Transport responsibility: breach of five common myths - Insurance Benefits

Transport responsibility: breach of five common myths

tags: Insurance, Transportation

What you don't know about transportation responsibility can cost you a lot of time. Learn the truth from fiction before you present your next load.

Fighting again

The responsibility for transport was simpler to understand. Under the traditional principles of the U.S. Federal Transportation Act, carriers were responsible for shipping up to delivery. But today, with individual contracts negotiated between each charger and carrier, it may not be clear who is responsible for transport accidents such as goods, damage or property injuries. As a result, plaintiffs' lawyers are increasingly escalating the supply chain -- from carrier to broker, and possibly even shipper -- to seek compensation.

In addition, the Federal Motor Vehicle Safety Administration's (FMCSA) Compliance, Safety and Accountability Program and Advanced Safety Measurement System (FMCSA) continue to confuse shippers. Do these security programs affect the potential responsibility of shippers? What actions should you take as a result?

All these developments prompt shippers to pay closer attention to the contract language and the details of the charger and carrier's insurance policies. Learn the details of shipping responsibility not only for lawyers anymore.

The following are seven misconceptions that some shippers have about their legal status. 

Legend #1: "SMS Agency 2010 /Law".

Some shippers believe that the CSA 2010/SMS methodology is the law and, therefore, are required to use it to verify their carriers' safety records.

Evidence of this misunderstanding appears in the work of transport insurance companies. In assessing the applicability of insurance, some companies began to consider whether the shipper included CSA point verification as part of the shipping procurement methodology.

"Checking CSA scores can be the difference between whether or not we will or will not secure risks, especially for high-value goods or special handling requirements," says Robert Optiz, Maritime Director Internal worldwide chubb group of insurance companies, Warren, New Jersey.

But CSA 2010/SMS methodology is not the law, FMCSA has not been approved for use in rule-making, claims a group of transport trade associations represented by attorney Henry Seton, partner in Vienna, Va.Based transport law firm Seton and Husk, LP.

Seton represents the petitioners in ASECTT et al. v. FMCSA, which seeks judicial confirmation that only the Department of Transport and Social Affairs is required to determine the safety of the carrier. Seton says shippers and brokers should rely on the agency's final safety fitness determination for a particular carrier. Under existing laws, shippers and brokers are not required to re-guess the agency's final decision (known as a safety rating) by monitoring SMS ratings. Under congressional laws, the Constitution's trade clause, and the federal precipigated doctrine, federal law trumps state law, Seton asserts.

"Shippers should not have a negligent choice responsibility under state law concepts when they choose a transportation company that the agency has determined is operational on the country's roads," Seton says.

ASECTT et al. came up against FMCSA after the agency published guidelines for shippers, brokers and insurance companies on May 16, 2012, proposing the use of SMS methodology in credit carriers, and that safety ratings are not A reliable standard. ASECTT (Alliance for Safe, Efficient and Competitive Truck Transport) is joined by 19 other plaintiffs named in the suit.

The plaintiffs cite that the agency itself "has already confirmed in the settlement of an earlier case, Nastke et al. v. FMCSA, that unless the sms carrier obtains an unsatisfactory safety rating of 49 CFR Part 385, or ordered by the State Department to stop its operations, is authorized to operate," Seton says.

The petitioners' opening submissions were recently filed in ASECTT et al v FMCSA, and two other groups of logistics industries provided supporting documents.

Meanwhile, FMCSA's actions led to widespread misunderstanding about CSA's 2010 methodology and SMS, Seton notes. Many shippers mistakenly believe that:

The CSA Became law in December 2010.

Shippers are required to use the SMS methodology to adopt carriers to avoid state law's responsibility for negligent selection.

The 100-cent SMS rating is an accurate indicator of carrier safety performance.

Seton says shippers' mistaken belief that they are required to use SMS ratings creates many vetoed liability issues. Among the questions raised were:

How does the charger use SMS methodology and maintain its best defense against neglected selection claims? Federal law trumps the reasons for state law, and the settlement in Nastke v. FMCSA makes it clear that the task The agency - not the shipper's responsibility - is to certify safety.

If the shipper uses SMS methodology in credit carriers, how can the admissibility of any carrier degree be challenged by the plaintiff's bar in a lawsuit?

Because percentage SMS ratings will always find arbitrarily that more than half of the carriers they register exceed the enforcement threshold of one or more, how a charger can use grades without losing capacity and choosing Carrier?

Because carrier percentile ratings change monthly and scores can fluctuate violently - especially for small airlines based on single-paper violations - how a charger can use SMS methodology and establish relationships Stable and long-term with dedicated service providers?

SMS methodology is not the law, and its use is contrary to the best interests of shippers and can only increase - not reduce - the shipper's liability, Seton asserts. Shippers must rely on their transport legal adviser to determine the right position while the logistics community awaits the outcome of ASECTT et al. v. FMCSA.

Myth #2: "Broker/carrier contracts are the standard and will protect me."

While most shippers negotiate contracts with their preferred carriers, many at the extreme only peek into the broker or carrier document, presumably covering them. Or they go from abroad, based on contract clauses that show excess control or violate laws. The contract can also be with a third-party logistics provider (3PL), but technically, there is no such entity in the law called 3PL. The party that buys transportation for you and does not own the equipment is either your agent or broker.

"The Chargers don't really control the deal," notes Oberitz Chubb. "They ask 3PL or broker to arrange the transfer, and they think that this party has its best interests in mind."

But the first interest of any external organization - broker, 3PL, shipping agent, carrier, insurance company - is its own. This transfer contract may include a discount, restrictions and high exclusions.

Another area to be examined is the variations of the bill of lading, such as compensation for loss on the basis of the price of the pound rather than the total value of the sentence, retail or replacement; the courts varied considerably on how they interpret the terms of the contract such as the full actual value of the shipment. This is particularly the case when shipping requirements are unique. Another issue is the use of subcontractors.

Most carriers offer a liability contract that differs from the general or standard liability contract. "Not everything that can happen to goods, such as God's actions, is covered by a legal liability contract," Says Obitz. So any claims will go towards the charger's insurance policy.

In addition, many shippers write contracts without lawyers -- or without transportation lawyers, says Ronald Lippman, a lawyer at Riker Danzig Shearer Highland and Peretti LLC.M, Morristown, N.J.

As a result, important items can be excluded or written in a manner that violates applicable laws. For example, Lippman recently witnessed a California-based Fortune 100 contract that included counter-compensation language that violated California law because that shipper, and possibly his lawyers, misunderstood the complexities of the transportation law. Shippers sometimes believe that one company can handle all the needs of their companies, including transportation issues.

Contracts are not a one-size-fits-all for any carrier, broker or charger. "There's no such thing as a standard item, but there's a standardization of concepts," Lippman says. "My transport contract began in 1995 and has been through 75 times to improve its language and keep pace with legal changes."

Laws such as the Carmack Amendment, which control and limit the liability of ordinary carriers for transit shipments, are already in place to address certain aspects of shipping. But a shipper transporting an exempted commodity - fresh produce for example - needs a specific language about these obligations because Carmack does not cover the goods. Requirements within a vertical market such as foods vary, or depending on the mode of transport. Specific industries must also be accountable to agencies such as the Food and Drug Administration and the Ministry of Agriculture for shipments.

The contracts of the shipper - carrier or shipper - carrier must be negotiated on the specific terms of each charger, and issues such as how to deal with the dispute and the balance of obligations between the parties must be clearly clarified.

"Anyone who ships any size without a contract will have problems with responsibility," Lippman says.

Responsibility, he says, is negotiable.

"Airlines are willing to expand the normal terms of the contract to get the business," Opitz says. "Carriers take a more dangerous approach to securing their cargo because shippers claim responsibility in all cases, not just legal liability."

Shippers are recommended to seek sales opportunities to transfer liability to third parties as soon as possible. For example, instead of being the responsible party from its warehouse to the buyer's warehouse, the shipper is liable only from one warehouse to another.

Legend #3: "I can tell the carrier exactly how to charge my cargo."

Some shippers take the opportunity to push contracts to the limit, which dictates to the carrier how to handle the shipment even after it leaves possession. This opens the door to all kinds of legal complications, including the definition of legal relations between the parties.

"Don't be arrogant, don't be arrogant, don't be arrogant. Don't control the limited details of how the carrier and broker play their roles," urges Joseph Swift, director at Brown & James, a St. Louis-based company based in Mo. transportation.

But not every lawyer agrees, "You have the right to ask airlines to comply with the law, and generally control their business when they're in your workplace," says Liebman of Riker. "It's a big jump from a contract that says the seller must comply with the Federal Wage Act into a contract that says you control the employees of that company."

Another liability concern is to ensure that the truck that will be rolled out is loaded properly. Opitz advises shippers to implement good protocols for safe loading practices, and consider hiring third-party loading surveyors to provide a second opinion on these practices.

Myth #4: "I have insurance, so you don't have to worry."

No one wants to be subject to a lawsuit requiring their insurance company to pay. But many shippers consider their insurance policies to be a plug in the carrier's liability gaps, or believe that the carrier's insurance is comprehensive and will cover the claim in all cases.

The truck's policy package must address liability for shipping, injury and property. Shippers who transport products sometimes do not realize the coverage they need. Sometimes operations management is unaware that the exceptional shipment will fall outside the truck's current insurance coverage. It's important for operations and risk management departments to work together to prevent this, Lippman notes.

Seton says the biggest misconception involving cargo insurance is that requiring an insurance certificate is a sign of coverage. Almost all shipping policies have exceptions, and the best policies that carriers can purchase, at best, will meet their legal liability under the Carmac Amendment.

The charger can ask for more, and may receive it through broadly worded compensation, or the only discretion not to mitigate the damages, but "do not expect the carrier's insurance company to pay the claim, and may The car carrier goes bankrupt in the meantime," seton says.

Insurance conditions must also fit your shipments. "You can take responsibility because you're uninsured or uninsured," Lippman says.

Myth #5: "If anything happens, my broker will cover it."

In July 2012, Congress passed the 21st Century Progress Act (MAP-21), which requires part of this broad highway bill for intermediaries to publish at least one other financial bond or guarantee. About $75,000 - up from $10,000 - starting in mid-to-late 2013. This change is aimed at ensuring that the broker has sufficient funds to pay the carrier for a shipment or any lawsuit resulting from that shipment. This can reduce the chance that the unpaid carrier goes after the charger to pay - although the charger already pays the broker.

Another important element of legislation requires intermediaries and carriers to carry appropriate licences; the transport broker must deal with at least three years of experience before being allowed to open a brokerage firm. These steps should help ensure that shippers do business with legitimate and qualified parties.

But what the action doesn't do is eliminate the shipper's liability in the event of an accident, says Liebman of Riker. That's why it's important to maintain adequate insurance coverage for shipping claims, damages and injuries. It is also important to ensure that brokers and transport companies retain adequate coverage.