In years past, when it came to cargo claims, there were few protections under federal law for shippers that moved their goods under contracts with motor carriers. Now, thanks to a recent U.S. District Court decision, contract shippers will have some of the same protections as those who ship under motor common carriage.

In late March, Judge Joanna Seybert of the Eastern District of New York ruled in M. Fortunoff of Westbury Corp. v. Peerless Insurance Co. that the wording of the Interstate Commerce Commission Termination Act of 1995 (ICCTA) indicates that Congress clearly intended that statutory cargo insurance requirements be applied to both common and contract motor carriers.

The case concerned loss-and-damage claims filed by Fortunoff against Fredrickson Motor Express before Fredrickson ceased operations in January of 1998. When the shipper was unable to recover its losses from the carrier, it sought payment from Peerless Insurance under the BMC-32 Endorsement in the carrier's cargo liability policy. Under federal law, that endorsement must be filed with the Federal Motor Carrier Safety Administration (FMCSA) by any insurance company that issues a cargo liability policy. It holds insurers liable for maximum payouts for losses of $5,000 per vehicle or $10,000 per occurrence, and those payments are not subject to any deductibles or exclusions, according to Fortunoff's lawyer, Raymond A. Selvaggio of Augello, Pezold & Hirschmann. The BMC-32 also allows shippers to recover claims directly from the insurer even if the carrier is bankrupt or no longer in business, he explained in a presentation at the Transportation Consumer Protection Council's annual meeting in Reno, Nev., last month.

The insurer, however, rejected Fortunoff's claim on the grounds that Fredrickson was acting as a contract carrier, and the BMC-32 only applied to motor common carriers. At one time, that was indeed the case. But shippers have long contended that because ICCTA eliminated the distinction between common and contract motor carriers, the BMC-32 has since applied to all motor carriers.

Peerless Insurance disagreed, saying that the FMCSA does not currently require contract carriers to maintain either cargo insurance or the BMC-32 Endorsement. It also noted that ICCTA allows the FMCSA to issue both common carrier and contract carrier permits during a "transition" period.

In her decision, Judge Seybert wrote that it was clear from the deliberate change in wording from "motor common carrier" in the original statute to simply "motor carrier" throughout ICCTA that Congress intended the BMC-32 Endorsement to apply to all motor carriers. She also cited statements from congressional committee discussions to support that interpretation.

The fact that FMCSA may temporarily continue to register motor carriers as either common or contract carriers, she added, has no bearing on the application of insurance and liability requirements.

At press time, it was unknown whether or not Peerless Insurance would appeal the decision. If the decision does stand, said Selvaggio, the FMCSA may have to take some action regarding motor carriers that currently operate only under a contract permit and do not carry cargo liability insurance.

Selvaggio also said he plans to petition the federal agency to issue new regulations clearly acknowledging that for regulatory purposes there is now only a single class of motor carrier.

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