Trucking insurance

Published on: July 6, 2011

US agrees to allow Mexican tractor trailers to operate here

While Georgia is a long way from the Mexican border, as a tractor trailer and big rig accident trial lawyer based in Atlanta, I have for several years followed the controversy over allowing Mexican trucking companies to operate in the United States. Concerns about safety rules and practices in Mexican trucking have simmered since 1995.

Today the U.S. and Mexico signed an agreement to allow Mexican tractor trailers and big rigs to operate in the U.S. and suspend retaliatory Mexican tariffs that added 5 to 25 percent to the cost of U.S. exports sold in Mexico.

This is the latest development in the long-running controversy to concerns about the safety standards of Mexican trucking, which long blocked North American Free Trade Agreement (NAFTA) rules permitting Mexican trucks to cross beyond a 25- mile border zone.

The USDOT justifies today’s action by saying that Mexican trucks must comply with all Federal Motor Vehicle Safety Standards, and will have electronic monitoring systems to track hours on the road, and that Mexican tractor trailer truck drivers must take drug tests that are analyzed in the U.S., hand over complete driving records and prove their English-language skills.

A previous cross-border pilot program for trucking certification program in 2009 included only 157 Mexican trucks.

Reactions from interest groups has varied widely:

• The US Chamber of Commerce supports the agreement as “a vital step toward a more efficient U.S.-Mexico border,” according to a statement from COC president Thomas Donohue. Truckers drop trailers at the border before crossing. Older rigs, often called transfers, pick them up to cross and leave them for a long-haul truck waiting on the other side.

• Regarding safety concerns, the Conservative Daily News blog points out that while USDOT will pay for electronic on-board recorder (EOBR) to monitor hours of service of Mexican tractor trailers, an “EOBR cannot determine if the driver of the commercial vehicle is working other than driving, or if this driver is asleep or awake. It will not ‘automatically’ do anything as the driver still must manually enter whether a change of duty status has occurred or not.” It quotes a report issued from the Congressional Research Service in February of 2010 which stated:

“The rationale of eliminating the truck drayage segment at the border, and of NAFTA in general, is to reduce the cost of trade between the two countries, thus raising each nation’s economic welfare. However the cost to federal taxpayers of ensuring Mexican truck safety, estimated by the U.S. DOT to be over $500 million as of March 2008, appears to be disproportionate to the amount of dollars saved thus far by U.S. importers or exporters that have been able to utilize long-haul trucking authority. . . . Any accumulated savings in trucking costs enjoyed by shippers therefore should be weighed against the public cost of funding the safety inspection regime for Mexican long-haul carriers.”

• The American Association for Justice Interstate Trucking Litigation Group, of which I am a board member, urged USDOT to bring up to date liability insurance coverage requirements, which have been unchanged since 1980, prior to implementing the cross-border program. The $750,000 minimum liability coverage for interstate motor carriers adopted in 1980 would be nearly $2,000,000 today if simply adjusted for inflation. USDOT responded:

“Mexico-domiciled motor carriers must establish financial responsibility, as required by 49 CFR part 387, through an insurance carrier licensed in a State in the United States. Based on the terms provided in the required endorsement, FMCSA Form MCS-90, if there is a final judgment against the motor carrier for loss and damages associated with a crash in the United States, the insurer must pay the claim. The financial responsibility claims would involve legal proceedings in the United States and an insurer based here. There is no reason that a Mexico-domiciled motor carrier, insured by a U.S.-based company, should be required to have a greater level of insurance coverage than a U.S.-based motor carrier. Increasing the minimum levels of financial responsibility for all motor carriers is beyond the scope of this notice and would require a rulemaking. In accordance with section 350(a)(1)(B)(iv), FMCSA must verify participating motor carriers’ proof of insurance through a U.S., State-licensed insurer. As a result, participating motor carriers may not self-insure.”

• The Owner-Operator Independent Drivers Association (OOIDA) is bitterly critical of the action, and is challenging it in court in Washington. OOIDA asserts that Mexico has failed to institute regulations and enforcement programs that are even remotely similar to those in the United States, and there would be no relevant corresponding reciprocity for U.S. truckers. According to OOIDA, “This program will jeopardize the livelihoods of tens of thousands of U.S.-based small business truckers and professional truck drivers and undermine the standard of living for the rest of the driver community.”

• Teamsters Union president Jim Hoffa also questioned legality of the program because it grants permanent operating authority to Mexican trucks after 18 months in the “pilot program” without Congressional authorization, and because DOT would use money from the Highway Trust Fund to pay for electronic on-board recorders for Mexican trucks. He said, “opening the border to dangerous trucks at a time of high unemployment and rampant drug violence is a shameful abandonment of the DOT’s duty to protect American citizens from harm and to spend American tax dollars responsibly.”

• Industry groups that export to Mexico, and are impacted by retaliatory Mexican tariffs, support the decision. They include the National Cattlemen’s Beef Association (NCBA) , California grape growers , and Washington State apple growers.

This Georgia truck wreck lawyer may run down to the mall to buy a Rosetta Stone home study course on Spanish.
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Published on: May 12, 2011

Ohio Supreme Court rules that Bluffton University baseball team members in bus crash can reach school’s liability coverage

By Ken Shigley

In my truck and bus accident law practice in Atlanta, one of the more newsworthy cases in which I have participated arose from the crash of the Bluffton Univeristy tour buss in Atlanta in 2007. In predawn darkness, a bus took a confusingly marked exit ramp and crashed off a bridge, killing the bus driver, Jerome Niemeyer, his wife, and five Bluffton University baseball team members and injuring other passengers. I have been local counsel for ten of the team members.

After the Georgia DOT and the bus company’s insurer paid their coverage limits, litigation was initiated in Ohio seeking to have the university’s liability insurance apply to the bus company and driver.

Recently, teh Ohio Supreme Court ruled that a driver of a rented bus is covered under a university’s auto insurance policy.

The representative parties for our team in Ohio argued that Niemeyer was an insured because he drove a bus, with Bluffton’s permission, that Bluffton hired. The university’s insurers each filed a declaratory judgment action, arguing that the university did not hire but rather contracted for transportation services, making Niemeyer an independent contractor and unforeseen third party they did not intend to cover.

In a 5-2 decision, the Ohio Supreme Court sided with the plaintiffs, reversing the lower court’s ruling. Considering the plain meaning of “hire” and “permission,” the court held that Niemeyer was an insured.

Justice Paul Pfeifer wrote for the majority, “We are not persuaded by the contention that the driver of a bus that Bluffton rented from a company in the business of renting buses is an unforeseen third party, when a clause in the insurance policy covers ‘anyone else’ driving a hired auto.” He added, “Whether the insurance company intended the clause to apply is immaterial because the language of the policy supports a conclusion that Niemeyer is an insured.”

Justice Evelyn Lundberg Stratton dissented, writing that,. “Today’s opinion unreasonably extends coverage to a third party and effectively opens the door for similar claims under other scenarios because the omnibus clause is standard in many insurance policies.”

This opens the door for additional compensation for injured members of the baseball team.
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Published on: March 18, 2009

How insurance adjusters lull you into complacency in order to take advantage of you

By Ken Shigley

When you or a loved one have been badly hurt in a catastrophic trucking accident, you may expect someone from the trucking company or its insurer to try to lull you into complacency. The objective is to avoid paying the value of the case, which they recognize is substantial. The tactics may remind you of the old joke, “I’m from the government and I’m here to help you.” They are from the insurance company and are “here to help you.”

The standard tactics, which my friend Morgan Adams in Chattanooga discussed in a recent blog post, include some variation of the following:

1. Pretending to be your friend. At trucking defense seminars, claims adjusters talk about how they try to become friends with a family by apologizing and offering to buy them a car and a house in exchange for giving up their claims. The adjusters take every opportunity to demonize any lawyers that the family might hire to represent them. At all costs they want to prevent the family from talking to an experienced trucking lawyer who would know how to investigate the case, demand that the company preserve paper and electronic records, and discovery trucking company’s violations of laws that contributed to causing the crash. In one recent case we handled, the adjuster started out talking to the family about paying their deductibles and copays on medical expense, and replacing their car, while at the same time trying to dispose of the physical evidence. But when the family hired me, and I deployed a rapid response to preserve evidence and make appropriate demands, the company soon paid its million dollar policy limit. Insurance adjusters know that revealing the truth could increase the value of the case significantly, and will do whatever they can to prevent that.

2. The misuse of annuities. Structured settlement annuities are a useful tool in settling cases because all the lifetime payments are tax-free and the burden of managing investments is lifted. However, in considering structured settlements, it is essential to focus first on what the defendant or its insurer is paying. Insurance companies will often show an unrepresented plaintiff that they will pay your family a million dollars over the next thirty years, while failing to mention that the annuity only costs $100,000 (or whatever) while the case has a present fair value in excess of a million dollars. In addition, they will use one of their own affiliated companies and brokers to issue the annuity, just switching the money from one hand to another. Thus, they play a shell game and get by with paying only a fraction of what the case is worth.

3. Inflation. No one knows exactly what future inflation will be, but we know that historically there is likely to be inflation. The adjusters will not seriously discuss with you how inflation will affect the value of funds paid.

4. Future medical expense. They exclude consideration of future medical expenses that eat into money paid to the family.They often fail to inform you of the impact of reimbursement claims by your health insurer, and do not protect your interests against such claims.

5. Future income loss. They exclude consideration of the full loss of income of the victim. People who have had major injuries often can’t work as much or as long as they would have, even if they initially return to work at the same job and at the same rate of pay.

6. Non-economic loss. They treat the non-economic losses of the family as having little or no value. The loss of quality of life, or the loss of a parent, is a matter of immense value which must be accounted for in a fair settlement of a case.

Remember the insurance adjuster’s job is to try to minimize payments on claims. No matter how friendly they may act, they are not there to help you.
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Published on: March 11, 2009

Insurance coverage for truck drivers hurt or killed by other drivers

By Ken Shigley

Trucking is among the more dangerous occupations. A significant percentage of my work as a trucking safety trial attorney in Atlanta is representation of injured truck drivers and their survivors when a crash is caused not by the trucker, but by another motorist.

Many lawyers in such situations may overlook the fact that many trucking insurance policies include uninsured motorist (UM) insurance coverage equal to the liability coverage. It’s not always there, but it’s definitely worth checking.

So if a truck driver is hurt or killed due to negligence of a motorist who has only $25,000 coverage, the truck’s UM coverage is available for damages above $25,000 up to the UM limits of the policy on the truck.

This morning I received an insurance policy in a case where I represent the folks who were hit by an 18 wheeler. The policy includes $1,000,000 for both liability and UM coverage. If the trucker had been killed due to negligence of the other driver, rather than the other way around, the truck driver’s family could collected on the $1,000,000 UM coverage.
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Published on: March 10, 2009

Time to adjust motor carrier insurance requirements for 29 years of inflation

By Ken Shigley

Handling truck accident injury and death cases in Georgia, I have often seen how inadequate the levels of insurance coverage can be for the havoc created by large truck crashes. Now there are efforts to catch up the levels of coverage for 29 years of inflation.

The current levels of insurance coverage required for interstate motor carriers were set in 1980.

The Motor Carrier Act of 1980 set minimum insurance standards for interstate trucks at $750,000 for trucks hauling general freight up to $5 million for trucks carrying hazardous materials.

Adjusted to inflation according to the Consumer Price Index:

• $750,000 in 1980 equals $1,921,811in 2009, and is worth only $292,693 today.

• $1 million in 1980 equals $2,562,415 in 2009, and is worth only $390,257 today.

• $5 million in 1980 equals $12,812,075 in 2009, and is worth only $2,491,933 today.

My friend Steve Gursten in Michigan has done a good job summarizing some horror stories of the inadequacy of the 1980 levels of coverage required for trucking companies on michiganautolaw.com.
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Published on: September 16, 2008

Impact of the Wall Street crisis on trucking and insurance

By Ken Shigley

As a truck accident trial lawyer in Atlanta, I’m puzzling over how the falling dominoes in the current crisis on Wall Street will impact the trucking and insurance industries.

High fuel prices, hurricanes, dependence on foreign oil, the subprime mortgage mess, the economic rise of China and India, the cost of war in Iraq and Afghanistan, and deferred spending on American infrastructure combine to affect both trucking and insurance.

Oil prices have risen due in large part to the increased world demand accompanying the economic development of China and India, while we are dependent upon Arabs, Russians, etc. for our supply. On the other hand, oil prices are moderated by any economic slowdown that decreases demand.

Hurricanes, which may be increasing in intensity due to global warming, temporarily impact fuel prices as they hamper production, refinery and port capacity on the Gulf coast. Payment of hurricane losses impacts the insurance industry that has already been impacted by the financial mess.

In trucking, high fuel costs have both direct and indirect effects. The direct impact of high fuel prices on truckers is obvious. Moreover, I have heard from truckers that motor carriers collect fuel surcharges and too often fail to pass it on to independent owner operators who actually purchase the fuel. The indirect impact is on demand, as shippers shift more long-haul business from trucks to rail. Any slowdown in the economy further depresses demand for shipping.

As more shipping shifts from long-haul trucks to multimodal freight logistics systems involving both long-haul rail and short-haul trucking, we are likely to see more freight containers bolted to poorly maintained trailer chassis. We will see a shift in the technical, regulatory and insurance issues involved in trucking accidents that result. Unfortunately, some judges who have poor understanding of trucking regulations and case law will not comprehend what is going on and render simplistic judgments with devastating impacts on innocent victims. The challenge for lawyers will be to ferret out the details of business relationships in order to overcome the multiple layers of defenses.

Under economic pressure, we can expect many trucking companies to cut corners on all aspects of safety. Those companies that carry more insurance than the law requires will be tempted to bet the company that, despite compromises on safety, they won’t face catastrophic injury claims.

There is already an ongoing shakeout in the trucking industry. That will continue. I keep hearing reports of owner operators just walking away from rigs they can’t pay for any more Some of those used trucks will wind up being exported to other countries. I expect we will see a trend toward reduction of trucking industry capacity and consolidation in the trucking industry.

At the same time, the financial crisis that began with the meltdown in subprime mortgage-backed securities has reached beyond investment banking to the insurance giant AIG. Laying aside any feelings of schadenfreude (joy about another’s misfortune) due to the arrogant corporate culture of AIG under the leadership of former CEO Hank Greenberg, we have to recognize the prominent role of AIG in the insurance industry. As the implications of its downfall ripple through the insurance industry, I expect to share the pain.

While AIG is the teetering giant in the news today, we will soon find that the impact of the financial crisis is widespread in the insurance industry, affecting both the insurance companies that are familiar to the public and the reinsurers that insure the insurance companies. If reinsurers begin to fail, the shock waves will reverberate throughout the insurance industry.

The insurance industry has a long history of blaming injury victims and trial lawyers for its own investment losses. It seems that every financial crisis affecting insurers’ investments is soon followed by a new round of premium increases. Unwilling to accept responsibility for investment losses, insurers blame the little guys and campaign for a new round of “tort reform.”

Due to the financial meltdown related to securitization of subprime mortgages, we will likely see increasing insurance premiums for everyone, including truckers. Many truckers who are already struggling will be put out of business by increases in fuel and insurance costs unrelated to anything they did wrong.

As the truckers cut costs, safety management will be one of the first things cut. The end result will be that more people will be killed or injured. Lawyers like me will represent the victims. Insurance and trucking companies will fight even harder to avoid paying claims. Stubborn refusals to pay legitimate claims will result in more trials of cases they should settle, and more large jury verdicts.

In this environment more than ever, families that are devastated when trucking companies operate in an unsafe manner need to understand that the insurance companies send “rapid response” teams to scenes of serious accidents, and will try to lull them into complacency while crucial evidence is “lost” or destroyed. Time is of the essence as it is essential to take early action to preserve evidence. We are prepared to fight the good fight against trucking and companies that are determined to avoid and delay payment of legitimate claims.
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Published on: June 20, 2008

Trucking accident victims protected by MCS-90 endorsement on truckers’ insurance polcies

By Ken Shigley

As a lawyer handling both sides of injury and death cases for decades, I can’t count the times I have searched for sufficient insurance coverage to cover a client’s loss. In trucking, there is at least an endorsement on the trucking company’s insurance policy that protects the public, even though the insurer may have a right to sue its insured trucking company to get the money back.

49 C.F.R. § 387.7(d) permits a motor carrier to meet its financial responsibility in one of three ways: (1) obtaining liability insurance, including an MCS-90 endorsement; (2) obtaining a surety bond; or (3) obtaining written authorization from the Federal Motor Carrier Safety Administration to self-insure. When a motor carrier opts not to use an insurance policy to meet its financial responsibility requirements, then the regulations do not require the carrier to maintain a minimum of $750,000 in insurance.

In practice, we see policy limits of $1,000,000 more often than $750,000.

The MCS-90 endorsement ensures that a motor carrier has independent financial responsibility to pay for losses sustained by the general public arising out of its operations. The endorsement is designed to protect the public, not the policyholder; the obligation the endorsement creates runs to the public, not to the insured. It seeks to ensure that ultimate responsibility lies with the insured trucking company.

MCS-90 does not provide insurance coverage per se. Rather, the endorsement creates a suretyship and carries with it a right to reimbursement.

MCS-90 endorsement of tractor-trailer liability policy requires the insurer to cover any loss under the policy, irrespective of the amount of the policy’s deductible.

MCS-90 endorsement does not create a duty to defend claims which are not covered by the policy but only by the endorsement, such as a vehicle that was not listed. Thus, a trucking company that violated terms of the policy needs to defend itself since the insurance company may be able to sit back until a judgment is entered, pay under the MCS-90 endorsement, and then sue the trucking company to get its money back.
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