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Presenting a live 90-minute webinar with interactive Q&A

Trucking Accident Cases and Insurance

Coverage Complexities: Guidance for

Personal Injury Counsel Minimum Insurance Requirements, Applicable Coverages, Impact of Written Lease Agreements and More

Today’s faculty features:

1pm Eastern | 12pm Central | 11am Mountain | 10am Pacific

WEDNESDAY, JULY 12, 2017

Christine Anto, Partner, SmithAmundsen, Chicago

Lew R.C. Bricker, Partner, SmithAmundsen, Chicago

Peter Kestner, Attorney, McEwen & Kestner, Inver Grove Heights, Minn.

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Trucking Accident Cases and Insurance Coverage Complexities: Guidance for Personal Injury Counsel

Lew Bricker Christine Anto Pete Kestner SmithAmundsen LLC SmithAmundsen LLC McEwen & Kestner Law Firm Chicago, IL Chicago, IL Inver Grove Heights, MN lbricker@salawus.com canto@salawus.com pkestner@mcewenlaw.com

July 12, 2017

Overview

• Every large commercial vehicle accident is more than how the accident occurred and an injury.

• Issues include:

• Entities involved

• Contracts

• Insurance

• Case Study

6

Accident – Case Study

• Shipper contacts Broker to broker load of tablets.

• Broker selects Motor Carrier and consults with Shipper.

• Shippers gives specific directions.

• Shipper leases trailer.

• Shipper provides specific directions.

• Broker enforces directions.

• Carrier places load with 3rd Party Contract Motor Carrier.

• 3rd Party Carrier has Independent Contractor driver.

7

Accident Aftermath – Brain Injury

• Coverages in place:

• 3rd Party Motor Carrier has $1M

• Motor Carrier has $5M SIR and excess

• Broker has $1M and excess

• Shipper has $10M and excess

• IC has $750K

• Lessor has $3M

• Indemnity and additional insurance language:

• Broker/Shipper

• Broker/Carrier

• Carrier/3rd Party Carrier

• Trailer lessor/Shipper

8

Minimum Financial Responsibility for Transporting Property

49 U.S. Code § 31139

(b) GENERAL REQUIREMENT AND

MINIMUM AMOUNT.

(2) The level of financial responsibility

established under paragraph (1) of

this subsection shall be at least

$750,000

9

Triggering the Minimums

49 CFR 387

Gross Vehicle Weight Rating

>10,000 lbs

10

Exemptions

49 USC 13502 Intrastate commerce ̶ §13504

Private carriers ̶ §13505

Miscellaneous ̶ §13506

Farmers

Exempt commodity

11

MCS-90 Endorsement

12

MCS-90 (Exclusions)

13

MCS-90 (No Coverage Limitations)

14

MCS-90 (Reimbursement Provisions)

15

MCS-90 (Direct Action)

16

Intrastate Commerce – TEXAS (43 TAC §218.16(a)

All Others

Private or for-hire

motor carriers with

a gross weight,

registered weight

or gross weight

rating in excess of

26,000 pounds

$500,000

17

Form E

18

How to Meet the Minimums

ow to Meet the Minimums

19

1. Admitted insurer

20

2. Self-insured program

21

3. Captive Insurer/Risk Retention Groups

22

Coverage Forms

erage Forms

23

BACKGROUND

•Truckers Coverage Form

• Introduced in 1970’s

• Contemplates for-hire motor carriers operating pursuant to rights granted by a public authority

•Motor Carrier Coverage Form

• Introduced in 1993 primarily in response to deregulation of transportation industry

• Deregulation permitted motor carriers to engage in leasing arrangements; wherein, the parties could draw hold harmless agreements assigning or accepting liability for injury or damage

• Motor Carrier Coverage Form was designed to reflect the policyholder’s responsibilities under such hold harmless agreements

June 1, 2010 – ISO Announced it Would Withdraw the Truckers Coverage Form

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SIGNIFICANT DIFFERENCES BETWEEN POLICY FORMS

Who Is An Insured

• Permissive users

• Owners/lessors of hired autos – owner/operators

Priority of Coverage (Other Insurance Condition)

• Primary v. Excess

Biggest Difference:

Dependence on Terms of Written Lease Agreements

25

Motor Carrier Coverage Form

61 Any “auto”

67 Specifically described

“auto”

68 Hired “autos” only

71 Non-owned “autos” only

26

Insuring Agreement

SECTION II – LIABILITY COVERAGE

A. Coverage

We will pay all sums an “insured” legally

must pay as damages because of “bodily

injury” or “property damage” to which this

insurance applies, caused by an

“accident” and resulting from the

ownership, maintenance or use of a

covered “auto.”

27

Who is an Insured?

28

Who is an Insured?

29

Who is an Insured?

30

Who is an Insured?

31

Who is an Insured?

32

OWNERS/LESSORS QUALIFY AS INSUREDS

Covers the owner, employee or driver of the leased power unit ONLY IF:

1.The power unit is leased from the owner under a written agreement;

2.The lease does NOT require the owner to hold the Named Insured harmless; and

3.Is being used in the Named Insured’s business of for-hire trucking.

33

OTHER INSURANCE – PRIMARY AND

EXCESS LIABILITY PROVISIONS

HIRED/BORROWED FROM NAMED INSURED:

Primary if written agreement between named insured (lessor) and other motor carrier (lessee) DOES require the Named Insured to hold the lessee harmless

Excess if written agreement does NOT require the Named Insured to hold the lessee harmless

HIRED/BORROWED TO NAMED INSURED:

Primary if written agreement between other motor carrier (lessor) and Named Insured (lessee) does NOT require the lessor to hold the Named Insured harmless

Excess if written agreement DOES require the lessor to hold the Named Insured harmless

34

PRACTICAL CONSIDERATIONS OF MOTOR CARRIER FORM

• Motor Carrier Policy Will be Excess where Lease Agreements require Owners/Operators to hold Motor Carrier harmless

• O/O policy to be primary for both in theory

• Effect of Anti-Indemnity Statutes

• Owner/Operators May Not Be Covered Under Motor Carrier’s Policy

• Does O/O have appropriate primary coverage?

• Indemnification obligation

• Defense cooperation issues

• O/O and its insurer may attempt to push liability onto Motor Carrier

• O/O may concede liability—agreed judgment

• Could alienate O/O’s—may lose good drivers

35

Some Issues that Arise (MANY more!)

Tender Issues

Conflicts

Communication

Priority of Coverage – SIRs, Exhaustion

36

Tender Issues Early Bird Catches… the Cash!

Early assessment of loss Issue identification Liability, damages and coverage Driver v. motor carrier

Early review of contracts for risk transfer opportunities Insurance, Contractual Indemnity, UIIA, etc.

Notify/tender other parties & parties’ insurers immediately

Don’t forget about excess There’s more than defense…

Post-Tender Recovery

37

Conflicts

Defense Counsel

• Who do you represent?

• Who do you report to? Copy?

Client

• Who is kept in the loop?

• Can you tell everyone everything?

• Setting up for settlement

Insurer

• Whose best interest?

• Named insured(s) v. additional insured(s)

• Multi-Claimant Issues

Conflicts with MC &

Drivers

Split Defense

Files

Split Insurance

Files – Multiple

Claim Reps

Direction & Control of Defense

Sharing Information with Excess

38

Managing Communications

Privilege Issues

Separate communications?

Sizeable deductibles/SIRs

Coordination and Control of Defense

Requiring approved counsel

Dictating strategy

Multiple Claimants & Insureds

Same insurer for multiple parties

39

MCS-90

History

• Motor Carrier Act of 1980

• Requires proof of minimum financial responsibility for interstate transportation with a gross vehicle weight rating of 10,000 or more pounds:

• For-hire motor carriers transporting nonhazardous property = $750,000

• For-hire and private motor carriers of hazardous substances = $1,000,000

• For-hire and private motor carriers operating portable tanks, cargo or hopper-type vehicles with capacities in excess of 3,500 gallons = $5,000,000.

• Financial responsibility satisfied by insurance policies (MCS-90), surety bonds (MCS-82), or self-insurance

40

MCS-90

• Most common way to meet financial requirements

• Intended as “Safety Net”

• Repeatedly misunderstood and misinterpreted by Courts

• Common MCS-90 Problems:

• Do policy terms and conditions apply?

• Who is the “Insured”?

• Is a judgment against the “Insured” necessary?

• Must the “insured” be liable for accident?

• How does a MCS-90 apply in conjunction with other insurance?

• The insurer’s right to reimbursement from whom?

• No duty to defend, but who should control defense?

41

MCS-90

• Liability has been expanded by Courts solely because of MCS-90

• Case Examples:

• MCS-90 liability expanded to permissive user of a non-scheduled auto, who would not otherwise qualify as an “insured” under the insurance policy. John Deere Ins. Co. v. Nueva, 229 F.3d 853 (9th Cir. 2000).

• Liability under a MCS-90 endorsement was allowed from a second insurance company that did not otherwise provide coverage even though recovery from another insurance company exceeded the federally mandated minimums. Lynch v. Yob, 768 N.E.2d 1158 (Ohio 2002).

42

Trends In Insurance Coverage

High SIRs & Deductibles Often controlled by policy language – AI issues, etc. Exhaustion Issues

Fronting Agreements Who controls?

Mixed Programs Combination self-insured and policies

Excess Layer Retentions Corridor Programs

Risk Retention Pools Often don’t know in play

43