Court Decision – In case of semi rig’s collision and wrongful death action, held that MCS-90 endorsement attached to insurance policy of motor carrier whose trailer was being hauled by a rig driven by a third party and pulled by a third party’s tractor unit would apply in the event there was a judgment in the case (context here was motion for summary judgment), despite the facts that (1) third party was hauling the trailer at time of the accident, (2) another third party had entered into a lease subject to purchase with tractor’s owner, and (3) that third party itself had entered into an Owner Operator Lease Agreement with yet another third party with obligation to do the maintenance.

Shropshire v. Shaneyfelt, 12 cv 1657 (U.S. District Court for the Western District of Pennsylvania, July 12, 2013. Copy of court-issued opinion available here.

Policy strength of the MCS-90 endorsement is strong indeed – given this remoteness between policy-holder and party who was operating the truck at the time of the accident.

INSURANCE (MARITIME) / Appeals court upheld summary judgment ruling inapplicable to these facts insurance policy language that excluded coverage where either a “carrier for hire” was involved or there had been “loss of and/or theft of documents of title” because (1) a warehouse could NOT be considered a “carrier for hire” under the Carriage of Goods by Sea Act, and (2) purchaser of the freight (cotton) whose agent received bill of lading could NOT be considered to have taken good to which he lacked title (because the bill of lading is – among various things – a document of title).

State National Insurance Co. v. Marketing Services, Inc., No. 12-60148 (U.S. Court of Appeals for the 5th Circuit, May 10, 2013). Copy of court-issued opinion available here

On the first point, defendant purchaser argued that warehouse was a “carrier” under the insurance contract. The insurance contract did not define that term. And the 5th Circuit had ruled under the former version of the Carriage of Goods by Sea Act that a “carrier” was “the owner or the charterer who enters into a contract of carriage with a shipper”, and under the more recent version that a “carrier” was “the owner, manager, charterer, agent, or master of a vessel”.

The court ruled that the warehouse here met neither version of the definition of “carrier”. 

On the second point, relating to “theft of documents of title” – there could have been no theft from defendant since the defendant’s agent had been delivered the bill of lading. Among various functions, a bill of lading is a document of title. Hence there could have been no “theft” where the holder of the freight was in possession of the bill of lading.

REMARKS – The MCS-90 endorsement mandated by the Motor Carrier Act held not to require issuer of that endorsement to pay out to another insurance company – in light of MCS-90’s design that was to protect an “injured member of the public” harmed by “negligent authorized interstate [motor] carriers”. It simply does not apply “between two or more insurance companies”. COMMENT: At some point the federal court systems will need to resolve this question about application of MCS-90 as between two or more insurance companies. The law is unsettled in the various jurisdictions – including as interpreted by federal and state courts.

Carolina Casualty Insurance Co. v. Canal Insurance Co., Case No. 2:11-cv-736 (U.S. District Court for the Southern District of Ohio, April 18, 2013). Free copy from the court available here.

Legal Take-Away:

Application of MCS-90 to cases between two or more insurance companies is unsettled in the law.

Practical Take-Away:

Until law is resolved on the application of MCS-90 to cases between two or more insurance companies, counsel for insurance carriers (1) should assume for planning purposes that MCS-90 will not apply to such circumstances, and (2) should always – in the context of an accident case presenting this situation – explore the possibility of making a good faith claim for recovery in such circumstances unless and until the law is settled to say otherwise.

INSURANCE (FORUM SELECTION CLAUSE VS. FORUM NON CONVENIENS CHALLENGE) / Forum selection clause in an aviation product liability insurance policy upheld by the 11th Circuit under landmark M/S Bremen v. Zapata Off-Shore Co., 407 U.S. 1 (1972), against policy holder’s challenge based on forum non conveniens grounds.

Kostelac v. Allianz Global Corporate & Specialty AG, No. 12-13718, Slip opinion [“Do Not Publish”], (U.S. Court of Appeals for the 11th Circuit, April 17, 2013). Free copy available here.

Virginia citizen injured in an air crash in Florida where aircraft was German manufacturer and insurance company had issued aviation product liability insurance policy to that German manufacturer. Virginia citizen sues German manufacturer in U.S. District Court for the Southern District of Florida.

U.S. District Court below had not addressed insurance company’s stated ground of forum selection clause and instead “weighed the public and private interests in the litigation, determined that Germany was a more appropriate forum for the suit”, and then dismissed complaint on ground of forum non conveniens – i.e., that German tribunal better than Florida tribunal under these circumstances per the forum non conveniens doctrine .

The 11th Circuit ruled that this is simply governed by the forum selection clause in the insurance contract – after reviewing 4 possible grounds for possible invalidity of the clause:

(1)  Clause and contract formation induced by fraud or overreacing;

(2)  Plaintiff would effectively be deprived of his/her/its day in court due to the inconvenience or unfairness of the chosen forum;

(3)  Fundamental unfairness of the chosen law would deprive the plaintiff of a remedy; or

(4)  Enforcement of the forum selection clause would go against a strong public policy.  

Prior to its analysis the 11th Circuit’s opinion concluded that – this being a diversity jurisdiction case – there was no difference in substance between the law of Florida and U.S. federal law on the validity of a forum selection clause.

INSURANCE (Excluded Coverage of Death While on “Corporate Aircraft”) / Employee’s surviving relatives bring lawsuit for denial of life insurance benefits where insurer’s initial response was denial of claim “based on a policy exclusion for ‘Corporate Owned or Leased Aircraft’”.

This case is reported while in the pleading stage, and the opinion and order relates to plaintiffs’ motion to amend their complaint (which district court granted). Odd facts in that the stated ground of insurance company’s initial denial related to “corporate aircraft” although court states that death occurred in a motorcycle event. Plaintiffs’ successfully moved to add major motor carriers USF Reddaway and YRC Worldwide, Inc. as defendants. Did decedent travel to event on corporate aircraft? Were they sponsors in some manner?

My point: Apparently under some life insurance or other death benefits policies travel on “corporate aircraft” is the subject of a coverage exclusion clause. This denial of claim based on “corporate aircraft” does not relate to a marginal or offbeat carrier (Zurich American Insurance Company), nor if “corporate aircraft” are in fact involved does this appear to relate to marginal or offbeat businesses (USF Reddaway and YRC Worldwide, Inc).

Martha Taylor v. Zurich American Insurance Co., Case No. CV 11-08110-PCT-JAT, Slip copy (U.S. District Court for the District of Arizona, April 1, 2013). Free copy available here.

Note: Subsequent to initial denial based on “corporate aircraft” exclusion, according to the initial complaint, insurer next based its denial on “extra-hazardous activity” exclusion, and – thirdly – on the basis that decedent’s death was not an “accident”.

MOTOR CARRIERS (INSURANCE) / Declaratory judgment action by insurance carrier against trucking company – held: Insurance carrier had no duty to indemnify trucking company for accident involving trucking company’s independent contractor’s truck while that truck was being driven by an employee of trucking company (driving on behalf of independent contractor and not on behalf of trucking company).

“Although Congress required motor carriers to obtain public-liability insurance, it did not require carriers to obtain insurance for their employees. The regulations expressly provide that this public-liability insurance “does not apply to injury to or death of the insured’s employees while engaged in the course of their employment.” 49 C.F.R. § 387.15.”

“The district court held that the policy contains an exclusion for employees of the insured and that because Olivas was an employee, there was no coverage for his injuries….”

Canal Indemnity Co. v. Rapid Logistics, Inc., Slip copy, 2013 WL 657665 (U.S. Court of Appeals for the 5th Circuit, February 22, 2013). Free copy available here.

MOTOR CARRIER / Administrative Rule Repeal – Federal Highway Traffic Safety Administration “repeals NHTSA’s regulation requiring motor vehicle insurers to submit information on the number of thefts and recoveries of insured vehicles and actions taken by the insurer to deter or reduce motor vehicle theft.”

“NHTSA is repealing this regulation because the agency’s only available statutory authority to require insurers to submit this information was removed by the Motor Vehicle and Highway Safety Improvement Act of 2012 (Mariah’s Act) (incorporated into the Moving Ahead for Progress in the 21st Century Act (MAP-21)). Given that NHTSA no longer has the authority to require insurers to submit this information and thus has no discretion to take any action other than rescinding the regulation, the agency did not issue a notice of proposed rulemaking (NPRM) prior to this final rule. Under those circumstances, public comment to the rulemaking is unnecessary.”

February 22, 2013, Final Rule.

TORTS (PRODUCT LIABILITY) / As result of system defect truck caught fire while on interstate hauling load – held: (1) Because no harm other than to the defective property itself aggrieved party can recover only in contract – not in tort; and (2) National Traffic and Motor Vehicle Safety Act does not create a private right of action to recover for harms allegedly caused by product manufacturer’s failure to comply with that act.

The Moorman Doctrine – Illinois common law, “the Moorman doctrine precludes recovery of purely economic losses in tort for failure to fulfill contractual obligations”. Moorman Manufacturing Company v. National Tank Co., 91 Ill. 2d 69 (Supreme Court of Illinois, 1983).

Great West Casualty Co. v. Volvo Trucks North American, Inc., Slip copy, 2013 WL 617068 (U.S. District Court for the Northern District of Illinois, February 19, 2013). Free copy available here.

MOTOR CARRIERS (INSURANCE) / Question relates to statute of limitations governing insurance on motor carrier truck involved in fatal accident: Applicable (Pennsylvania) law recognizes two distinct forms of contract-based indemnity: (1) Indemnity against loss and (2) indemnity against liability. Complaint pleads first, but even if second applies claim not time-barred.

These two distinct forms are not mutually exclusive. In any event complaint pleaded indemnity against loss. But even if it was construed as claiming indemnity against liability: “However, even if Count I constituted a claim for indemnification against liability, the claim did not become “fixed and established” until LGIC reached a settlement agreement with the estate—September 28, 2007.”

Lincoln General Insurance Co. v. Kingsway American Agency, Inc., Slip copy, 2013 WL 458449 (U.S. District Court for the Middle District of Pennsylvania, February 6, 2013). No free copy available at time of posting.

UPCOMING: The Motor Carrier Act of 1980 mandates that MCS-90 and Form F endorsements protect the public from uncompensated losses – if the endorsee motor carrier operates “in interstate commerce”. Can a mistake by the driver as to routing that is not intended by the company employing the driver, “override and negate the authorized fixed and persisting intent of a shipper and interstate common carrier that the transportation involved be interstate”?

The 2nd Circuit ruled that it can do so. 

Before the U.S. Supreme Court

Lyons v. Lancer Ins. Co.

12-529

On a Petition for a Writ of Certiorari to the U.S. Court of Appeals for the 2nd Circuit

Petitioner’s Reply Brief on the Merits available here (subscription required). 2013 WL 543282.

Petitioner here argues that there is a conflict between the circuits: 

“Notwithstanding the holding in Lyons v. Lancer, Courts, other than the Second Circuit have already held that a bus driver does not have the legal authority to act, nor is he a shipper with the authority to override the fixed and persisting intent of an actual shipper in determining whether transportation was interstate or intrastate. Consumers v. Sons Trucking Inc. IV, U.S. Court of Appeals Fifth Circuit No. 01-20201 (dated and filed October 8, 2002); Canal Insurance Company v. Owens, et al., 211 U.S. Dist. Lexis 118329 (dated and filed October 12, 2011).”

Legal doctrine take-away: 

“Deregulation” was premised in part on the “financial responsibility” minimums for insurance of motor carriers against harm to others. But that requirement applies only to an interstate motor carrier.

Practical business take-away: 

At issue here is whether or not the protection built into the “deregulation” of the motor carrier industry in 1980 will have an unpredictable gap where a driver has opted to routing that is intrastate notwithstanding the employer motor carrier’s “intent” that would render the carrier “interstate” in character.

This is about predictability that the MCS-90 and Form F endorsements will be enforceable on behalf of those harmed by motor carriers.