Owner-Operator Independent Drivers Association announced that it is supporting one of its owner-operator members in a demand for class arbitration with FFE Transportation Services over several alleged violations of the truth-in-leasing regulations. This is the first time that OOIDA has recommended use of arbitration for resolving a dispute over the leasing regulations. Last year, the U.S. Supreme Court ruled that arbitrators have the authority to certify classes. OOIDA emphasized that while it recommends exercising the new option for classwide arbitration, it is not softening its reliance on the federal court system.
A federal district court in Jacksonville, Fla., rejected a request by Landstar System and its subsidiaries to dismiss a lawsuit filed by the Owner-Operator Independent Drivers Association regarding chargebacks. Landstar challenged OOIDA’s private right of action, the authority of the court to order the payment of damages and the four-year statute of limitations claimed by OOIDA.
Texas Court of Appeals ruled that a shipper had not waived its protections under the federal Carmack Amendment simply because the contract set the carrier’s liability for losses in Mexico at zero. While that contract term may be common practice and may have reflected the parties’ intention that the shipment not be subject to Carmack, it does not represent an express waiver of Carmack, the court ruled. (Celadon Trucking Services vs. Titan Textile Co.)
Q Our company is a small over-the-road carrier that transports expensive shipments in truckload quantities. About half of a truckload worth $500,000 was damaged beyond repair, and the shipper filed a claim for $250,000. Although we have cargo limits of $200,000 per occurrence, our insurer has stated that it will only pay $100,000 of the claim less the deductible because of some co-insurance provision in the cargo policy that we knew nothing about. Can this be right?
A Co-insurance provisions often show up in casualty policies. Insurers use them to keep policyholders from under-insuring property on first-dollar coverage. A typical co-insurance provision reads something like this:
“In the event of a loss to which the limit of liability applies, the insurer shall in no event be liable for a greater proportion of such loss than the limit of liability involved bears to 100 percent of the evaluation of contents of the vehicle at the time such loss occurred.”
Co-insurance provisions can have surprising and devastating effects. In your case, your coverage of $200,000 per occurrence is 40 percent of the $500,000 worth of goods on the truck. So your insurer will pay only 40 percent of the loss, or $100,000.
You obviously assumed that all losses were covered at least up to the limit of $200,000 per occurrence, and surely the shipper did as well when it received your certificate of insurance. Co-insurance provisions, like other exclusions and policy loopholes, are not disclosed on the typical certificates of insurance used in the industry.
Ironically, co-insurance provisions limit recovery on partially damaged loads but have no effect in the case of a total loss. So if the shipment had been a total loss, the insurer would have paid the full $200,000 policy limit.
Address the co-insurance problem at the outset. Check your policy to ensure there is no co-insurance provision so you won’t have to deal with a nasty surprise. If you are forced to accept a co-insurance provision in your cargo policy, negotiate a released evaluation with your shipper that includes an alternate maximum, such as “$2.50 per pound per article” or “$100,000 per truckload, whichever is less.” This step will avoid this gap problem on partial losses where the total value of the cargo exceeds your policy limits.
ATA challenges New Mexico ID card
The American Trucking Associations has asked the New Mexico Supreme Court to invalidate the state’s reinstitution of an identification card and associated fee requirement for motor carrier vehicles subject to the state’s weight-distance tax.
Following a challenge by the ATA Litigation Center on behalf of C.R. England, New Mexico agreed in 2000 to eliminate a vehicle-specific weight-distance tax identification card and $6 per-card fee. The state agreed to replace the ID card with a single motor carrier identification that could be reproduced by the carrier and placed in its vehicles.
In 2003, New Mexico Legislature ordered the state’s Department of Revenue to reinstitute the vehicle-specific permit, called the “Weight-Distance Tax Identification Permit,” and authorized a fee to cover card issuance. Under the Department of Revenue’s regulations, effective July 1, 2004, carriers will be issued blank permits on non-reproducable paper that they are to complete with specific vehicle information and then carry in that vehicle. Each permit will cost $2.
ATA argues that the $2 charge, like all flat annual fees, violates the Commerce Clause because it inherently costs interstate motor carriers more for activity in New Mexico than it does local motor carriers. Also, flat state charges, if imposed in multiple states, expose interstate motor carriers to a cumulative burden greater than that of intrastate carriers, ATA contends.
ATA also challenges as an undue burden on interstate commerce the identification permit requirement itself. The current motor carrier identification document is an equally effective regulatory tool and must be used as a less burdensome alternative, ATA says.
International loses Texas dealership ruling
International Truck and Engine Corp. cannot renew its licenses to operate two used truck centers in Texas because Texas law prohibits vehicle manufacturers from owning or controlling dealerships, a federal appeals court has ruled. International had argued that comments by the appeals court in an earlier case suggested that the ban applied to new vehicles but not used vehicles. (International Truck and Engine Corp. vs. Bray; U.S. Court of Appeals for the Fifth Circuit)