Logistics and the Law: Double Trouble (page 2)
-- Logistics Management, 2/1/2006
Page 2 of 3 -- By making insurers liable for damages and attorneys' fees, the proposed legislation would remove the cost factor that discourages shippers from litigating small claims, while also relieving the federal government of the cost of enforcing this regulation.
In addition, the FTCA argued that the FMCSA needs to promulgate regulations to modify insurers' Certificates of Insurance by adding the exclusionsin the policies, which currently are not shown. Without knowledge of the exclusions, holders of Certificates of Insurance don't know whether or not their freight would be covered for the most frequent causes of transit losses.
The FTCA further requested that Certificates of Insurance be amended to make insurers legally liable for failing to notify certificate holders of any modification to or cancellation of coverage. The present form merely states that the insurer will "endeavor" to notify the holder, but that it will have no liability if it should fail to do so.
A second action taken by the DOT and FMCSA that is adverse to the shipping public occurred when the agencies surreptitiously had a change in the DOT Secretary's authority over brokers and freight forwarders inserted into SAFETEA-LU, the highway funding billsigned August 20, 2005. The change consisted of substituting the word "may" for "shall" in the statute that delegates to the Secretary authority to regulate these intermediaries.
There is no consensus as to whether the Secretary must initiate a rulemaking to determine whether continued regulation is needed to protect the public, or whether this change has been accomplished effective August 20, 2005. In either event, the elimination of regulation of brokers and freight forwarders could have a devastating effect on the shipping community and could set back the advances made by the intermediary industry since 1980, when entry controls were relaxed. Continued regulation will help to rid the industry of dishonest, unstable entities, while eliminating regulation will attract more dishonest operators.
As if shippers, brokers, and third-party logistics companies (3PLs) did not have enough problems with truck and driver shortages today, a federal district court in Maryland has compounded these and other problems inherent in hiring truckers. The court has refused to dismiss a Motion for Summary Judgment against a broker/3PL, sending the case to a jury to determine whether or not the broker was negligent in hiring the trucker that caused an accident that seriously injured two young men.
The crux of the court's decision was that "… an employer may be held liable for negligence in selecting, instructing, or supervising … [an independent] contractor." The court ruled that although the broker/3PL was not the carrier under federal law, "its self-proclaimed status as a 'third-party logistics company' providing 'one point of contact' service to its shipper clients is sufficient under Maryland law to require it to use reasonable care in selecting the trucker whom it maintains in its stable of carriers."
This decision will be used by plaintiffs to attempt to hold any entity that hires truckers responsible for any damages, injuries, or loss of life resulting from the truckers' operations. The question now is, what constitutes "reasonable care" when selecting a trucker in today's business environment?
The court's standard for selecting carriers, in this writer's opinion, is completely unrealistic and unattainable. That standard included " … the subsidiary duties (1) to check the safety statistics and evaluations of the carriers with whom it contracts, available on the SafeStat database maintained by FMCSA, and (2) to maintain internal records of the persons with whom it contracts to assure that they are not manipulating their business practices in order to avoid unsatisfactory SafeStat ratings." Continued...
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