Lohr, et al. v. Zehner, et al., 2014 WL 2504574 (M.D. Ala. 2014)
Owner operator Ricky Briggs was under lease to motor carrier Wilmac Enterprises in Alabama. Wilmac provided Briggs with placards bearing the carrier’s MC number. Apparently, Wilmac believed it had terminated the lease effective June 30, 2011, but had no evidence it ever notified Briggs of the termination or requested return of the placards.
In July 2011, Briggs accepted a load from carrier Kevin G. Transportation. He didn’t notify Wilmac about this haul or share any of its freight charges with Wilmac. His truck, still displaying Wilmac’s placards, was involved in a multi-vehicle accident which tragically resulted in the death of Richard Lohr. Mr. Lohr’s estate sued everyone involved, including Wilmac, in the U.S. District Court for the Middle District of Alabama.
Wilmac moved for summary judgment, seeking dismissal of the plaintiff’s claims on the grounds its lease with Briggs had terminated before the accident and, in any event, Briggs was operating outside the scope of his lease agreement with Wilmac. The court wasn’t so sure about the lease termination, but agreed Wilmac couldn’t be liable given the carrier’s noninvolvement with the transport in question. Going through a nice little history lesson about (largely obsolete) logo liability and respondeat superior principles in the trucking context, the court ruled that state vicarious liability law governs carrier liability in owner-operator lease claims. Notwithstanding the placards, Alabama won’t apply master servant liability principles when a driver operates outside his lease, so Wilmac can’t be liable.
Champion Transportation Services, Inc. v. Lexington Insurance Co., 2014 WL 1612946 (N.D. Ill. 2014)
Lexington Insurance Company issued to motor carrier Champion Transportation a cargo liability policy that excluded from coverage a series of items categorized as “valuable papers,” such as “accounts, bills, deeds, evidences of debt” and … “documents.” Shipper Lithographix, a printer, shipped with Champion a cargo of annual reports to its customer Exelon Corporation. The annual reports were stolen en route, and Lexington denied Champion’s $178,986 claim for coverage based on the exclusion, as well as on exclusions for consequential damages. Champion sued Lexington for coverage in the U.S. District Court for the Northern District of Illinois.
On cross motions for summary judgment, the court, by and large, found coverage. While the word “document” is broadly defined in the dictionary, it must comport with the series of examples Lexington’s policy lists as “valuable papers” in the context of a coverage analysis. The court ruled that the policy’s examples demonstrate that “‘valuable papers’ are kinds of ‘papers’ that are unique and potentially irreplaceable, and have some value beyond their mere production value,” i.e., “value beyond the paper it is printed on.” The court further observed that “[b]y excluding ‘valuable papers’ … the Policy clearly carves out a certain category of ‘papers’ – and by extension ‘documents’ – that have value beyond their commercial or replacement value, and hence are ‘valuable’ for Purposes of the Policy.”
Finding that costs of bindery and alterations of replacement cargo aren’t consequential damages, the court ruled Lexington must pay the loss. However, as Lexington’s position wasn’t “vexatious and unreasonable,” its declination of coverage didn’t amount to the kind of bad faith for which it would be come liable for its insured’s attorneys’ fees.
Medvend, Inc. v. YRC, Inc., 2014 WL 2440066 (E.D. Mich. 2014)
Carrier YRC hauled interstate a load of medication dispensing machines for shipper Medvend. YRC had issued a bill of lading that incorporated its terms and conditions located on its website. Those terms and conditions included tariff provisions that limited TRC’s liability to ten bucks a pound. Apparently, nothing in the bill of lading or website offered Medvend an opportunity to choose between two levels of liability, as is required of carriers seeking to limit their liability for cargo loss.
Yes, the cargo was damaged en route, and Medvend submitted to TRC a written notice of claim less than a month after delivery, stating a claim value of $45,000. Several weeks later, after inspecting the damaged equipment more thoroughly, it submitted inspection reports demonstrating a claim value of over $120,000.
When YRC declared that its liability, if any, was limited to a fraction of the cargo’s value, Medvend sued the carrier in the U.S. District Court for the Eastern District of Michigan. YRC pointed to the incorporated limitation of liability clause. In response to Medvend’s argument that the Sixth Circuit’s opinion in Toledo Ticket Co. v. Roadway Express, 133 F.3d 439 (6th Cir. 1998), required carriers to offer their shippers an option of two levels of liability before they may enjoy limited liability, YRC argued that Toledo Ticket no longer is good law in light of legislative changes in 1995 by way of ICCTA to such things as tariff filing requirements (Toledo Ticket required carrier to file tariffs with the Interstate Commerce Commission as a prerequisite to limiting their liability; with ICC’s closure, tha’st no longer even possible). Some courts have gone that way, but this one didn’t. It agreed with a series of precedents that Toledo Ticket wasn’t legislatively overruled by ICCTA. And in any event, YRC hadn’t shown its website was even up and running at the time of the loss.
Regarding Medvend’s modification of its claim value, despite a precedent the court found ambiguous, the court concluded that claim value may be reasonably modified. Claimants don’t always know the full extent of their losses for some time after a loss, and the information this shipper provided was adequate for YRC to begin processing the claim. In any event, the modified claim still was submitted within the nine-month deadline for giving notice.
Brody v. Liffey Van Lines, et al., 2014 WL 2450807 (S.D.N.Y. 2014)
New York City residents the Brodys hired Liffey Van Lines to store and move their household stuff, some to another address in Manhattan, and some to their new place in Florida. The Brodys requested and paid for “extra care” taken of their goods, as well as “insurance” of up to $400,000.
Liffey packed the cargo and placed it into storage with New York Self Storage. The Brodys later specified to Liffey that they wanted some of their goods moved to Florida, and entered into a separate contract with Allied Van Lines for that transportation. The goods arrived damaged in Florida. Having lost faith in Liffey, they asked for delivery of their remaining stored goods to their New York home. Those goods arrived damaged as well.
The Brodys sued Liffey, Allied, SIRVA (Allied’s parent company) and New York Self Storage in New York state court. The claim against SIRVA was quickly dismissed as groundless (there was no basis to pierce the corporate veil), and the warehouse defaulted, but the two carriers removed the action to the U.S. District Court for the Southern District of New York. There, they promptly moved to dismiss a litany of state and common law theories of liability the Brodys had pleaded in their complaint. In bringing the motion for judgment on the pleadings, the carriers asserted Carmack preemptively governed the whole shooting match.
The court confronted the complicated circumstance of cargo collectively tendered to a carrier as a single load, but later divided into interstate and intrastate deliveries. As Allied only transported the interstate segment, the court agreed all of the shipper’s claims (as stated) were preempted by Carmack. Allied’s motion to dismiss was granted accordingly. Liffey, which delivered the intrastate portions, got creative.
First, it argued that it transported a segment of the Brodys’ cargo intrastate only as the first leg of an interstate haul, i.e., where Allied took over. The court agreed and dismissed the claims against Liffey related to those loads. Regarding the cargo that never left the Empire State, Liffey first urged that the Brodys originally intended to ship that portion of their stuff out of state, but then changed their mind when they decided to end their business with Liffey. But as no evidence confirmed that argument, it failed. Next, Liffey argued that while this was indeed intrastate carriage, Carmack governs nonetheless, because it’s an interstate carrier. As Carmack’s applicability is defined by the nature of the carriage, and not by the carrier’s authority, that argument also failed.
Finally, the judge ruled that evidence might be developed demonstrating that the Florida and New York cargo wasn’t definitely separated into two buckets, such that a renewed argument for summary judgment might be appropriate. Right now, at least some state and common law claims against Liffey remain.
Sompo Japan Ins. Co. of America v. Action Express, LLC, 2014 WL 1920728 (C.D. Cal. 2014)
Sompo Japan issued a cargo insurance policy to shipper Kenwood USA with respect to a load of electronics it booked with carrier Daylight Transportation for transport from California to Florida. Daylight subbed the shipment to carrier Action Express. The load was stolen en route, causing a loss to Kenwood of some 103 grand.
Daylight and Action Express had limited their collective liability to 30 grand, which they paid to Kenmore. Sompo Japan paid the 83 grand difference, and then sued Action Express in subrogation in the U.S. District Court for the Central District of California. The opinion makes no mention of any settlement agreement between the shipper and carriers that might be effective against Kenmore’s subrogee; or why Action Express’s limitation of liability would be effective as against Kenwood but not Kenwood’s insurer. Carmack isn’t addressed at all which, as explained below, is curious.
In dismissing Sompo Japan’s claim, the court instead agreed with Action Express that the equitable doctrine of Superior Equities defeats the insurer’s subrogation rights because it failed to show any wrongdoing by Action Express. Under that doctrine, an insurer may not pursue subrogation against a third party whose equities are greater than the insurer’s. As Action Express wasn’t alleged to have committed any wrongdoing in causing the loss, an analysis of the equities didn’t favor Sompo Japan over the carrier. This suggests, notwithstanding Carmack’s near strict liability principles, that a subrogated cargo insurer must show wrongdoing by a trucker in order to recover its payout to an insured shipper. This is a confusing result at best, and one which could upend cargo liability concepts if it is deemed authoritative.
Casey v. Smith, et al., 353 Wis.2d 354, 2014 WL 1508506 (Wis. 2014)
Owner operator Zeverino and his truck were under lease to carrier Taylor Truck Line. The lease required that Zeverino obtain his own bobtail insurance to cover his non-trucking use of his rig. Taylor would obtain coverage for trucking operations. The driver procured his coverage from Acceptance Casualty Insurance, and Taylor obtained its from Great West Casualty.
Zeverino was on his way to a repair shop for repairs to his rig’s broken grill when he was involved in a multi-vehicle accident. An injured motorist filed suit in Wisconsin, naming all players and their insurers as defendants. Acceptance and Great West agreed one of them was on the hook, but disagreed as to which, all the way up to the Badger State’s Supreme Court.
Acceptance pointed to two exclusions in its policy: one for when the covered rig was being put to the “business use” of a lessee; and the other for when it is “en route to” a “business purpose.” Affirming two lower courts, the high court shot down both, and found Acceptance liable under its policy.
The court’s analysis of the “business use” exception centered around whether the lease actually required the repairs Zeverino was en route to; whether they were necessary to the truck’s operation; and whether Taylor ordered them. The answer was no to each of these. Zeverino was off duty when he took his truck in for the repair, and Taylor didn’t even know about it. Precedents have defined “in the business of” to mean “to further the commercial interests of,” and the court didn’t see how a grill repair advanced Taylor’s interests. Moreover, no federal reg or other law required an intact grill for safe and proper vehicle operation.
Similarly, Acceptance tried to broadly define “business purpose” in its second asserted exclusion to mean, well, just about anything. It urged that a trip for maintenance was “a business purpose,” which would be so broad a definition that the policy wouldn’t provide any coverage at all. Again, the court ruled that the exclusion would only apply if the trip was necessary for essential repairs required to haul freight. Acceptance gets to cover the injured motorist’s claims against Zeverino.
Before proceeding, please note: If you are not a current client of Lane Powell PC, please do not include any information in this email that you or someone else considers to be confidential or secret in nature. Prior to the establishment of a lawyer-client relationship, unsolicited emails from non-clients containing confidential or secret information cannot be protected from disclosure.