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Bits & Pieces

Volume 14, Edition 8

Well this has been an interesting month up here in the Big Apple, with an earthquake and a visit from Irene.  Even the New York City Subway system, which stops for nothing, was shut down.  What ever happened to the slow days of August?

This month our own Shuie Yankelewitz was provided an opportunity to represent your interests at the Traffic Records Forum in Charlotte, North Carolina.  He did a great job representing the insurance industry, if I do say so myself.  He was extremely successful in impressing upon the state agencies that you are in this with them and everyone is pulling for safer roads.  The need for correct data is critical to insurers, law enforcement and other governmental agencies.

Tiana Cain has set up an on-line survey questionnaire for you to complete to tell us how we are doing. The responses have been great so far and we thank you for taking the time out of your busy day to give us feedback. For those of you who have not responded you can take the survey by clicking here.

For anyone in the Minnesota area, I will be speaking at the IMUA meeting on September 13, 2011.  The link for the meeting presentation and registration can be found on the IMUA website at www.imua.org. I am looking forward to meeting up with you as we discuss the issues facing the cargo insurer industry.

In other news:

EOBR – The OOIDA has been successful in its initial attack on the proposed regulations requiring electronic onboard recorders for motor carriers with a safety history of 10 percent or greater level of non-compliance with the hours-of-service regulation after a compliance review.  The 7th Circuit held that that DOT failed to ensure that the regulations would not harass drivers, a mandate required before the regulation can be implemented.

HOUSEHOLD GOODS – The FMCSA issued regulatory guidance to clarify the appropriate and intended use of blank or incomplete documents under 49 CFR 375.501(d) – Must I write up an order for service? According to the release, carriers may require shippers to sign incomplete, but not blank, documents so long as the omitted information is limited to: (1) The actual weight of the shipment, in the case of non-binding estimates; and (2) unforeseen charges incurred in transit. The guidance also clarifies that carriers may not require shippers to sign “Revised Written Estimates,” “Rescissions of Old Estimate,” or other documents authorizing the carrier to rescind an estimate unless the shipper and carrier mutually agree to amend the estimate, and the shipper signs a new estimate before the carrier loads the shipment. The original version of § 375.501(d), published as an interim final rule, prohibited carriers from requiring individual shippers to sign blank or incomplete estimates, orders for service, bills of lading, or any other blank or incomplete documents pertaining to the move.

NAFTA – The impact of Mexican trucks into the US continues to remain a forefront issue. A federally funded program, that retrofitted 76 trucks in Arizona with new $1,600 catalytic converters, was terminated because it appeared that some Mexican trucks were given the benefit of the program. Before it was ended, EPA grants administered through the state funded the purchase and installation of catalytic convertors on 25 U.S.-owned heavy trucks, 19 Mexican-owned trucks and 32 trucks of motor carriers with offices in both countries.  The fact of the matter is that the trucks are coming in – whether anyone likes it or not. Surface transportation between the United States and its North American neighbors, Canada and Mexico, was 15.7 percent higher in May 2011 than in May 2010, totaling $77.3 billion, according to the Bureau of Transportation Statistics (BTS) of the U.S. Department of Transportation. The value of the trade continues to rise even in these tough economic times.

FREIGHT VOLUME – Accordingly to the BTS the amount of freight carried by the for-hire transportation industry rose 2.6 percent in June from May, rising after two monthly declines. They reported that freight shipments in June rose to their second highest level since August 2008. They also report that the trend is positive, with Freight shipments increasing in 18 of the last 26 months, with the first six months of 2011 up 1.3 percent.  However, overall freight shipments are down 3.2 percent in the last five years.

CSA – ATRI has completed a survey on driver issues with CSA.  Overall the conclusion is that drivers understand the program but still have many misconceptions over what it will do.  Seventy-seven percent incorrectly believed that their old violations hurt their new employer.  FMCSA materials say “only violations that a driver receives while working for a motor carrier apply to that carrier’s SMS evaluation.” Over 2/3 of drivers are fearful that CSA scores will result in a loss of their job. Forty-one percent of the surveyed drivers reported not receiving CSA training or education from their company, and 36 percent reported their employer had provided one learning session. The remainder, nearly 23 percent, received multiple sessions from their employer.  Education, as always, is critical.

HAZARDOUS MATERIALS – In other CSA news the FMCSA has determined that it will no longer simply rely on a carrier’s MCS-150 to determine if a carrier is a hazardous materials carrier.  The FMCSA will classify a carrier based upon whether the carrier is hauling hazardous materials during roadside inspections.  Hazmat carriers are subject to lower thresholds, approximately 5% lower, for agency intervention in each of the CSA categories.

CARGO THEFT – Canada is also beginning to focus on the increase in cargo theft. This month the Canadian Trucking Alliance met with carriers and Canada’s Public Safety Minister to discuss the increase in organized criminal activity on cargo theft.  While the trucking industry has made substantial investments in security programs and policies, organized criminals are not deterred.  In the absence of a greater enforcement effort and penalties, the monetary return from cargo crime is seen as far outweighing the risk.

FUEL STANDARDS – The Obama administration has released its rules on the mandated 23 percent reduction in fuel consumption for heavy duty trucks.  The impact of the rule depends on who you talk to. For example, an analysis of the new federal fuel efficiency standards for heavy-duty trucks and pickups conducted by the National Wildlife Federation (NWF) found that there will be overall savings for carriers who are in compliance with these rules.  Specifically, there is expected to be a $73,000 net savings over the expected lifecycle of each tractor trailer unit due to reduced fuel consumption, after accounting for the additional costs of new technology. Heavy duty ¾ and one ton pickup truck models should save $6,000 over the course of their lifecycle, according to NWF’s analysis – with gasoline-powered models seeing a 10% improvement in fuel economy, with diesel-powered units gaining 15%, From the other side, we hear that the added cost for complying with the regulation was estimated to be approximately $6,620 per truck, something which in this economic environment is money small carriers do not have.

FMCSA FRAUD- An enforcement officer has pleaded guilty to accepting bribes in exchange for Level 1 CVSA decals. The decals, issued by the Commercial Vehicle Safety Alliance, signal to other law enforcement officers that a commercial motor vehicle has passed a roadside inspection and may allow that carrier to skate on by when hitting a weigh station

CASES:

CARGO

A plaintiff’s efforts to get the court to reconsider the application of a limitation of liability failed in the Central District in California. Plaintiff argued that the obligation of a motor carrier to provide enhanced security was a term of the contract and the limitation would not be enforceable if the carrier broke its promise. The court rejected that argument and also rejected any argument that the subcontractor was not entitled to the benefit of the limitation.  (Personal Communications Devices, v. Platinum Cargo Logistics, 2011 WL 3319538)

Federal Court jurisdiction does not exist when the storage company moves goods to another state when the storage fees are not paid.  As the plaintiff had contracted with the defendant only for storage, and its claim was based only on breach of storage contract, the simple fact that the defendant moved the goods would not confer Carmack jurisdiction in the Eastern District of New York. (Baker v. United Van Lines Slip, 2011 WL 3273899)

The Duck Rule!  For those of you who have heard me speak at various industry events and training sessions, here is a case on the Duck Rule.  If you walk like a carrier, and talk like a carrier – you are unlikely to be able to say you are a broker.  The Central District in California refused to permit the defendant to argue that it was a broker when it signed the motor carrier agreement representing itself as the carrier.  (Contessa  Premium  Foods v. CST Lines, 2011 WL 3648388)

A carrier was successful in invoking its Canadian limitation of liability in the Southern District in Texas. The Court held that whether you applied Canadian law or U.S. Law, the carrier, by complying with the basic rules for limiting liability, had met the Carmack Amendment requirements for limitation. (Tronosjet Maintenance, Inc. v. Con-Way Freight, 2011 WL 3322800)

General Commodity carriers offering insurance?  The Eastern District in Wisconsin held that a claim against a motor carrier for bad faith denial of an insurance claim was subject to Carmack.  The opinion indicates that the customer sought insurance up to the full value of the shipment and the carrier failed to pay.  The court held that the plaintiff was limited to its Carmack remedy.  (Marshall v. YRC, 2011 WL 3418302)

Was it pre-sold or was there a fraud?  The District Court in Connecticut held that a motor carrier and its insurer could continue with a counter-claim against a shipper where they alleged that the shipper had fraudulently claimed that a yacht was pre-sold in order to increase the recoverable damages. The court also held that judgment against the carrier for the actual damages was premature where there was a question as to how to measure the damages when there was no clear evidence of value at time of shipment.  (Ensign Yachts v. Arrigoni, 2011 WL 3351969)

Preemption extended? The Eastern District in New York held that a state law causes of action against a household goods carrier for fraudulently overcharging and adding in extra services was also preempted by the Interstate Commerce Act. While the Carmack Amendment did not apply, another statute 49 U.S. 14501, allowed for pre-emption on claims involving price, routes or services.  (Frey v. Bekins Van Lines, 20111 WL 3585496)

In the Southern District in Texas a motor carrier’s efforts to remove a case to federal court failed when the plaintiff, who had picked up the goods in Mexico and transferred them to the motor carrier in the U.S., actually issued a through bill of lading to the customer. The court held that the claim against the motor carrier was not subject to Carmack because of that through bill of lading.  (Golden Logistics v. Danny Herman Trucking, 2011 WL 3567521)

The District Court in Maryland upheld the limitation of liability in a warehouse receipt issued by a stevedore.  The court held that the plaintiff had actual notice of the limitation, even if it did not receive all pages. There was no question that they received the front of the document, which contained a notice that there were terms on the back, which the court held put the claimant on notice to ask about the other terms. (Coutinho & Ferrostaal, Inc. v, M/V federal Rhine, 2011 WL 3267210)

It is not often that there are cases in which a carrier is seeking recovery from a cargo owner. In the Northern District of Illinois a rail car and a rail car company sought recovery from a cargo owner for damages caused by an improperly loaded shipment which resulted in damage to the rail and the rail car. The court held that the cargo owner bore no liability as it was not the merchant under the bill of lading which had been issued to the NVOCC.  (Kawasaki Kisen Kaisha v. Plano Molding Co., 2011 WL 316378)

AUTO

A truck driver was unsuccessful in its suit against a cattle owner for personal injury, property damage and cargo loss when his vehicle struck a cow.  The court held in Texas there had to be admissible evidence that the cattle owner knew that his animals were traversing the road way.  Cases like this are interesting to us here in New York. It is unlikely that someone would not notice if its cow wandered onto 34th Street. (Evans v. Hendrix, 2011 WL 3621337)

The Northern District on Indiana has held that two insurers can both be held responsible to pay claims under the MCS-90 when they each insure different parties, both of whom are found liable for the loss.  The fact that the plaintiff recovered under the provisions of one endorsement did not preclude recovery under the second carrier’s endorsement.  (Fairmont Specialty Ins. Co. v. 1039012 Ontario, Inc., 2011 WL 3651333)

A plaintiff in the Court of Appeals in Arizona found herself quite dismayed when the court allowed a trucker to use plaintiff’s own expert testimony against her. Plaintiff had a suit against a trucker and against the medical parties involved post accident and settled with the medical parties before trial. The trucker was able to use all of the plaintiff’s allegations against the medical parties and her experts to minimize its own contribution to the injuries.   (Ryan v. San Francisco Peaks Trucking Co., 2011 WL 3758724)

MISC

Get your discovery done on time. The District Court in Idaho refused to grant a continuance to an insurer who sought more time to address the terms of an insurance policy and what law applied.  The court held that the insurer had already gotten some discovery in a state action and therefore was not impacted by a refusal to allow discovery to go further. The court also held that there was no need to conduct discovery on what type of suits were required to be defending, concluding that an insurer had an obligation to defend a carrier in an administrative proceeding.  (Wells Cargo, Inc. v. Transport Insurance Company, 2011 WL 3489993)

One insurer saw itself subjected to sanctions this month for failing to produce a proper witness to address the 30(b)6 issues set forth in the plaintiff’s notice. While the subrogating insurer produced a vice president of marine claims, the witness was not properly familiar with the areas of concern to the plaintiff. (ACE USA v. Union Pacific Railroad Company, 2011 WL 3101808)

Forum selection clauses do not always get you were you want to be.  The Western District of Arkansas held that a forum selection clause in a JB Hunt contract, which required suit in Arkansas where they are located, was valid.  However it went on determine that it was still an inconvenient forum and transferred the case to Florida.  So much for the selection. (JB Hunt v. S&D Transportation, 2011 WL 370367)

For our inland marine friends we report on a builder’s risk decision, since we do not see many cases on those policy forms.  The United States District Court in Colorado ruled that the defective materials exclusion applied to flanges which cracked and caused water damage.  The ensuing loss was covered.  The insured had attempted to replace all flanges in the building at the insurer’s expense.  Try as they might, the plaintiff’s were unsuccessful in convincing the court that this was a sue and labor expense covered under the Duties In The Event of Loss.  The court held that the sue and labor obligation applied only to covered claims.  (RK Mechanical, Inc. v. Travelers Property & Casualty Company of America, 2011 WL 3294921)

See you next month.

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