As mid-year insurance renewals are finalized, the transportation industry needs to be alerted to certain revisions to the “Notice of Cancellation” provision in the ACORD 25 Certificate of Insurance (“COI”). The revised ACORD 25 removed long-standing language requiring prior written notice to the certificateholder (often 30 days) of any policy cancellation. This change has prompted concerns on how certificateholders will be assured they will receive information on the status of cargo coverage. Also effective March 21, 2011, the FMCSA stopped requiring regulated motor carriers (with the exception of household goods movers and freight forwarders) to file proof of cargo insurance. Thus, in most common situations, members of the public are no longer able to obtain information regarding the status of a particular motor carrier’s cargo coverage via the FMCSA’s website.
Insurance regulators further recognized that insurance companies may not be able to satisfy the prior written notice requirement in those instances where an insured chooses to immediately cancel an insurance policy. In this regard, modifying the ACORD 25 cancellation provision and removing the language requiring prior written notice of cancellation was intended to reduce the likelihood that a COI would run afoul of state insurance laws and regulations prohibiting misrepresentations of insurance coverage.
To ease concerns of shippers and others that request a COI, transportation providers may wish to explore various options such as endorsing the underlying policy to include a requirement that the certificateholder receive advance notice of cancellation or including a provision in the shipping agreement confirming that the insured will provide prior notice of cancellation. Motor carriers confronted with this issue may need to explore these options in order to maintain valuable business relationships and ensure compliance with state insurance laws. A thorough review of the relevant shipping agreements may also be necessary to ensure that such agreements are consistent with the language contained in the applicable COIs.
The Federal Motor Carrier Safety Administration proposed its plan for a three-year pilot program in which Mexican and U.S. carriers can provides long-distance services between each country.
The pilot sets up a vetting and enforcement program to ensure the safety of Mexican trucks, with the goal of evaluating their safety performance, based on inspections at the roadside, ports of entry and weigh stations, and on traffic enforcement. Hazardous materials and passenger carriers will not be included in the program.
The program is the result of an agreement between President Obama and President Calderón of Mexico to resolve the long-standing dispute over cross-border trucking. FMCSA will publish the details of the program in the Federal Register on Thursday and will take comments for 30 days.
Once the program is in place, Mexico will suspend the tariffs it levied when the Congress killed the earlier version of the pilot. In 2009 Mexico imposed import tariffs on about 89 U.S. agricultural and industrial products, and in 2010 it revised and expanded the list to 99 products.
In general, the program will set up a three-stage process for Mexican carriers that wish to participate. FMCSA said it does not know how many Mexican carriers will join. The last program attracted 775 applications, but only 29 of those carriers completed the paperwork and were vetted.
The Process
The process will start with the Mexican carrier filling out a 28-page application covering details of its operations, including affiliations, insurance, safety program and compliance with U.S. laws.
The application will be followed by a pre-authorization safety audit, in which FMCSA reviews the carrier's safety management system and inspects the specific trucks that will cross the border.
The safety management system would have to include such elements as a drug and alcohol testing program and a way to verify hours of service, insurance and driver qualifications, among numerous other requirements. Trucks that pass the inspection will get a CVSA decal.
If the carrier passes the audit, it would receive provisional operating authority and could commence cross-border operations. Provisional authority will last for 18 months. After that period, if the carrier has no pending enforcement or safety improvement actions and has cleared a compliance review, it is eligible for permanent authority in the pilot program.
Mexican carriers that have permanent authority in the pilot program would be eligible to convert that to standard permanent authority after the three-year pilot program is done.
For the first three months of the provisional authority stage, Mexican trucks and drivers will be inspected each time they enter the U.S. That period will be extended if the carrier does not get at least three inspections.
After three months and clearing the audit, the carrier will get the same inspection rate as the rest of the trucks now engaged in cross-border, commercial zone trucking. To be eligible for this status, the carrier must have an out-of-service rate at or below the U.S. average and its Safety Management System scores must be below the FMCSA threshold.
If instituted, the pilot program would run for three years from the first grant of provisional authority, unless FMCSA gathers enough data to make a decision about the program before that time. The agency said it could stop the program earlier if continuation is not consistent with the pilot's goals.
FMCSA will publish on its website and in the Federal Register comprehensive data on the Mexican carriers in the program, including their names, their audit performance, the trucks that have been cleared, the results of roadside inspections and the number of trips. The agency will track each carrier's data to gauge compliance.
The U.S. and Mexican departments of transportation will establish a monitoring group to supervise the administration of the program. In addition, FMCSA is establishing its own advisory committee, a subcommittee of the Motor Carrier Safety Advisory Committee, for suggestions. And the agency will make annual reports to Congress.
The Fifth Circuit Court of Appeals recently issued an opinion clarifying the scope of the MCS-90 endorsement. In Canal Ins. Co. v. Coleman, No. 10-60196, Timothy Briggs, a trucker and employee of P.S. Transport, was backing a truck into his driveway when he collided with a vehicle occupied by Bernetta Coleman and her husband Glen. At the time of the accident, Briggs was was driving the truck “bobtail,” meaning he did not have a trailer attached to his truck and was not transportation property. For this reason, the parties stipulated that Briggs was not engaged in the “transportation of property” at the time of the accident. The Colemans brought suit against P.S. Transport in state court to recover for their injuries.
In response to the state-court suit, P.S. Transport’s insurer, Canal Insurance, filed a declaratory judgment action in federal court claiming that it owed no coverage under the MCS-90 endorsement because Briggs was not transporting property at the time of the accident. The sole issue presented by the Colemans’ appeal to the Fifth Circuit was whether P.S. Transport’s automotive insurance policy, specifically the policy’s MCS-90 endorsement, covered the accident between Briggs and the Colemans. The Colemans argued that that whenever a truck operated by a motor carrier required to carry an MCS-90 endorsement is involved in an accident, the MCS-90 endorsement should provide coverage anytime the policy itself does not. The Fifth Circuit rejected this argument, instead holding that there is no coverage created by the MCS-90 endorsement when the driver is not engaged in “the transportation of property” at the time of the accident.
That being said, the Fifth Circuit cautioned against reading its opinion too broadly. While it would seem that the Court substantially limited the scope of the MCS-90 endorsement by tying coverage to whether the driver was transporting property, the Court noted that its holding was based solely on the parties’ stipulation that Briggs was not engaged in the “transportation of property” at the time of the accident. The Court noted that the definition of “transportation” given in the Motor Carrier Act is quite broad, and suggested that Briggs could have been found to be in engaged in “transportation” even though he was not transporting property at the time of the accident.
Thus, while the Coleman opinion represents a victory for motor carriers and their auto insurers, it is unclear to what extent future cases will attempt to distinguish its holding on the basis of the parties’ controlling stipulation. Carriers and insurance companies facing MCS-90 endorsement issues in the Fifth Circuit and elsewhere should carefully evaluate both the facts and controlling law to determine whether coverage is likely to be available for the accident at issue.
Recent developments illustrate a number of existing and developing theories of law whereby a shipper may be held liable for damages caused by a carrier it selects to transport its freight. Because a property broker may in many situations have similar factual attributes to that of an actual shipper (e.g., control of carrier selection, pick-up and delivery time specifications, cargo loading and securement specifications, etc.), a property broker should be conscious of these developing theories of liability and implement processes and procedures to safeguard against a finding of negligence on its part with respect to any given movement of cargo.
Possible safeguards include (i) separation of property brokerage operations in an entity separate from any motor carrier or other transportation operations; (ii)development of responsible carrier selection guidelines to govern and document the broker’s carrier qualification procedures; and (iii) clear delineation within contracts between both the broker and the shipper, and the broker and the carrier of responsibilities of the aspects of a cargo move and the insurance and indemnification responsibilities of the parties.
Powered by Compendium