid and held that the time commenced to run from the date that the loss occurred, not the date that the claim was declined.  The court also held that the insurer could not be estopped to assert the suit time where appropriate reservations of right were contained in all letters. (Franco Apparel Group, Inc. v. National Liability & Fire Ins. Co., 2011 WL 2565287)

Very often an insurer is involved in a complex coverage analysis before ever proceeding in subrogation against a third party.  In an action in the Southern District of Florida the court permitted the insurer, suing a warehouseman in subrogation, to withhold the documents in the claim file which addressed coverage and liability.  The court held that while those documents were not prepared in anticipation of the immediate litigation, they were prepared in anticipation of litigation on the coverage issues.  (Mitsui Sumitomo v Carbel, 2011 WL 2682958)

A trucking company’s efforts to recover monies paid out as a result of employee dishonesty were unsuccessful in Iowa.  A company driver committed a long term fraud, pocketing cash from the truck stop using the credit card.  As the trucking company agreed with Comdata that it would be responsible for driver actions, it could not recover from Comdata and instead turned its eyes to the truck stop.  The court held that under the economic loss rule in Iowa there was no negligence claim available.  The court also held that the plaintiff was not a third party beneficiary of the Comdata-truck stop contract under Tennessee law.  (Annett Holdings v. Kum & Go, 2011 WL 2652324)

The Minnesota Court of Appeals held that an insurance agent to the trucking industry was not liable for failure to advise the trucking company that it should have worker’s compensation insurance in addition to cargo, general liability and auto liability insurance. The court held that there was no heightened duty of care and rejected a conclusion that an insurance agent informing a prospective or current client of the workers’ compensation insurance requirement constituted legal advice.  (Philter, Inc. v. Wolff Ins. Agency, Inc., 2011 WL 2750709)

The Supreme Court of Rhode Island held, in a multi-claimant accident  the rule that an insurer assumed risk of judgment in excess of policy limits, after declining to settle, applied to the case involving multiple claimants with claims exceeding policy limits.   In the case in question, however, there were factual issues as to whether the insurer engaged in meaningful settlement negotiations  and also that a general release executed by passenger in exchange for assignment of rights did not bar him from pursuing claims against insurer. (DeMarco v. Travelers Ins. Co., 2011 WL 2697038)

Good bye from the Green Mountains.  I am going off for a hike.  See you next month.

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