Post on 02-Mar-2022
Safety Regulations and Paradigm Shifts
by Henry E. Seaton, Esq. Seaton & Husk, L.P.
Transportation and Logistics Council
41st Annual Conference March 23-25, 2015
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30 years ago, deregulation:
• Created increased truckload competition and supply; and
• Initiated “procurement law” as a reaction to “the filed rate
doctrine” fiasco.
• New safety regulations 30 years later will irrevocably
change shipper/broker/carrier relations and the use of
shipper dictated terms in procurement contracts.
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1. Sleep Apnea
• STOP-BANG (Snoring, Tiredness during daytime, Observed apnea, high blood Pressure, Body mass index, Age, Neck circumference, Gender)
• Average age of drivers is 50
• Early retirement of road warriors
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2. Insurance ANPRM:
• Proponents advocate as much as $9,000,000 to $10,000,000 insurance minimum
• Insurance market has no appetite
• Would raise settlement value of all suits
• Giving competitive advantage to only largest carriers
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3. Driver Training Reg-Neg:
• Driver training school and safety advocates want CDL training requirement
• Would substantially raise entry barrier requiring new entrant scholarship or contracts with future employer requiring repayment
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4. Hours of Service Requirements
• Circadian rhythms and nighttime driving
• 34 hour restart and new study
• Reduces productivity/frustrates owner-operator model and 1 truck, 1 driver
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5. FDA Rules
• All parties agree increase cost of transporting perishable foodstuffs/cargo claims
• Increased costs must be passed on to shipper and ultimate consumer
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6. URS – Unified Registration System
• 40 page application will frustrate new applicants.
• Required evidence of insurance and agents for all (private and exempt).
• System has been outsourced and will implode.
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7. Agency has Sought Authority over Shippers and Brokers
• Requiring or permitting will stifle delivery demands “beyond reasonable” dispatch.
• Prepare to pay detention and to accommodate carrier unloading upon arrival.
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8. CSA 2010 / SMS Methodology
• “Liability runs up the supply chain” • Shippers and brokers duped into becoming willing “stakeholders” • Failure of the industry to timely examine SMS methodology
• Warmed over SafeStat • Enforcement anomalies (5 states produce 45% of unsafe driving) • Peer group creep • No correlation to safety • Insufficient data to measure 90% of carriers • Cannot determine crash preventability • Profiling of non-fleet trucks / ISSP
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Crash Ratios and the Law of Large Numbers • 10 truck operator involved in 2 non-preventable accidents is over 1.6
million crashes per million threshold.
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0 20 40 60 80 100
Acci
dent
s / M
illio
n M
iles
Power Units
Carriers with 3 Alerts
49% of small carriers with 3 had no accidents in past 2 years. Proves volatility point, the larger the size, the less fluctuation.
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Rigged to Fail
• Law of large numbers / insufficient data
• 90% of carriers cannot be measured (GAO)
• Agency cannot determine crash preventatiliby (3/4th of crashes are not carriers fault)
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• Now all stakeholders recognize methodology is fatally flawed, but:
• Some seek competitive advantage; and
• Shippers asleep at the wheel
• No recognition it is the Agency’s job to certify safety
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Legislation and Congressional Oversight
• Proposed in 2 bills last Session.
• Will be reintroduced.
• What is needed is a simple affirmation of preemption of state laws / it is the FMCSA’s job.
• No second guessing required.
• State law causes of action up the supply chain trumped under §31144.
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Double Brokerage and MAP-21
• Increase in bond to $75,000 may have helped but is no remedy. • Chain of custody issues and double payment liability is largely
shipper’s fault:
• Don’t confirm retained carrier actually picks up shipment at point of origin and delivers at destination
• Do not require broker to maintain constructive trust as required by regs
• Ostrich like approach is not winsome
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Shifting Paradigm Resulting from Restricted Supply
• Carriers will no longer sign “take it or leave it” procurement contracts.
• The “just sign it, everybody does” argument will not work.
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How Aggressive Procurement Contracts are Counterproductive for Carriers and Brokers • Vicarious liability
• Shippers insist broker accept carrier duties
• Shipper places on broker the duty to “ensure”:
• Driver is qualified • Equipment is in good working condition • Hours of service are complied with; and • Worker’s compensation benefits are paid, etc.
• This type of language makes the broker vicariously liable under variety of
state law theories (e.g.): • In control of carrier • Joint venture with carrier • In a contractor/subcontractor relationship with carrier • Assumes non-delegable duty as “de facto” carrier
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Simple Requirement that broker is solely responsible for carrier selection and
indemnity is sufficient.
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Use of SMS Methodology
• Shipper requires that carrier or broker (when selecting carrier) use arbitrary SMS threshold higher than safety fitness standard imposed by FMCSA
• Shipper in effect has admitted state law credentialing obligation
• Opens the door for plaintiff’s bar (e.g., watermelons and bricks)
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Cargo Claims in Excess of Carmack • Broken seals
• Reject it, crush it and dump it
• Shippers insist on sole discretion with respect to salvage
• Shipments rejected for broken seals are dumped without inspection
• Shipper fails to recognize carrier’s insurer will not pay claim!!
• Shipper and broker attempt to enforce by offset liability which exceeds Carmack
• Creates spiral of death for small carrier
• Need for joint inspection and collaborative effort to deal with issue in context of FDA rules 23
Unilateral Offset
• Driven by defective cargo insurance
• Yet leads to unadjusted claims / no insurance settlement
• Carriers cannot accept
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Indemnity and “Buy Me Insurance”
• Shipper insists on broadly worded indemnity without reference to breach or negligence by carrier including for shippers own negligence.
• Ignore affect of “anti-indemnity statutes” and need for evenhanded bilateral indemnification.
• Risk transfer device – broker cannot promise shipper everything and expect to be held harmless by “poor man’s indemnity” from small carrier.
• Broker unlike carrier is not beneficiary of state anti-indemnity laws.
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Freight Payment
• Shippers selecting a 3PL must recognize that 3PL is its agent.
• Protracted payment terms in excess of 30 days without interest and
no shipper recourse is unacceptable to carriers.
• Broker is not a bank and should not be required to finance the float or
to accept surety obligation to carriers if shipper does not pay.
• Outsourcing without accountability is frivolous.
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Conclusion • FMCSA has no appetite to encourage or protect the shipping community.
• It abandoned the simple cargo insurance requirement years ago.
• Views shippers and brokers as a source of recovery for plaintiff’s bar.
• Procurement contracts designed for “general vendors” by corporate counsel:
• Will not withstand carrier scrutiny when truckload supply and demand is balanced.
• Shippers and brokers need to be proactive in insisting on enforcement of federal rules of
commerce that:
• protect the shipping public against upstream liability for truck accidents in the absence of direct
shipper negligence;
• exercise great care to avoid self-inflicted wounds and lengthy procurement contracts.
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