A Motor Carrier’s Use of an Owner-Operator Doesn’t Morph It Into a Broker for Insurance Purposes (Or Otherwise)
Great West Casualty Company v. Cobra Trucking, Inc., et al., 2013 WL 431949 (D. Mont. 2013).
Insurer Great West issued a policy to motor carrier Cobra Trucking which specifically excluded coverage for brokerage operations. Cobra had a contract with a shipper defining it as a carrier. Per typical procedure in the trucking industry, it dispatched a load to one of its owner operators for a haul originating in Montana and concluding in Wyoming. The driver was involved in an accident that, tragically, killed one and injured two other motorists. Cobra and the claimants sought coverage under Great West’s policy. This prompted the insurer to sue all concerned in the District of Montana seeking a declaratory judgment that Cobra’s assignment of the load to an independently-authorized operator constituted uncovered brokerage.
On the claimants’ motion for summary judgment, the court explained that Great West’s understanding was flawed. It rejected the insurer’s argument that brokerage operations can be conducted without a party acting as a broker (huh?), and that motor carriers may provide brokerage services under 49 CFR §371.2(c) (yeah, but so what?). Shipping documentation quite clearly demonstrated that Cobra was its shipper’s carrier of record here, firmly establishing that absent a new transaction with a new motor carrier, that it was “legally obligated to transport” the shipper’s cargo. The owner operator didn’t have any contract with Cobra’s shipper at all. Add to that the fact that Great West’s policy “does not define ‘broker operations,’” and you have a recipe for motor carrier coverage. Motion for summary judgment granted.
And on the Same Topic - Broker Contingent Cargo Liability Insurance Coverage Proves Elusive
The Custom Companies, Inc., et al. v. North River Insurance Co., 2013 WL 441170 (N.D. Ill. 2013)
Freight broker CDN Logistics purchased a policy from insurer Crum & Forster that included contingent cargo liability (“CCL”) and motor truck cargo (“MTC”) coverage. It brokered a load of Nike athletic shoes that vanished during an interstate haul. After paying out $212,432.28 to settle Nike’s claim, it collected $100,000 from the insurer of the trucker from which the load was stolen. Out of pocket $112,432.28, it extended its open palm toward Crum & Forster for the difference under both aspects of coverage. When the insurer declined to fill that palm, CDN sued it in the U.S. District Court for the Northern District of Illinois.
On cross motions for summary judgment, Crum & Forster moved to dismiss any claim under the MTC coverage, asserting that the entire record confirmed CDN was wearing its broker hat in this transportation. CDN claimed it had trip leased a truck, and exercised a level of control over the transit that a question of fact remained as to whether it might have been wearing its carrier hat in this transaction. Agreeing, the court denied the MTC coverage part of Crum & Forster’s motion.
The policy’s CCL endorsement contained that standard language proclaiming it to be “excess over any other collectible insurance…,” and coverage was generally capped at $100,000 for wearing apparel cargoes. The insurer conceded this coverage applied, but urged it should be applied subject to set off of the $100,000 CDN had collected from the carrier’s insurer. CDN retorted by pointing to another endorsement that provided the $100,000 ceiling applied to the MTC coverage, and was an amendment to what would otherwise be a $10,000 cap for that part of the policy. Thus, CDN rationalized that the $100,000 cap doesn’t apply to the CCL endorsement at issue. This is just as confusing in the opinion, but in any event, the court shot it down, citing that the existence of an amendment applicable only to MTC coverage doesn’t negate the fact that the policy generally was limited to a hundred grand. The court also found unpersuasive terms mandating coverage requirements between the parties.
Thus, CDN survived summary judgment on the MTL coverage issue, with which it might ultimately have a tough time, but CTL coverage was nixed by the earlier insurance payment.
Illinois’ Conversion From Contributory To Comparative Fault in Joint Tortfeasor Analysis Nixes Active-Passive Negligence Analysis in Stolen Container Issue
Zurich American Ins. Co. v. LCG Logistics, LLC, et al., 2013 WL 675896 (S. D. Ill. 2013)
And here’s another tidbit from Prairie State. Shipper Eddie Bauer Fulfillment Services booked a load of blue jeans with broker LCG Logistics, which in turn placed the freight with carrier Universal Carries for transport from Texas to Ohio. Universal’s truck broke down in Illinois, and its driver took the combo to Truck Centers, Inc. (TCI) for repairs. The cargo disappeared from TCI’s facility.
The shipper’s subrogated insurer sued LCG and Universal in the U.S. District Court for the Southern District of Illinois, and LCG impleaded TCI in a third-party action alleging that it failed to safely secure the freight, such that it should be liable for indemnity for any judgment LCG might have. LCG’s theory was that TCI was “actively negligent” in causing the loss, but it failed to state any factual allegations supporting that theory.
Like with most states, Illinois’ conversion from a contributory to comparative fault state, wherein percentages of fault are ascribed to two or more tortfeasors representing the extent of their responsibility for a claimant’s loss, has rendered the active-passive negligence dichotomy irrelevant for indemnity purposes. Thus, the third-party complaint fails to state a claim as written. Fortunately for LCG, the court allowed it to re-plead its third-party complaint correctly.
A Durable Power of Attorney Probably Isn’t Sufficient To Empower a Broker to Sue Under Carmack
Pyramid Transportation, Inc. v. Greatwide Dallas Mavis, LLC, 2013 WL 840664 (N.D. Tex. 2013)
Shipper Macias engaged broker Pyramid Transportation to arrange transit of a dump truck from Georgia to Texas. Pyramid booked the load with carrier Greatwide Dallas Mavis, whose truck was involved in an accident en route that damaged the cargo. Pyramid had to pay another carrier to complete the haul, and a storage facility to hold on to it, pending resolution of the parties’ disputes. Meanwhile, a disgruntled Macias refused to pay Pyramid for this and other services. It gave the broker a durable power of attorney, but not an assignment of rights, to pursue its cargo claims against Greatwide. Pyramid sued Greatwide in a Texas state court, alleging claims under Carmack, as well as state and common law causes of action. Greatwide removed the action to the U.S. District Court for the Northern District of Texas on the basis of federal questions the Carmack claims raised.
On the parties’ cross motions for summary judgment, Greatwide raised Pyramid’s standing to sue under Carmack. To address this issue, the court went through an interesting analysis of “constitutional” versus “prudential” standing. Greatwide had only raised the former, asserting that Pyramid hadn’t been “injured in fact,” because it didn’t actually own the cargo. Pyramid responded by pointing to the many thousands of dollars it had to spend to retrieve and store the truck, and by way of uncollected charges due from Macias. The court found this to be demonstrated injury enough to give Pyramid constitutional rights to sue to recover its losses.
But that wasn’t the end of it. The court brought its own motion to dismiss sua sponte (literally, “of its own accord”) based on Pyramid’s lack of prudential standing, a concept that Congress can define through legislation that states exactly who has rights under a statute. Carmack empowers only parties to bills of lading, i.e., shippers, to sue carriers for lost/damaged/destroyed cargo. Pyramid was party only to a load receipt, which the court found inadequate, and legal subrogation didn’t apply because Pyramid had independent contract rights vis-à-vis Macias. At the heart of the analysis was the fact that Pyramid hadn’t obtained an actual assignment of rights from Macias, a simple and typically applied mechanism that would allow the broker to stand in its shipper’s shoes. Pyramid gets to respond to the court’s sua sponte motion, but let’s face it, when your adversary is the decision maker, the cards are stacked against you. Dismissal of the Carmack claim would destroy federal question jurisdiction, so issues of diversity remain as to whether the court will send the matter back to state court to adjudicate Pyramid’s contract claims in the event it doesn’t have Carmack standing.
Cargo Loaders Can’t Escape Liability or Exposure to High Damages on Summary Judgment
Liberty Mutual Fire Insurance Co., et al. v. The Boldt Company, 2013 WL 632254 (N.D. Ga. 2013)
Shipper Cellu Tissue hired the Boldt Company to load and stow in a trailer a used “wrapper,” which is a heavy and sensitive piece of equipment that wraps paper towels around cardboard tubes during the manufacturing process. The wrapper had to be disassembled and placed into two trailers, and then secured so as to avoid sharp movement during transit from Wisconsin to Georgia. Boldt loaded one trailer with freight secured against its walls, and the other by nailing down the wrapper’s wooden braces to the trailer’s floor.
When the trucker slammed on brakes, the nailed-down cargo broke loose, damaging the wrapper, which was worth about 270 grand. To repair the damaged one would cost 300 grand, and a new one ran about 670 grand. But Cellu couldn’t find a used unit to buy, and didn’t have time to await repairs before contracted product was due. So it bought a new wrapper.
Cellu’s subrogated insurers apparently paid Cellu the new unit’s purchase price, and sued Boldt in the U.S. District Court for the Northern District of Georgia seeking to recover $670,000. Boldt moved for summary judgment on liability, arguing its techniques in securing the cargo were reasonable, even if a superior methodology might have been available. After all, no federal reg specifies how freight has to be secured. Boldt also argued that the wrapper’s fair market value, i.e., replacement cost of a like (used) model, should be extent of its potential liability.
The court didn’t buy the loading methodology argument. Just because regs don’t spell out how every item of freight should or shouldn’t be loaded doesn’t mean that the absence of a reg empowers lumpers to determine unilaterally what’s adequate for liability purposes. Add to that the fact that the more secure methodology clearly was known to Boldt (i.e., the one it employed in the undamaged trailer), as well as a plaintiff expert who begged to differ, and we have a question of fact not proper for determination on summary judgment. This one goes to the jury.
On the damages issue, Boldt did a little better, but still didn’t get the ruling it was looking for. The court asked for additional briefing and reserved ruling for another day. At issue is whether Cellu’s attempt to mitigate damages by buying a new wrapper that would avoid business losses was reasonably foreseeable. In other words, the cost of immediate procurement of a working machine needed to avoid a business loss would be recoverable as consequential damages only if that business loss itself were a recoverable loss. The parties didn’t fully brief that issue, or present evidence supporting their positions. Stay tuned.
Absence of Evidence of Latent Defect in Cargo Securement Leads to Summary Judgment Dismissal of Injured Driver’s Personal Injury Claim
Aragon v. Wal-Mart Stores East, LP, et al., 2013 WL 593837 (E.D. Mo. 2013)
Experienced driver Aragon saw that freight loaded by shipper Wal-Mart hadn’t been strapped or load-locked as would be required by contractual carrier guidelines. He opened one of the trailer doors, and didn’t see a problem. Later on at delivery, he opened both doors, and the unsecured cargo fell out onto his leg. The injured driver sued Wal-Mart and another involved entity in the U.S. District Court for the Eastern District of Missouri to recover for his resulting injuries. The defendants moved to dismiss.
Generally, per 49 CFR §392.9, carriers have a nondelegable duty to ensure their loads are safely secured. However, per the “Savage Rule” (based on the Fourth Circuit’s 1963 decision in U.S. v. Savage Truck Line, Inc.), shippers can be liable for harm caused by inadequately secured cargo if the defective securement was latent, i.e., not reasonably detectable by the carrier. The driver said his glance into the trailer, which at other times was sealed, couldn’t reveal unstable loading. But he conceded he saw the securement wasn’t in compliance with contractual requirements. The driver argued that the visible absence of straps doesn’t itself mean inadequate loading, but unfortunately, he didn’t offer any evidence of latently improper stowage (other than his self-serving declaration) on which a jury could conclude that. Summary judgment was granted accordingly. Fact-intensive issues like this usually go to a jury, but on summary judgment, you first have to sell a case that the judge finds reasonable.