Spring 2015
TRANSPORTATIONNEWSLETTER
Cover ing legal and other developments affecting those in the transpor tation industry INSIDE THIS ISSUE Not Enough Changing in Your Trucking Company? Get Ready for URS . . . . . . . . . . . . . . . . . . . . . . . . .
02
Team Updates . . . . . . . . . . . . . . . .
03
LendingYour Trailer = Lending Your Insurance? Maybe!
Seriously Now: Does the Americans with Disabilities Act Really Require Motor Carriers to Allow Alcoholics to Drive? . . . . . 06 Broker or Carrier? The Difference Can Determine Your Liability . . . . . . .
06
Court Reminds Transportation Companies to Keep Those Corporate Formalities . . . . . . . . . . . . . . . . . . .
07
Sleep Apnea: The Tireless Debate . . . . . . . . . . . 07
On
The Transportation Newsletter is available online!
To view the complete online version of the Transportation Newsletter, visit www.smithmoorelaw.com/ TNLApril2015.
September 28, 2007, John Kanard was working on a New Jersey Turnpike construction project when an 8,000 pound concrete road barrier fell on Kanard’s foot— crushing and severing it. Carolina Casualty Insurance Co. v. Travelers Property Casualty Co., 2014 WL 5410643, at *1 (D. N.J. Oct. 22, 2014). At the time of the incident, Kanard was an employee of Ho-Ro Trucking which, pursuant to a subcontract with General Contractor (the general contractor), was in charge of transporting these giant barriers to another location. Id. A General Contractor employee dropped the barrier while loading it onto a Ho-Ro trailer. Id. Kanard brought suit against General Contractor and other defendants on August 18, 2008, and General Contractor’s liability insurer, Travelers, provided the defense. Id. General Contractor ultimately settled with Kanard for $5 million, $1 million of which was paid by Travelers, with the remaining $4 million paid by General Contractor’s excess continued on page 2 >>
continued from page 1 >>
carrier, Illinois National. Id. Thereafter, these insurers sought to recover from other potentially liable insurers: Ho-Ro’s primary insurer Carolina Casualty (as owner of the trailer), Penske’s primary and excess insurer Old Republic (as owner of the tractor), and Ho-Ro’s excess carrier Lexington Insurance. Id. Carolina Casualty brought a declaratory judgment action to determine the liability of these various carriers. Id. Travelers argued that Carolina Casualty (Ho-Ro’s primary auto liability insurer) must indemnify Travelers and reimburse it for its defense costs. Id. at *5. Carolina Casualty argued that under the express policy language, non-Ho-Ro employees are not afforded coverage for liability incurred
while moving property to a covered tractor or trailer. Id. at *7. While the court agreed that General Contractor is not an insured under the policy language, the court went on to hold that New Jersey’s omnibus statute, in conjunction with an agreement between Penske (the tractor’s owner) and Ho-Ro (which was leasing the tractor from Penske), “places certain statutory coverage obligations upon [Carolina Casualty] as Ho-Ro’s carrier.” Id. In this regard, the court acknowledged that the trailer was not a motor vehicle under the Omnibus Statute and thus Ho-Ro was not required to maintain financial responsibility (however, there are jurisdictions where that might not be the case). The court concluded that because of the contract between Penske and Ho-
Ro (which obligated Ho-Ro to obtain insurance naming Penske as an additional insured), Ho-Ro was required to maintain insurance for all liability “imposed by law for bodily injury...sustained by any person arising out of the ownership, maintenance, operation or use of a motor vehicle...” – in this instance, the tractor. Id. (quoting N.J.S.A. 39:6B-1). Continuing on to adjudicate whether Kanard’s lawsuit arose from the use of the tractor, the court found that “use of a motor vehicle includes the loading of cargo.” Id. at *8. Nonetheless, the court still had to determine whether the loading of goods onto Ho-Ro’s trailer constituted “use” of the tractor. Id. To read more about the insurance liability ruling visit: www.smithmoorelaw.com/ TNLTrailer.
Not Enough Changing in Your Trucking Company? Get Ready for URS In 2013, the Federal Motor Carrier Safety Administration (FMCSA) issued a Final Rule establishing the Unified Registration System (URS), which is intended to streamline current Federal registration processes and increase the accessibility of data on entities regulated by the FMCSA. The URS, which goes into effect on October 23, 2015, consolidates four systems currently in place: (1) the United States Department of Transportation (USDOT) identification number system; (2) the commercial registration system; (3) the financial responsibility information system; and (4) the process agent designation system.
The Application Process
The following sections highlight major components of the URS and changes it will make to registration requirements and processes:
Current registration systems issue four identification numbers: USDOT Numbers, MC Numbers, MX Numbers, and FF Numbers. Under the URS, the FMCSA will use the USDOT Number as its sole unique identifier for all regulated entities. It will
2
| Transportation Newsletter | Spring 2015
The URS uses a multi-phase registration process with the following phases: (1) fee payment and application submission; (2) administrative filings (process agent designation and evidence of financial responsibility, as applicable); and (3) notice of, and opportunity to, protest applications for operating authority, as applicable. After the first phase, the USDOT issues an inactive USDOT Number. Once all phases are complete, the number is activated. Identification Numbers
no longer issue MC, MX, and FF Numbers. Entities registered before October 23, 2015 are not required to remove obsolete numbers from their vehicles, but the FMCSA encourages them to omit the numbers from new or repainted vehicles. Fee Payment and Application Submission Every entity under the FMCSA’s commercial and/or safety jurisdiction, except Mexico-domiciled long-haul carriers, must complete the new Form MCSA-1. To read more about changes to the URS process visit: www.smithmoorelaw.com/ TNLURS.
SMITH MOORE LEATHERWOOD SPRING 2015
TRANSPORTATION TEAM Rick Coughlin
Bennett Crites*
Charleston, SC | 843.300.6633
Manning Connors
Greensboro, NC | 336.378.5368
Greensboro, NC | 336.378.5236
Greensboro, NC | 336.378.5471
Charleston, SC | 843.300.6653
erik.albright@smithmoorelaw.com
mike.bowers@smithmoorelaw.com
manning.connors@smithmoorelaw.com
rick.coughlin@smithmoorelaw.com
bennett.crites@smithmoorelaw.com
Erik Albright
Mike Bowers
Julie Earp
Jay Holland
Kori Flake
Shawn Kalfus
Greensboro, NC | 336.378.5256
Wilmington, NC | 910.815.7165
Atlanta, GA | 404.962.1017
Atlanta, GA | 404.962.1042
julie.earp@smithmoorelaw.com
jay.holland@smithmoorelaw.com
kori.flake@smithmoorelaw.com
shawn.kalfus@smithmoorelaw.com
Fredric Marcinak
Kevin McCarrell
Rob Moseley
Greenville, SC | 864.751.7691
Greenville, SC | 864.751.7652
fredric.marcinak@smithmoorelaw.com
kevin.mccarrell@smithmoorelaw.com
*TEAM LEADER* Greenville, SC | 864.751.7643
KristEn Nowacki
Bob Persons
Greenville, SC | 864.751.7753
Atlanta, Ga | 404.962.1075
kristen.nowacki@smithmoorelaw.com
bob.persons@smithmoorelaw.com
rob.moseley@smithmoorelaw.com
Jack Riordan
Joseph Rohe
Charleston, SC | 843.300.6659
Greenville, SC | 864.751.7638
Greenville, SC | 864.751.7668
Atlanta, GA | 404.962.1074
mary.ramsay@smithmoorelaw.com
jack.riordan@smithmoorelaw.com
joseph.rohe@smithmoorelaw.com
jennifer.rathman@smithmoorelaw.com
Mary Ramsay
Jennifer Rathman
Peter Rutledge
Matt Stone
Marc Tucker
Heather White
Greenville, SC | 864.751.7624
Greenville, SC | 864.751.7610
Atlanta, GA | 404.962.1057
Raleigh, NC | 919.755.8713
Charlotte, NC | 704.384.2635
kurt.rozelsky@smithmoorelaw.com
peter.rutledge@smithmoorelaw.com
matt.stone@smithmoorelaw.com
marc.tucker@smithmoorelaw.com
heather.white@smithmoorelaw.com
Kurt Rozelsky
* New Transportation Team Member
Smith Moore Leatherwood LLP | Attorneys at Law |
3
Making Tracks •
•
•
4
January 14 was the start of the SML Transportation Webinar Season, with Rob Moseley leading a webinar on the proposed regulations for the Food Safety Modernization Act. If you would like to listen to the archived version, see www.smithmoorelaw.com/rob-moseley-presented-smltransportation-webinar-january-14. Rob Moseley led the presentation of the first annual Freight Claims Boot Camp sponsored by the Transportation Lawyers Association on January 15 in Chicago. Fredric Marcinak served as the Emcee for the program. The Boot Camp was followed by the Chicago Regional Seminar. Kori Flake and Shawn Kalfus joined in the festivities. To get the year off on a good footing, hundreds were on hand for Jump Start in Atlanta, sponsored by SMC3. Rob Moseley’s all day Transportation Contract Law and Freight Claims Workshop was well attended. Jennifer Rathman from the Atlanta office attended as well.
•
Marc Tucker served on a panel at the Association of Corporate Counsel meeting in Charlotte discussing data breach and security issues on February 4.
•
Marc Tucker followed up by attending the NC League of Transportation and Logistics Winter Meeting on February 5th in Raleigh.
•
The SC Timber Producers hosted Rob Moseley for a discussion of using contract carriers from the forest to the mill in Myrtle Beach on February 6-8.
•
Rob Moseley escaped the icy SC Upstate for the warm weather in Miami February 10-12 at the BB&T Capital Markets meeting. Rob took part on a panel discussing issues affecting carriers and brokers in the upcoming environment.
•
SC Trucking Association videotaped comments from Rob Moseley addressing needed tort reform to be presented to the SC Legislature in support of the SCTA agenda. Once again, Rob proves he is more suited to radio.
| Transportation Newsletter | Spring 2015
•
Matt Stone served as a panelist on “The First 48 Hours: Critical Steps to Achieving a Favorable Outcome in a Catastrophic Motor Vehicle Loss” at the Claims & Litigation Management Alliance (CLM) Annual Conference in California in March.
•
Fredric Marcinak made the drive down to Atlanta for the Specialized Carriers & Rigging Association’s Specialized Transportation Seminar on March 3-6 speaking on “Witness Prep to Win.”
•
Matt Stone and Kurt Rozelsky teamed up on the SML Webinar circuit to discuss lessons learned from recent jury trials on March 11. If you would like to listen to the archived version, see www.smithmoorelaw.com/kurtrozelsky-and-matt-stone-hosted-transportation-webinarmarch-11.
•
Matt Stone and Rob Moseley participated in a presentation of the Georgia Motor Trucking Association in Atlanta on March 24. Matt spoke on recent jury verdicts and Rob addressed the upcoming regulatory agenda and offered attendees free legal advise in exchange for fishing trips. Of course, you have to be in the boat with him, so consider at your peril.
•
From Atlanta, Rob Moseley made the trip to Hollywood (no, not that Hollywood – you know how Rob dislikes California) for the Marsh Fleet Solutions captive meeting. Rob spoke on current litigation and business issues facing trucking.
•
From Florida, Rob Moseley made it back to the Lowe’s Motor Speedway near Charlotte for the March 26 NC League Transportation and Logistics meeting. Rob spoke on carrier hiring pitfalls. Marc Tucker joined in the fun.
•
Marc Tucker attended the meeting of the North Carolina Trucking Association Board of Directors in March.
The Road Ahead •
On April 7, the NCTA will sponsor a Regulation and Accident Seminar featuring Rob and Marc. This will be in Raleigh at the North Carolina Trucking Association headquarters. To register, go to www.nctrucking.wildapricot.org/page-959636
•
Rob Moseley will make it back to the Tarheel state for the Truckload Carrier Association’s Safety Meeting in Charlotte on May 4-5. Rob will be speaking on Trucking Technology – interesting topic for Rob who was the last SML attorney to give up his Blackberry.
•
Marc Tucker will be in the cloud on May 12th for the transportation team’s next webinar on cybersecurity issues and the transportation industry. To register, please go to www.smithmoorelaw.com/DataBreachWebinar.
•
Jack Riordan will be hosting the SC Defense Trial Attorneys Association Trial Academy to be held in Greenville on May 20-22. Rob and Kurt will add their two cents as well.
•
Rob Moseley will be ruining people’s lunches in discussing new regulations at the May 21 meeting of the Charleston Motor Carriers Association. To register, go to www. charlestonmotorcarriers.com.
•
Kurt Rozelsky will be hobnobbing with the industry leaders at the Magna Legal Services meeting in Naples May 28-29.
•
Fredric Marcinak will be headed to Arizona for the TLA Annual Conference on May 13-16. He will be speaking on Cargo Theft and co-chairing the Freight Claims Committee.
•
Rob Moseley will be attending the Annual Meeting and the meeting of the Board of Directors of the SC Trucking Association at Hilton Head on June 11-13.
•
The summer meeting of the Conference of Freight Counsel will be in Charleston in June. Kristen Nowacki will be tagging along as Rob and Fredric make a pilgrimage to The Citadel.
•
Matt Stone will be in Omaha for the CLM Transportation Meeting June 18-19.
•
Matt Stone and Rob Moseley will attend the Georgia Motor Trucking Association Annual Meeting at Amelia Island on June 21-24.
•
Rob Moseley will actually make it over the Rockies for the San Diego edition of SMC3’s Connections on June 21. Rob will be presenting the one day contract and freight claims seminar. For more information, see www.smc3connections. com.
•
Rob Moseley and Marc Tucker will be at the NC Transportation and Logistics League Annual Meeting at Myrtle Beach June 25-27.
Transportation Industry Team Adds Rising Star to Charleston Office We are pleased to announce the addition of Bennett Crites to the Transportation Industry Team in our Charleston office. Bennett’s practice focuses in transportation and commercial trucking law, where he is experienced litigating cases from minor injury to wrongful death and catastrophic injury. He also has experience representing taxi companies in automotive accident lawsuits. “Bennett is an experienced trial lawyer and will be a great asset to our already strong litigation group,” said Greg Holland, practice area leader for the firm’s litigation group. “We are excited to welcome him to our team.” Rob says, “Bennett is a great catch for the group, but he needs a haircut.” South Carolina Super Lawyers® has consecutively identified Bennett as a Rising Star® in 2012, 2013 and 2014. He has also earned an AV Distinguished rating by Martindale-Hubbell.
Bennett Crites Bennett is a Charleston native and earned his law degree from the University of South Carolina School of Law and his undergraduate degree in Business Administration from The Citadel. Following law school, he served as a judicial law clerk to the Honorable R. Markley Dennis, Jr. Smith Moore Leatherwood LLP | Attorneys at Law |
5
SERIOUSLY NOW: DOES THE AMERICANS WITH DISABILITIES ACT REALLY REQUIRE MOTOR CARRIERS TO ALLOW ALCOHOLICS TO DRIVE TRUCKS?
Does the Americans with Disabilities Act (ADA) really require motor carriers to allow alcoholics to drive trucks? It probably depends on whether the driver has a “current clinical diagnosis of alcoholism.” 49 C.F.R. § 391.41(b)(4). In our Fall 2014 edition of the Transportation Newsletter, we wrote about a then recent case from the Eleventh Circuit Court of Appeals that held that a trucking company who fired a driver for alcoholism did not violate the ADA. Jarvela v. Crete Carrier Corp., 754 F.3d 1283, 1287 (11th Cir. 2014). More recently, the same court issued a new opinion in the same case after it was reheard, essentially reaching the same result—that only one who is a qualified individual with a disability is protected from discrimination. In the trucking industry, the Department of Transportation Regulations mandate
that a person is not qualified to drive a commercial motor vehicle if he has a “current clinical diagnosis of alcoholism.” Therefore alcoholic truck drivers may not be qualified individuals with disabilities. 49 C.F.R. § 391.41(b)(4). Jarvela v. Crete Carrier Corp., 776 F.3d 822 (11th Cir. 2015). How does one square the Jarvela opinion that was issued January 28, 2015, with a jury verdict from Arkansas against Old Dominion Freight Line just twelve days earlier (www.eeoc.gov/eeoc/newsroom/ release/1-16-15.cfm.)? In this verdict, the jury found in favor of EEOC and awarded a former driver $119,612 in back pay. The driver was fired after he self-reported alcohol abuse, based on an Old Dominion unwritten policy never to allow drivers who have self-reported alcohol abuse to return to a driving position. Part of the
answer is included in this excerpt from the EEOC’s press release: “The EEOC has always maintained that Old Dominion had a right to ensure that its drivers comply with DOT Regulations so as not to endanger the public,” said General Counsel David Lopez. “At the same time, the ADA requires that Old Dominion make an individualized determination as to whether the driver could return to driving and provide a reasonable accommodation of leave to its drivers for them to obtain treatment. To maintain a blanket policy that any driver who self-reports alcohol abuse could never return to driving—with no individualized assessment to determine if the driver could safely be returned to driving—violates the ADA.” To read more about the EEOC ruling in this case visit: www.smithmoorelaw.com/ TNLADAEEOC.
BROKER OR CARRIER? THE DIFFERENCE CAN DETERMINE YOUR LIABILITY In today’s shipping environment of tight margins, driver shortages, and high equipment costs, motor carriers often face capacity limitations, especially during times of peak seasonal volume. In these situations, the temptation is to “subcontract” or “interline” freight to another motor carrier while continuing to be listed as the carrier of record for purposes of the bill of lading and the original shipper. Aside from creating potential exposure for both cargo and personal 6
| Transportation Newsletter | Spring 2015
injury liability for acts of the actual carrier, this practice has now been prohibited by provisions of Map 21 that expressly prohibit brokering without obtaining broker authority or without engaging in true interline practices. 49 U.S.C. § 14916(a). Accordingly, many carriers are obtaining broker authority, either in their own name or in the name of an affiliated company. While this can be a successful strategy, it requires the proper corporate structure enforced during training and
the employee’s diligence in following the proper procedures. Otherwise, the benefits of this strategy may be lost. In the freight claims context, identification as a broker or a carrier is crucial to determining liability. To read more about determining liability visit: www.smithmoorelaw.com/ TNLBrokerCarrier.
COURT REMINDS TRANSPORTATION COMPANIES TO KEEP THOSE CORPORATE FORMALITIES A trial court determined that Inter-Florida Container Transport, Inc. was liable under the Carriage of Goods by Seas Act for the theft of three shipping containers of computer monitors from a storage facility in South Florida. LIG Insurance Co., LTD v. Inter-Florida Container Transport, Inc., 564 Fed Appx. 495 (11th Cir. 2014). The insurer for the consignee of the monitors was not satisfied with the amount of any available cargo insurance and brought additional claims against Leonel Diaz and 10997 Project, Inc. The basis for the claims was that Mr. Diaz and 10997 were alter egos of Inter-Florida.
The court examined the alter ego factors under maritime law: (1) Directors and Officers become corporations; (2) adequate capitalization; (3) one corporation’s use of another corporation’s property and assets as its own; (4) informal inter-corporate loan transactions; (5) overlapping decision-making between corporations; (6) failure to observe formal legal requirements; and (7) “existence of fraud, wrongdoing, or injustice to third parties.” The appellate court found that the trial court was correct in its application of the alter ego theories to Diaz and 10997. The court brought out the fact that
the two companies ignored corporate formalities and held no board meetings. The court also brought out the fact that 10997 had no income, no bank account, and no employees. The leases between the parties were informal and unwritten. Therefore, Diaz and 10997 were found jointly liable for this freight theft. This case should be a warning sign to any transportation entities that are not keeping their separate entities at arms-length and following the required corporate formalities.
SLEEP APNEA: THE TIRELESS DEBATE The Federal Motor Carrier Safety Administration (FMCSA) estimates that three out of ten commercial drivers suffer from Obstructive Sleep Apnea (OSA). It is a condition familiar and critically important to all those in the commercial trucking industry. The safety issues associated with sleep apnea have been widely discussed; however, the debate as to the FMCSA’s role in the health certification of commercial drivers is far from over. First, what is OSA? How is it defined? Medically, the term can be applied to a number of different types of respiratory issues, which have a number of different treatments, making the management of OSA particularly problematic for the motor carrier, medical professional, and the regulators. Requirements Versus Guidelines In January, the FMCSA published a Bulletin to Medical Examiners and Training Organizations Regarding Obstructive Sleep Apnea (the
“Bulletin”) (U. S. Dept. of Transportation, Federal Motor Carrier Administration, National Registry of Certified Medical Examiners, Bulletin to Medical Examiners and Training Organizations Regarding Obstructive Sleep Apnea, 2015). The stated purpose of the Bulletin is to remind medical examiners and trainers on the FMCSA’s National Registry of Certified Medical Examiners of the physical qualifications standards and advisory criteria concerning the respiratory system for commercial drivers, specifically, how the “requirements” apply to drivers who may suffer from OSA. Bulletin at p. 1.
Commercial drivers are required to obtain a Medical Examiner’s Certificate in order to lawfully operate a commercial vehicle. Federal Motor Carrier Safety Regulation § 391.41(b)(5) encompasses OSA and prohibits individuals from receiving the required Medical Examiner’s Certificate if the driver has a medical history or clinical diagnosis of a respiratory dysfunction likely to interfere with their ability to safely operate a commercial motor vehicle. To read more about the sleep apnea ruling visit: www.smithmoorelaw.com/ TNLApnea.
Smith Moore Leatherwood LLP | Attorneys at Law |
7
TRANSPORTATION INDUSTRY TEAM Our Transportation Industry Group has developed a nationally recognized presence in representing both large and small trucking companies, trucking insurers, shippers, and brokers/intermediaries. We serve as a national and regional counsel for several trucking insurers and national counsel for a number of trucking companies with headquarters in the Southeastern United States and beyond. The largest part of the group’s work is related to the defense of catastrophic accidents, including the work of the emergency response team. As part of the array of transportation services provided to firm clients, an emergency response team is standing by to service clients with urgent needs following a catastrophic accident. The team is available any time, and has handled numerous night time and weekend emergencies for our clients. For more information on our Transportation team, please visit www.smithmoorelaw.com/transportation.
GEORGIA | NORTH CAROLINA | SOUTH CAROLINA Smith Moore Leatherwood LLP | Attorneys at Law | www.smithmoorelaw.com
T: (864) 751-7600 F: (864) 751-7800 www.smithmoorelaw.com Attorneys at Law 2 West Washington Street, Suite 1100 Greenville, SC 29601
Smith Moore Leatherwood LLP