Providers of transportation, including freight forwarders, non-vessel-operating common carriers, motor carriers, property brokers, logistics companies, and ocean carriers face a myriad of challenges as they work to provide efficient transportation services in a very competitive economic environment. Customers demand lower freight rates, on-time deliveries, damage-free cargos, and other add-on services. A driver shortage looms with an aging workforce. Service pressure requires investment and new technology, which is necessary to stay competitive but is also expensive. States and the federal government add their own regulatory pressures. Amidst all of these challenges, there are many legal issues as well.
Those “hot” issues are as follows:
1. Liability Insurance and Contractual Clauses
These are not new issues, but remain a continuing challenge. It is common practice for shippers, freight forwarders, and logistics companies to require motor carriers to provide liability insurance coverage for both cargo and personal injury risks. Such requirements are usually paired with contractual indemnity provisions. Doing due diligence to confirm that insurance is actually in place, as described in a certificate of insurance, is a best practice that is not always followed, leading to issues of coverage in the event of a casualty. Knowledge of the scope of coverage is also not always complete, which could lead to no coverage for certain types of losses and liabilities. Indemnity provisions that are poorly written or are not reciprocal in a contractual chain also continue to pose problems.
What constitutes “damages” under the Carmack Amendment when a shipment involves food products coming within the purview of the new statutory Food Safety Act requirements has been a particular concern, with some recent cases holding that the mere fear of the possibility of contamination may be a sufficient measure of damages under the Carmack Amendment, even in the absence of any physical damage. Thus, shipments exposed to odors delivered in unsealed trailers or with some disruption in packaging may be rejected and found to be damaged, even without any actual proof of physical damages. Defending against such claims is becoming increasingly problematic.
3. Personal Jurisdiction
Establishing the requisite “minimum contacts” to establish personal jurisdiction over a transportation provider must be more closely scrutinized given the way in which parties contract for the shipment of goods, especially in the interstate shipment of cargo.
4. Security Issues
Security has taken on a whole new dimension in addition to the physical protection of cargo because of the commercial and legal risks inherent in the electronic/Internet contracting for transportation services, as well as the transmission of sensitive and proprietary data by the same means. The need for due diligence in selecting the providers, the security practices of those providers, the contracting and handling of information, and managing the supply chain risks have become of paramount importance. Quantifying the nature of potential risks, implementing risk management practices to deal with them, and arranging for insurance when possible to minimize the impacts of the risks remains a challenge that only recently has been fully recognized.
The ongoing attempts to implement safety protocols by the FMCSA continue to be hotly contested, especially with the change of administrations in Washington and the requirement that the Department of Transportation do an overall review of the regulatory burden of those companies within its jurisdiction. The use or nonuse of CSA scores by plaintiffs in personal injury cases to support a claim for liability based on negligent hiring continues to be the source of much confusion. A negative CSA score can be very problematic to a motor carrier before a jury where the perception of motor carriers and their drivers may not be favorable.
6. Ocean Carriers
Ocean carriers continue to feel pressure to use clean diesel fuel to minimize air pollution, control the discharge of their ballast water to prevent the introduction of invasive species into domestic waters, implement new safety practices required by the United States Coast Guard, and, of course, be diligent in matters of security.
All of these “hot” issues will continue to be challenges for the providers of transportation and the source of new law as the issues are addressed by the courts.
Dennis Minichello is a shareholder in Marwedel, Minichello & Reeb, P.C., and practices in the area of transportation law, dealing with contractual, commercial, and insurance issues, as well as defending transportation clients in casualty litigation before state and federal courts.