abc’s of trucking patricia o. alvarez …€™s of trucking by: patricia o. alvarez the alvarez...

ABC’S OF TRUCKING

By:

PATRICIA O. ALVAREZ The Alvarez Law Firm, P.C.

415 Shiloh Drive, Suite A Laredo, Texas 78045

956/722-6601; 956/722-1527 (fax) E-mail: [email protected]

www.thealvarezlawfirm.com

ELISAMAR SOTO The Alvarez Law Firm, P.C.

415 Shiloh Drive, Suite A Laredo, Texas 78045

956/722-6601; 956/722-1527 (fax) E-mail: [email protected]

www.thealvarezlawfirm.com

State Bar of Texas 22ND ANNUAL ADVANCED

PERSONAL INJURY LAW COURSE July 12-14, 2006 – Dallas

August 2-4, 2006 – San Antonio August 23-25, 2006 – Houston

CHAPTER 17

©2006 by Patricia O. Alvarez/Elisamar Soto

The Alvarez Law Firm, P.C. is an AV rated defense civil litigation law firm. Its attorneys counsel and represent individuals and businesses in civil and commercial litigation, employment matters, transportation issues, and in contractual, extra-contractual and insurance coverage disputes. Its attorneys are committed to provide the highest quality representation to their clients, practicing ethically and responsibly.

PATRICIA O. ALVAREZ [email protected]

PERSONAL Born: October 12, 1954, México City, México

EDUCATION University of Texas at Austin, J.D., 1987. University of Texas at San Antonio, B.B.A. 1982; MBA studies (degree not obtained) Universidad Autónoma de Coahuila, Monclova, Coahuila, México 1974-1979 MARTINDALE-HUBBELL RATING: AV TEXAS MONTHLY SUPER LAWYER: 2003, 2004, 2005 LANGUAGES

Fluent in Spanish and French

BAR ADMISSIONS 1987, Texas; 1992, Florida; U.S. District Court, Southern (1991), Northern (1991), Eastern (1991) and Western (1989) Districts of Texas, District of Columbia Court of Appeals (2003), U.S. Court of Appeals, Fifth Circuit (1989) and U.S. Supreme Court (1992).

CERTIFICATION Board Certified by the Texas Board of Legal Specialization in Personal Injury Trial Law.

PROFESSIONAL ACTIVITIES American Bar Association (Chairman, Commercial Transportation Litigation Committee, 1997-1998; Vice-Chair 1998-2002); International Bar Association; International Association of Defense Counsel; Defense Research Institute (National Director 2004-2007; Vice-Chair Membership and Publications 1997-2002 of Trucking Committee; Vice-Chair Trucking Committee 1999-2001); Association for Trial Defense Attorneys, Federation of Defense and Corporate Counsel; Texas Association of Defense Counsel (Director 1998-2001; Vice-President 2001-2002), Transportation Lawyers Association; Trucking Industry Defense Association; San Antonio Bar Association, Hidalgo County Bar Association (Director 1994-1997); and, Webb County Bar Association. TEXAS BAR ACTIVITIES Trustee in the Texas Bar Foundation (2005-2008); Texas Bar Director for the 12th District (2002-2005); member of the Continuing Legal Education Committee (2000-2003); member of the Pattern Jury Charge Volume 2 Committee of the State Bar of Texas (1991-1992); member of the Pattern Jury Charge Volume 1 Committee of the State Bar of Texas (1993-1994); member of the Pattern Jury Charges-Civil Special Committee (1995-1996); member of the Texas State Bar College. PUBLICATIONS: A list of publications by Ms. Alvarez will be provided upon request.

ELISAMAR SOTO

[email protected] PERSONAL Born: August 30, 1975, Laredo, Texas

TEXAS LAWYER RISING STARR: 2005, 2006 EDUCATION University of Houston Law Center, J.D. 2000. Texas A&M International, Laredo, Texas B.B.A. 1997. LANGUAGES

Fluent in Spanish

BAR ADMISSIONS 2000, Texas; U.S. District Court, Southern District of Texas (2001). PROFESSIONAL ACTIVITIES Member: Defense Research Institute; Texas Association of Defense Counsel; Association of Defense Trial Attorneys, Webb County Bar Association.

PUBLICATIONS Bobtail, Trucking And Trailer Insurance: Coverage Issues To Know When Defending And Suing Trucking Companies, Texas State Bar 2004 Trucking Seminar, San Antonio, Texas (Co-authored).

Inadmissibility of Preventable Accident Safety Policies, For the Defense, November 2002, Vol. 44, No. 11 (DRI) (co-authored). The Challenges of defending the Corporate Representative for Deposition, DRI Trucking Law Seminar, Chicago, Illinois (co-authored).

ABC’S of Trucking Chapter 17

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TABLE OF CONTENTS

I. INTRODUCTION................................................................................................................................................... 1

II. IMPORTANT TERMS USED IN THE TRUCKING INDUSTRY ....................................................................... 1

III. ABC’S OF DRIVER QUALIFICATIONS............................................................................................................. 2

IV. ABC’S OF LOG BOOKS ....................................................................................................................................... 3 A. The Regulatory Framework............................................................................................................................. 3 B. Pre-suit Retention Policies .............................................................................................................................. 5

V. THE ABC’S OF CLAIMS FOR NEGLIGENT HIRING, RETENTION AND TRAINING................................... 6

VI. ABC’S OF NON-TRUCKING & TRUCKING POLICIES.................................................................................... 6 A. Differences between trucking and non-trucking policies .................................................................................. 7

1. Non-Trucking Policy and Truckmen’s Endorsement .............................................................................. 7 2. A Non-Trucking Policy Covers Truck When Not Used in the Business of the Trucking Company ...... 7 3. Language of Non-Trucking Use Policies and/or Endorsements:............................................................. 8 4. Coverage Issues Associated with the Term “In the Business of”............................................................ 8

VII. STATUTORY ENDORSEMENTS: FORMS E AND F AND THE MCS-90 .................................................... 14 A. MCS-90 Endorsement: .................................................................................................................................. 14 B. Forms E and F ............................................................................................................................................... 15


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ABC’S OF TRUCKING I. INTRODUCTION

Trucking remains a heavily litigated area, and one virtually left untouched by tort reform --- at least for now. This paper covers five basic topics, which are helpful to attorneys interested in this area. II. IMPORTANT TERMS USED IN THE

TRUCKING INDUSTRY You cannot be a “trucking attorney” if you do not

know the language. Some important terms include: MOTOR CARRIER A “motor carrier” is “a person providing commercial motor vehicle (as defined in section 31132) transportation for compensation." 49 U.S.C. § 13102(14). CARRIER OR COMMON CARRIER A “carrier” is defined as a motor carrier, a water carrier, and a freight forwarder. 49 U.S.C. § 13102(3) (2005). A “common carrier” is one that holds itself out to the public as ready to carry goods for anyone who requests its services, as distinguished from a private carrier, which reserves the right to accept or reject employment as a carrier. J. Aron & Co. v. Cargill Marine Terminal, Inc., 998 F. Supp. 700, 704 (E.D. La. 1998). PRIVATE MOTOR CARRIER The term “private motor carrier” in the ICC Termination Act of 1995 is defined as a person, other than the motor carrier, transporting property by commercial motor vehicle in interstate or foreign commerce when the person is the owner, lessee, or bailee of the property being transported, and the property is being transported for sale, lease, rent or bailment or to further a commercial enterprise. 49 U.S.C. § 13102(15). INTRASTATE MOTOR CARRIER A motor carrier that operates within one state (e.g., Texas). INTERSTATE MOTOR CARRIER A motor carrier that operates in multiple states. EQUIPMENT Defined in the regulations as a motor vehicle, straight truck, tractor, semi trailer, full trailer, any combination of these and any other type of equipment used by authorized carriers in the transportation of property for hire. 49 C.F.R. 376.2(b). LEASE AGREEMENT A written agreement between the owner of the equipment and a motor carrier usually for the lease of the

equipment. Federal regulations govern the form and content of the leasing agreements; allocate responsibility for maintaining liability insurance coverage, and dictate minimum insurance requirements. 49 C.F.R. § 376, et seq. LEASED EQUIPMENT The equipment leased by a lessor to the motor carrier (lessee). OWNER/OPERATOR The owner of the equipment who leases his equipment and his driver (usually himself) to a motor carrier. BILL OF LADING A bill of lading is basically a transportation contract between a shipper-consignor and the carrier, which terms and conditions bind the shipper and all connecting carriers. 1 Sorkin, Goods in Transit §2.01 at 2. A bill of lading represents the title of the goods and serves as evidence of the carrier’s receipt of goods, their condition at the time of receipt, and their nature and quantity. Id. Bills of lading contain information on the load (e.g., weight). Bills of lading are governed by the Bills of Lading Act. See 49 U.S.C. §§ 80101 to 80116 (2005). TRUCK, TRACTOR-TRAILER, RIG OR 18-WHEELER: A trucking rig consisting of a tractor and a trailer, typically having eighteen wheels, and used for carrying freight. SEMI-TRACTOR: Semi tractors usually have 3 axles, the front, or "steer" axle having two wheels, and each of the two rear "drive" axles having a pair of "dual" (double) wheels on each side. The most common configuration of tractor has 10 wheels. TRAILER: A trailer is a wheeled vehicle without a motor that is designed to be hauled by a motor vehicle. A trailer usually has two "tandem" axles at the rear, each of which has dual wheels, or 8 wheels on the trailer. Trailers can be flat-beds, cargo box, and so forth. BOBTAILING Driving a tractor without an attached trailer. DEADHEADING Driving a tractor with an attached trailer that is empty. 4 Saul E. Sorkin, Goods in Transit §45.01[1] (1994) FIFTH WHEEL A tractor’s coupling assembly that allows the trailer attached to that tractor to pivot.

http://www.TexasBarCLE.com/CLE/PMCasemaker.asp?table=US_distctopinions&volume=998&edition=F.Supp.&page=700&id=11076_01


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LOG BOOKS Every driver of every motor carrier is required to record his or her duty status, whether on duty or off duty, for each 24 period. Recording of duty status can be done manually or by an automatic on-board recording device. 49 C.F.R. §§ 395, 395.8. Manual recordings are known as “driver’s logs. NON-TRUCKING or BOBTAILING INSURANCE Insurance issued to a lessor, and which covers the lessor when not driving for the lessee. This type of insurance is usually for small limits (e.g., $250,000). TRUCKING OR COMMERCIAL AUTO INSURANCE Insurance issued to the lessee (motor carrier) that covers its trucks, whether leased or not, when operated in its business as a motor carrier (must be for minimum statutory limits—intrastate are $500,000 and interstate are $750,000). INTERSTATE COMMERCE COMMISSION (ICC) Prior to 1995, the ICC was the regulatory agency that oversaw all aspects of the trucking industry. The ICC provided motor carriers with authorization to conduct interstate transportation business. Pursuant to the Interstate Commerce Commission Termination Act of 1995, the Department of Transportation and the Surface Transportation Board took over the ICC’s functions, and acquired jurisdiction over motor carriers and the procurement of transportation. FEDERAL DEPARTMENT OF TRANSPORTATION The Department of Transportation is the department that presently provides authorization to motor carriers to conduct interstate transportation business. SURFACE TRANSPORTATION BOARD The Surface Transportation Board (STB) was created in 1995, and is the successor agency to the Interstate Commerce Commission (ICC). The STB is an economic regulatory and adjudicatory agency with jurisdiction over railroads, certain trucking companies, moving vans and ocean shipping rate matters. FEDERAL MOTOR CARRIER SAFETY ADMNISTRATION (FMCSA) Established on January 1, 2000, FMCSA is a separate administration within the Department of Transportation. Its mission is to reduce crashes, injuries, and fatalities involving trucks and buses. FMCSA’s website is: http://www.fmcsa.dot.gov. To operate as a motor carrier, registration with the FMCSA is required. Motor Carrier Act of 1980, 49 U.S.C.A. §10927 (West 1994).

FEDERAL MOTOR CARRIER REGULATIONS (FMCR) Federal regulations govern the trucking and busing industry. Most of the regulations relating to trucking are contained in Title 49. Texas has adopted most of Title 49 for application in intrastate commerce. III. ABC’S OF DRIVER QUALIFICATIONS

Part 391 of Title 49 of the Code of Federals Regulations defines the qualifications for drivers, and the motor carrier’s responsibilities. The rules establish “minimum qualifications for persons who drive commercial motor vehicles as, for or on behalf of motor carriers” and “minimum duties of motor carriers” regarding their driver’s qualifications. 49 C.F.R. § 391.1(a).

The specific qualifications required of drivers are set forth in § 391.11. These qualifications deal with age, language proficiency, training/experience, valid driver’s license, and road test. Section 391.15 sets forth the specific instances that disqualify a driver from driving. These include criminal offenses, violations of out-of-service “disqualifications,” and revocation of license privileges.

The federal regulations require the motor carrier to maintain a driver qualification file for each driver it employs. The driver’s qualification file must include:

1. The driver’s application for employment. 49 C.F.R. § 391.51 (b)(1); see id. § 391.21.

2. A written record of inquiries made with past employers regarding the driver’s driving and alcohol/drug testing history. 49 C.F.R. § 391.53; see id. § 391.23 (a).

3. Inquiries into the driver’s driving record during the preceding 3 years to the appropriate agency of every State in which the driver held a motor vehicle operator’s license or permit during those 3 years. 49 C.F.R. § 391.53(a); see id. § 391.23 (a).

4. The certificate of driver’s road test issued to the driver, or a copy of the license or certificate which the motor carrier accepted as an equivalent to the driver’s road test.

5. The response to each State agency to the annual driver record inquiry. The motor carrier is required at least once every 12 months to make an inquiry into the driving record of each driver it employs, covering at least the preceding 12 months to the appropriate agency of every State in which the driver held a commercial vehicle operator’s license or permit during the time period. 49 C.F.R. § 391.51; see id. § 391.25.

6. A note relating to the annual review of the driver’s driving record. The motor carrier is required at least once every 12 months to


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review the driving record of each driver it employs to determine whether that driver meets minimum requirements for safe driving or is disqualified to drive a commercial vehicle. 49 C.F.R. § 391.51; see id. § 391.25.

7. A list or certificate relating to violations of motor vehicle laws and ordinances. The motor carrier is required at least once every 12 months to require each driver it employs to prepare and furnish a list of violations of motor vehicle traffic laws and ordinances of which the driver has been convicted or on account of which he/she has forfeited bond or collateral on account of during the preceding 12 months. 49 C.F.R. § 391.51; see id. § 391.25.

8. The medical examiner’s certificate of his/her physical qualification to driver a commercial motor vehicle, or a legible photographic copy of the certificate. 49 C.F.R. §391.51.

The motor carrier is required to retain the driver’s qualification file for as long as a driver is employed by that motor carrier and for 3 years thereafter. 49 C.F.R. § 391.51(c). However, after three years of being executed, the motor carrier is not required to keep a State’s responses to the annual driver’s driving record, annual reviews, list relating to violations, medical examiner’s certificate or waivers of physical disqualifications. IV. ABC’S OF LOG BOOKS1 A. The Regulatory Framework

The most recurrent allegation in trucking accident litigation is that the accident occurred because the driver was fatigued from driving “out of hours.” This means that the driver was in violation of federal regulations found at 49 C.F.R. § 395. Section 395.8 sets forth the requirements for use, retention and formatting of driver logs. Every driver of every motor carrier is to record his or her duty status, whether on duty or off duty, for each 24 period. Every driver is required to record his or her duty status by using an automatic on-board recording device. Id. at (a)(2), or by manually recording his or her duty status in duplicate on a specified grid. Id. at a(1). Either method is acceptable.

The logs require pertinent information such as date of entry and transfer, total miles driving each day, tractor trailer number, name of carrier, driver signature/certification and total hours. Id. at (d). A failure to complete the record of duty activities under that section or to preserve those records may subject the driver and/or the carrier to criminal prosecution. Id. at

1 Zalud, TURNING LEMONS INTO LEMONADE: EFFECTIVE TACTICAL HANDLING OF DRIVER LOGS FROM THE CHRYSALIS OF PRE-SUIT TO THE CRUCIBLE OF TRIAL, For the Defense (Defense Research Institute 2005).

(e). Drivers are to keep their records of duty status current to the time shown for the last change of duty status. Id. at (f)(1). Entries are to be made by the drivers only. Id. at (f)(2). The driver must sign the duty status record with his or her legal name or name of record. Id. at (f)(7). The signature certifies that all entries required by the section are true and correct. Id.2

2 Section 395.8, “Driver’s record of duty status”, provides that:

(a)Except for a private motor carrier of passengers (nonbusiness), every motor carrier shall require every driver used by the motor carrier to record his/ her duty status for each 24-hour period using the methods prescribed in either paragraph (a)(l) or (2) of this section.

(1)Every driver who operates a commercial motor vehicle shall record his/her duty status, in duplicate, for each 24-hour period. The duty status time shall be recorded on a specified grid, as shown in paragraph (g) of this section. The grid and the requirements of paragraph (d) of this section may be combined with any company forms. The previously approved format of the Daily Log. Form MCS-59 or the Multi-day Log. MCS-139 and 139A, which meets the requirements of this section, may continue to be used.

(2)Every driver who operates a commercial motor vehicle shall record his/ her duty status by using an automatic on-board recording device that meets the requirements of § 395.l5 of this part. The requirements of § 395.8 shall not apply, except paragraphs (e) and (k) (1) and (2) of this section.

(b)The duty status shall be recorded as follows:

(1) “Off duty” or “OFF.”

(2) “Sleeper berth” or “SB” (only if a sleeper berth used).

(3) “Driving” or “D.”

(4) “On-duty not driving” or “ON.”

(c) For each change of duty status (e.g., the place of reporting for work. starting to drive, on-duty not driving and where released from work), the name of the city, town, or village, with State abbreviation, shall be recorded.

NOTE: If a change of duty status occurs at a location other than a city, town, or village, show one of the following; (1) The highway number and nearest milepost followed by the name of the nearest city, town, or village and State abbreviation, (2) the highway number and the name of the service plaza followed by the name of the nearest city, town, or village and State abbreviation, or (3) the highway numbers of the nearest two intersecting roadways followed by the name of the nearest city, town, or village and State abbreviation.


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(d) The following information must be included on the form in addition to the grid:

(1) Date;

(2) Total miles driving today;

(3) Truck or tractor and trailer number;

(4) Name of carrier;

(5) Driver’s signature/certification;

(6) 24-hour period starting time (e.g. midnight, 9:00 a.m., noon, 3:00 p.m.);

(7) Main office address;

(8) Remarks;

(9) Name of co-driver;

(10) Total hours (far right edge of grid);

(11) Shipping document number(s), or name of shipper and commodity;

(e)Failure to complete the record of duty activities of this section or § 395.15, failure to preserve a record of such duty activities, or making of false reports in connection with such duty activities shall make the driver and/or the carrier liable to prosecution.

(f) The driver’s activities shall be recorded in accordance with the following provisions:

(1)Entries to be current. Drivers shall keep their records of duty status current to the time shown for the last change of duty status.

(2)Entries made by driver only. All entries relating to driver’s duty status must be legible and in the driver’s own handwriting.

(3)Date. The month, day and year for the beginning of each 24-hour period shall be shown on the form containing the driver’s duty status record.

(4)Total miles driving today. Total mileage driven during the 24-hour period shall be recorded on the form containing the driver’s duty status record.

(5)Commercial motor vehicle identification. The driver shall show the number assigned by the motor carrier, or the license number and licensing State of each commercial motor vehicle

operated during each 24-hour period on his/ her record of duty status. The driver of an articulated (combination) commercial motor vehicle shall show the number assigned by the motor carrier, or the license number and licensing State of each motor vehicle used in each commercial motor vehicle combination operated during that 24-hour period on his/her record of duty status.

(6)Name of motor carrier. The name(s) of the motor carrier(s) for which work is performed shall be shown on the form containing the driver’s record of duty status. When work is performed for more than one motor carrier during the same 24-hour period, the beginning and finishing time, showing a.m. or p.m. worked for each motor carrier shall be shown after each motor carrier’s name. Drivers of leased commercial motor vehicles shall show the name of the motor carrier performing the transportation.

(7)Signature/certification. The driver shall certify to the correctness of all entries by signing the form containing the driver’s duty status record with his/her legal name or name of record. The driver’s signature certifies that all entries required by this section made by the driver are true and correct.

(8)Time base to be used. (i) The driver’s duty status record shall be prepared. maintained, and submitted using the time standard in effect at the driver’s home terminal, for a 24-hour period beginning with the time specified by the motor carrier for that driver’s home terminal.

(ii) The term “7 or 8 consecutive days” means the 7 or 8 consecutive 24-hour periods as designated by the carrier for the driver’s home terminal.

(iii) The 24-hour period starting time must be identified on the driver’s duty status record. One-hour increments must appear on the graph, be identified, and preprinted. The words “Midnight” and “Noon” must appear above or beside the appropriate one-hour increment.

(9)Main office address. The motor carrier’s main office address shall be shown on the form containing the driver’s duty status record.

(10)Recording days off duty. Two or more consecutive 24-hour periods off duty may be recorded on one duty status record.

(11)Total hours. The total hours in each duty status: ff duty other than in a sleeper berth; off duty in a sleeper berth; driving, and on duty not driving, shall be entered to the right of the grid, the total of such entries shall equal 24 hours.

(12)Shipping document number(s) or name of shipper and commodity shall be shown on the driver’s record of duty status.

(g)Graph grid. The following graph grid must be incorporated into a motor carrier recordkeeping system, which must also contain the information required in paragraph (d) of this section.


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The log measures four kinds of time: (1) “off-duty” (where the driver has no work responsibilities at all); (2) “sleeper berth” (time spent resting in the on-board sleeper berth in the truck cab); (3) “on-duty driving” (time spent behind the wheel); and (4) “on-duty non-driving” (time spent performing non-driving duties such as loading, maintenance, vehicle inspections and the like). When local law enforcement authority stops a driver, the condition of the logs is a threshold and immediate inquiry (and the evidentiary red alert begins). The-log-is “current” only if it is completed up to the last “change-of-status,” e.g., from off duty, to a driving period. B. Pre-suit Retention Policies

By the fiat of federal regulation, driver logs are required to be maintained by the company for six months. 49 CFR 395.3(k)(1). Importantly, a critical component of any record retention policy is to actually comply with it—both as to retention or records—and as to destruction of records. Thus, if there is no notice of any incident, lawsuit, claim or complaint, driver logs should be destroyed at the end of the mandatory six-month period, and that act of destruction should itself be documented, (and retained). Also, at the first notice of an accident, the carrier and its counsel should declare a moratorium on document destruction under extant record retention policies, to ensure that records pertinent to the accident are not destroyed.3

The term and concept of “first notice” should be defined broadly by the motor carrier. The consequences of not following this step are evident in Hopper v. Swann, 2004 WL 948526 (Tex. App.-Tyler). In that case, Donald Hopper sued James Swann, who was a driver employed by Wright Transportation. Wright was a motor carrier hauling a load of metal coils from Nashville to Forth Worth on September 20, 1999. Each coil weighed between 2,000 and 3,000 pounds. Near Forth Worth, Texas, one of the straps securing the load broke off. One of the metal coils slipped from the truck and rolled across the westbound lane of Interstate 20. The coil slammed into the front passenger side quarter panel of Hopper’s vehicle, shattering the windows on that side of the vehicle and injuring Hopper’s eye. Importantly, Hopper and his family declined to be taken to the hospital. Also, Swann informed Wright of the

3 Failure to prevent the destruction of documents that possess some significance in an action can result in criminal or civil sanctions, or both. Criminal statutes governing obstruction of justice are 18 U.S.C. § 1503 (prohibits the obstruction of judicial proceedings), 18 U.S.C. § 1505 (prohibits the obstruction of proceedings before governmental departments, agencies, and committees), 18 U.S.C. § 1510 (prohibits the obstruction of criminal investigations), and 18 U.S.C. § 1512 (prohibits witness tampering).

incident and also relayed that Hopper had driven the vehicle himself to a nearby gas station and was cleaning out the broken glass from the passenger compartment.

Within four days of the accident (but unbeknownst to Wright), Hopper was contacted by Wright’s insurance company. Hopper informed the insurance company of his injury. On November 30, 1999, Hopper’s attorney sent a letter to the claims investigator for the insurance company, informing him that he had been retained to represent Hopper. Seven months after the accident, in accordance with Wright’s regular business practices, Wright destroyed Swann’s logbook relating to the trip (Curiously, he had previously taken the broken strap and the load’s tarpaulin cover to the dump and thrown them away).

On October 17, 2000, Hopper filed suit against Swann and Wright Transportation. Subsequently in the proceedings, Hopper filed a request for a spoliation of evidence instruction, relating to the destroyed driver logs. At trial, the court granted Wright’s motion for directed verdict as to Wright. The jury later rendered a defense verdict as to Swann. Hopper appealed, first contending that the trial court erred by failing to give his spoliation instruction. The spoliation instruction would have explained permissible inferences that could be made against a party, such as Wright Transportation, who had lost, altered or destroyed evidence.

The appellate court first addressed the destruction of the logbooks and found that there had not been communication between Wright’s insurance carrier and Wright:

Wright further testified that he never received any communication from Hopper or his attorney regarding the accident and his liability insurance carrier never contacted him and told him to retain any type of evidence. With regard to the driver’s log books, Wright stated that his practice was to retain a complete set of logbooks for six months, and on the seventh month, to throw away the set of log books that were six months old. . . . Wright was never contacted by anyone, including his liability insurance carrier and Hopper’s attorney, who gave him any indication that he was going to be sued or that a claim would be made against him prior to the day he threw away the log books.

Id. at 3 (emphasis added). The court then examined whether there should have been a spoliation charge to the jury under the circumstances and found there should not have been:

Before any failure to produce material evidence may be viewed as discovery abuse, the opposing party must establish that the


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non-producing party had a duty to preserve the evidence in question.’. . .Trevino v. Ortega, 969 S.W.2d 950, 955 (Tex. 1998) (Baker, J. concurring). Such a duty arises only when a party knows or reasonably should know that there is a substantial chance that a claim will be filed and that evidence in its possession or control will be material and relevant to that claim.

Id. at 5. The court then noted that Mr. Wright had no indication of a claim before he destroyed the logbooks pursuant to Wright’s regular document retention/destruction policy. Consequently, it affirmed the trial court’s refusal to give a spoliation instruction to the jury.

Thus, strict compliance with a well drafted record retention/destruction policy, without actual or even, arguably, constructive notice of the claim, avoided a damaging spoliation instruction, which could have not only impacted the merits of the claim, but possibly given rise to punitive damages. (Other important factors in the case, of course, were that the injuries were clearly minor, and the putative plaintiff left the scene without medical treatment). See also, Ordonez v. M. W. McCurdy & Co., Inc., 984 S.W.2d 264 (Tex. App. 1998) (evidence demonstrated that all log books were routinely disposed of after six months and that subject log books were thrown away pursuant to normal business practices, along with no evidence that log books were destroyed for purposes of concealing them from Plaintiff; court declined to charge jury with evidence spoliation instruction). V. THE ABC’S OF CLAIMS FOR NEGLIGENT

HIRING, RETENTION AND TRAINING A “negligent hiring, retention or training claim” is

based on the action taken by the employer with respect to a given employee that creates an unreasonable risk of harm to others. See, e.g., Yeager v. Drillers, Inc., 930 S.W.2d 112, 117 (Tex. App.--Houston [1st Dist.] 1996, no writ); Leake v. Half Price Books, Records, Magazines, Inc., 918 S.W.2d 559, 563 (Tex. App.--Dallas 1996, no writ); Peek v. Equipment Services, Inc., 906 S.W.2d 529, 534 (Tex. App.--San Antonio 1995, no writ); Porter v. Nemir, 900 S.W.2d 376, 385-387 (Tex. App.—Austin). This claim is also based on direct liability---not vicarious liability—as is a claim of negligent entrustment. See LaBella v. Charlie Thomas, Inc., 942 S.W.2d 127, 137, n.9 (Tex. App.—Amarillo 1997, writ denied); see also Dieter v. Baker Serv. Tools, Inc., 739 S.W.2d 405, 408 (Tex. App.—Corpus Christi 1987, writ denied). Like a negligent entrustment claim, the plaintiff must first prove that the employee committed an actionable tort. Gonzales v. Willis, 995 S.W.2d 729 (Tex. App.—San Antonio 1999, no pet.).

Nonetheless, if a defendant asserts vicarious liability (e.g., stipulates that it is vicariously liable for the acts of its employee), information regarding negligent hiring is limited to the issue of punitive damages. Estate of Arrington v. Fields, 578 S.W.2d 173, 175 (Tex. Civ. App.—Tyler 1979, writ ref’d n.r.e.). That is so because the derivative liability of the employer has already been established by a stipulation of respondeat superior -- at which point the competence or incompetence of the employee and the care exercised in his employment are immaterial issues. The employer is liable for the acts of his employee whether the servant is competent or not. Id. at 178. Thus, the trucking company’s liability for ordinary negligence is established under the doctrine of respondeat superior. See Rossell v. Central West Motor Stages, Inc., 89 S.W.3d 643, 654 (Tex. App.--Dallas 2002, pet denied). However, where gross negligence/exemplary damages are alleged, negligent hiring (including negligent training and retention) is factually material to that determination. VI. ABC’S OF NON-TRUCKING & TRUCKING

POLICIES The most important area is the issue of insurance,

yet it is the issue that is consistently ignored by both defense and plaintiff counsel. This area is important because, depending on the nature of the activity performed at the time of an accident, a motor carrier may have coverage for the statutory limits, or may have coverage for an amount below those limits.4 If, for example, the “activity” is a “non-trucking” activity, the applicable insurance policy may provide only $250,000 as opposed to $1 million in coverage. On the other hand, the activities may be so inter-wined that multiple insurance policies potentially cover the event ---and,

4 The minimum level of coverage for private and for hire motor carriers depends on the carriage, the type of equipment, and the commodity being transported. The federal statutory requirements are:

For hire motor carriers with a gross vehicle weight rating exceeding 10,000 lbs. and which transport non-hazardous property—$750,000.

For hire and private motor carriers with gross weight ratings exceeding 10,000 lbs. and which haul oil, hazardous waste, or hazardous materials or substances must establish financial responsibility coverage of not less than $1,000,000.

Both for hire and private carriers operating portable tanks, cargo or hopper-type vehicles with capacities in excess of 3,500 water gallons must obtain financial responsibility limits of at least $5,000,000.

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together, provide a hefty amount of combined coverage. For these reasons, it is important to know the differences between “trucking” and “non-trucking” activities. A. Differences between trucking and non-trucking

policies More and more trucking companies with operating

authority lease the equipment to avoid the expense of ownership of additional vehicles. They also may lease the “driver,” --- thus, the name “owner operator.”5 Under the Federal Motor Carrier Regulations, the motor carrier that leases the equipment assumes exclusive possession, control, and responsibility for the vehicle. 49 C.F.R. § 376.12(c). For this reason, the regulations require the written lease to specify the legal obligation of the authorized carrier to maintain insurance coverage for the protection of the public. The motor carrier, however, is not obligated to cover the truck at all times. Insurance coverage is usually restricted to the period of time when the truck is actually being operated in the lessee’s business. So, for example, when the leased equipment is not used in the lessee’s business, the regulations specify who is responsible for providing insurance that will protect the public. 40 C.F.R. § 376.12 (j).

Generally in a motor carrier leasing relationship there are at least two policies of insurance which may provide coverage: (1) a non-trucking use insurance policy issued to the lessee/owner operator and (2) a trucking use policy, which may include coverage for “trailer interchange” agreements. If the tractor is hauling a trailer that belongs to a third party, insurance covering the trailer may provide coverage under limited circumstances. 1. Non-Trucking Policy and Truckmen’s Endorsement

A Non-Trucking Use Policy is issued to the person who leases equipment to a motor carrier. The policy is a combination of a Business Auto Policy and a Truckers-Insurance For Truckmen’s Endorsement, known as the “Truckmen’s Endorsement.” The purpose of the truckmen’s endorsement is “to safeguard the insurer from being exposed to liability for accidents that occur while the truck is under lease or hire to another company and engaged in transporting property in the business of the other company or in the insured’s own business.” 2 Nissenberg, Law of Commercial Trucking § 14-6(a) (2nd Ed. 2002).

Although the language of the endorsement may range from policy to policy, it generally excludes coverage of a truck if the insured is engaged in the business of transporting property for a motor carrier. This type of policy is widely referred to as “Bobtail

5 See Part II herein.

Insurance.”6 This term developed because it was assumed that a trucker who is “bobtailing” is generally not using the vehicle for trucking purposes but, instead, for his personal use. The use of the name “Bobtail Insurance,” however, is misleading because the endorsement excludes both bobtailing and deadheading7 operations when being performed in the trucking business of the motor carrier. See, e.g., Wenkosky v. Protective Ins. Co., 698 F. Supp. 1227 (M.D.Pa. 1988).8 2. A Non-Trucking Policy Covers Truck When Not

Used in the Business of the Trucking Company A Non-Trucking Use Policy is intended to cover the

insured when the truck is being used outside the trucking business of the motor carrier. See 4 Sorkin, Good in Transit, § 45.01(1) to 45-5 (1994). Issuance of a Non-Trucking Use Policy assumes that the motor carrier carries Trucking Insurance to cover its trucking operations.9 Conversely, when the same equipment is being used for the personal use of the lessor, the Non-Trucking Use Policy should provide coverage exclusive of any trucking coverage.

Determination of coverage under a Non-Trucking Use Policy is rarely a simple matter. The difficulty arises from the confusing nature of the interplay between the nature of the operations of the leased vehicle at the time of the accident and the federal regulations applicable to motor carriers, the terms of lease agreements, and the terms of insurance contracts. See e.g., Empire Fire & Marine v. The Insurance Company of the State of Penn., 638 S.2d 102, 103 (Fla. App. 1994), cert. denied, 513 U.S. 1051, 115 S.Ct. 655, 130 L.Ed.2d 558 (1994). As a result, the courts do not uniformly apply coverage principles when determining coverage under a Non-Trucking Use Policy. Moreover, the case law varies from case to case and from jurisdiction to jurisdiction. Consequently, the outcome of coverage disputes is difficult to predict, and virtually impossible to generalize.

6 See Part II herein.

7See Part II..

8 Conversely, “when the tractor is being used without a trailer or with an empty trailer, and is not being operated in the business of an authorized carrier” the Non-Trucking Use Policy provides coverage. 4 Sorkin, Goods in Transit, § 45.02[2].

9When the equipment is being operated for trucking business purposes, the Commercial Auto Liability Insurance for Trucking Use (“Trucking Policy”) issued to the motor carrier should cover the loss.


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3. Language of Non-Trucking Use Policies and/or Endorsements: The Truckmen’s Endorsement clause takes many

forms. A basic clause reads as follows:

a. a covered truck while used to carry property in any business;

b. a covered truck while used in the business of anyone to whom the truck is rented or leased.

Few endorsements exclude coverage only when the tractor is “bobtailing.” Most endorsements exclude coverage while the driver is in route at the request of any person or organization in the business of transporting property, or while a trailer is attached to carry property in any business. Other endorsements make the distinction between the transportation of “business property” and of “personal property.” 4. Coverage Issues Associated with the Term “In the

Business of” The single most important coverage issue in a Non-

Trucking Policy is the determination of what activities trigger the language “in the business of the motor carrier” contained in the truckmen’s endorsement. As stated, the reason is that the term “in the business of” is usually not defined in the Business Auto Policy. Consequently, courts turn to legal principles to determine if an activity is excluded under the truckmen’s endorsement. The result is that opinions vary from jurisdiction to jurisdiction. Moreover, cases are fact intensive, and are decided on a case by case basis. Thus, the outcome is unpredictable and virtually impossible to generalize. a. Legal principles used to define “in the business of”

When determining whether a particular activity falls within the term “in the business of,” the focus is whether under state law, the leased equipment was being used “in the business of” the authorized motor carrier at the time of the accident. The focus is not on the motor carrier’s federal statutory responsibilities to the general public. This distinction is important and merits discussion.

Under federal regulations, the motor carrier is required to enter into a lease agreement when using leased equipment. The federal regulations govern the form and content of the lease. The lease must state that the motor carrier “assumes complete responsibility for the operation of the equipment for the duration of the lease” and “maintains exclusive possession, control, and use of the equipment for the duration of the lease” as it relates to the injured party. 10 49 C.F.R. § 376.12(c)(14).

10 Some states also have regulations similar to the federal regulations. Ohio is an example. Other states, Texas for example, statutorily incorporate by reference the federal regulations.

11 To this end, the motor carrier is required to maintain insurance “for bodily injuries to or the death of any person resulting from the negligent operation, maintenance or use of motor vehicles” operated under the carrier’s license. 49 C.F.R. § 387.303(a)(1)12; see also 49 C.F.R. § 387.7; 49 C.F.R. § 376.12(j). If the leased equipment is involved in an accident then, in theory, the motor carrier is responsible to the injured person, and its Truckers Policy should provide coverage to compensate the injuries. See, e.g., The Connecticut Indemnity Co. v. Harris Transport Co., 909 F. Supp. 1212, 1219 (W.D. Ark. 1995) (applying the “Logo Liability Rule” to impose statutory liability on motor carrier where accident occurs while motor carrier’s logo shown on truck).

In the absence of any reference to the regulations in an insurance contract, the responsibilities of the motor carrier to the general public are separate than those of the insurer. St. Paul Fire & Marine Ins. Co. v. Frankart, 370 N.E.2d 1058 (Ill. 1977). The regulations are only intended for the benefit of the public, not for the benefit of the insurers, the driver, the owner or the motor carrier. Roseberry v. Balboa Ins. Co., 627 N.E.2d 1062, 1064-65 (Ohio App. 1993), motion overr., 624 N.E.2d 1067, discretionary appeal not allowed, 669 N.E.2d 859 (1993). They are not controlling when coverage is in controversy. See Maryland Cas. Co. v. City Delivery Service, Inc., 817 F. Supp. 525, 531 (M.D. Pa. 1993) (citing Carolina Casualty Ins. Co. v. Insurance Co. of N. America, 595 F.2d 128 (3d Cir. 1979); Occidental Fire & Cas. Co. of North Carolina v. Rocious, 772 F.2d 47 (3d Cir. 1985), Daily Express, Inc. v. Northern Neck Transfer Corp., 490 F. Supp. 1304 (M.D.Pa. 1980)); cf. Assicurazioni Generali v. Ranger Ins. Co., 64 F.3d at 981. Instead, state law principles of respondeat superior and insurance contract interpretation apply. Maryland Cas. Co., 817 F. Supp. at 531. In applying state law to coverage disputes, federal regulations come into play only to the extent that the language of the policy follows

11 As a result of technical amendments effective April 1, 1997, 49 C.F.R. § 1057.12 was renumbered 49 C.F.R. § 376.12(c)(1). See 62 F.R.15417. Technical amendments such as this were made to conform to the ICC Termination Act of 1995. The ICC Termination Act of 1995 transfers the authority for the coordination and preservation of the nation’s transportation system from the Interstate Commerce Commission (ICC) to the Surface Transportation Board under the Department of Transportation. 49 C.R.F. § 1301. Notwithstanding the elimination of the ICC’s authority, the regulations promulgated pursuant to its authority continue in full force and effect until modified, terminated, superseded, set aside, or revoked by the Board. 49 C.F.R. § 204.

12 As a result of a technical amendment effective September 24, 1997, 49 C.F.R. 1043.2(a)(1) was renumbered § 387.303(a)(1). See 62 F.R. 49939.


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the language of the regulations. Frankart, 370 N.E.2d at 1061. Succinctly said:

“The language of the insurance policy must be given its ordinary meaning unless good reason appears for doing otherwise. The relevant I.C.C. regulation of insurance (citation) contains no provision which would require a motor carrier specifically to carry insurance affording liability coverage for judgments rendered solely against an owner-operator of a vehicle leased to the motor carrier. In the absence of such provision we think it is unreasonable to apply (the regulatory provision) and the public policies of the Interstate Commerce Act, as a gloss to the exclusionary provisions of the insurance policy in this case. We do not think that such broad coverage could reasonably have been contemplated by the parties when they formed their insurance contract. Nor should we make the unwarranted assumption that the insurer and the insured somehow intended the apparent and obvious meaning of the endorsement to be inoperative and to be controlled instead by an I.C.C. regulation which in no way relates to or binds insurance companies.” Wellman v. Liberty Mutual Ins. Co., 496 F.2d 131, 138-39 (8th Cir. 1974). In the case at bar, we find that the disputed insurance policy is ambiguous to the limited extent that it does not define “in the business of” to necessarily be the equivalent of the carrier’s liability under the regulations.

Id. b. Absence of a definition of the term “in the business

of” Defining “in the business of” is troublesome for the

courts. The problem stems from the fact that most policies do not define the term. When the term is not defined in the policy, the courts construe it according to its recognized common usage in conjunction with the rest of the policy. See, e.g., Frankart, 370 N.E.2d at 1061; Planet Ins. v. Anglo American Ins. 711 A.2d 899, 903 (N.J.Sup.A.D. 1998); Liberty Mutual Ins. v. Connecticut Indemnity Co., 857 F. Supp. 1300, 1307 (N.D.Ind. 1994). The focus is on the activity that is being performed at the time of the accident. If the activity is found to come within the concept of a trucking activity then, by virtue of the Truckmen’s Endorsement, coverage is excluded. Activities such as delivering or picking up a load for the carrier are almost always excluded since the trucking nature of these operations falls within the common usage of “in the business of.” In fact, any activity performed

whenever there is freight in the vehicle is inclusive in the concept of “in the business of.”

When the nature of the activity is not easily ascertainable, some courts turn to state principles of respondeat superior to define whether the particular activity at issue falls within that concept. See, e.g., Hot Shot Express, Inc. v. Assicurazioni Generali, S.P.A., 556 S.E.2d 474 (Ga. App. 2001); MGM Transport Corp. v. Cain, 496 S.E.2d 822, 824 (N.C. App. 1998). Other courts focus on the lease agreement for a determination of the responsibilities of the parties for a particular activity. See, e.g., Planet Ins., 711 A.2d at 903; but see, Empire Fire & Marine Ins. Co. v. Liberty Mutual Ins. Co., 699 A.2d 482, 497 (Md. App. 1997) (fact that vehicle under lease is not dispositive of whether vehicle being used in the business of lessee; to hold otherwise, would render bobtail insurance a nullity because truckers’ insurer would always be liable).

A minority takes extreme measures, striking the term as ambiguous. These courts focus on the ambiguity of the exclusionary language rather than on the ambiguity of the activity. See, e.g., Assicurazioni Generali, S.P.A. v. Ranger Ins. Co., 64 F.3d at 983 (term “in the business of” endorsement contained in a “pure bobtail” policy is vague and subject to more than one reasonable interpretation); see also Connecticut Indemnity Co. v. Stringfellow, 1997 WL 86092 p. 7 (M.D.Pa.); Rebush v. St. Paul Fire and Marine Ins. Co., 1987 WL 28345 (E.D.Pa.). The effect is that a Non-Trucking Use Policy virtually becomes a Trucking Policy.13 c. Activities that may or may not fall within the

exclusionary language “in the business of” Following is a discussion of the important categories

of activities undertaken by a driver that may or may not fall within the exclusionary language “in the business of.” (1) Is The Driver “In The Business Of” The Motor

Carrier While Driving To And From His Home? As a general rule, an owner-operator is not engaged

“in the business of” the motor carrier while driving to and from the place of employment. MGM Transport Corp. v. Cain, 496 S.E.2d at 824; see also LeBlanc v. Bailey, 700 So.2d 1311 (La. App. 1997). In the trucking business, this general principle is often difficult to apply. Truckers may keep the leased equipment at home, and be dispatched from there. Their home becomes their place of employment. So, when the owner-operator is

13 If one considers the annual premiums a lessor pays for Non-Trucking Use coverage (approximately $240 per year) relative to the premiums the lessee pays for a Trucking Policy (in the range of $5,000 to $9,000 per year), it is evident that a Non-Trucking Policy is not meant provide the same coverage as does a Trucking Policy.


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returning home, his point of origin, after having transported a load for the motor carrier and the accident occurs, the issue becomes whether the owner-operator is acting in the business of the carrier. See, e.g., Engle v. Zurich-American Ins. Group, 549 N.W.2d 589 (Mich. App. 1996). The leading case is Frankart.

In Frankart, Robert Frankart was the owner and operator of tractor leased to Wilson Freight Company. The lease agreement, which was in compliance with the ICC regulations, provided that the equipment would be leased to Wilson for “its exclusive possession, control, responsibility and use . . . .” Frankart, 370 N.E.2d at 1059. Pursuant to the lease, the equipment would display Wilson’s ICC permit when in use under the lease. Frankart was allowed to sublease his equipment to other motor carriers as long as the ICC permit was removed. The lease also required Frankart to obtain “bobtail and deadhead” insurance.

Frankart was involved in an accident while the equipment displayed Wilson’s ICC permit. A week before the accident, Frankart had picked up a load while under dispatch by Wilson. The load was delivered in Oklahoma a day after the dispatch. After the delivery, the Wilson’s dispatcher told Frankart that no loads were available for him to transport in the direction of Wilson’s terminal in Cleveland, Ohio. Frankart then drove to Wilson’s terminal in Granite City, Ohio, and took his name off the availability list. From there, he departed with an empty trailer to his home in Findlay, Ohio. Frankart, however, made a deviation to Peoria, Illinois, where he could buy cheaper fuel and lease the truck to another motor carrier. On his way into Peoria, the accident occurred. At the time of the accident, Frankart was covered a by Combination Automobile Policy which included a Truckmen’s Endorsement. The endorsement provided as follows:

It is agreed that such insurance as is afforded by the Policy for Bodily Injury Liability *** with respect to any automobile described below, or designated in the Policy as subject to this endorsement, does not apply: *** (b) while the automobile or any trailer attached thereto is used to carry property in any business: (c) while the automobile is being used in the business of any person or organization to whom the automobile is rented.

The court found that the policy extended coverage to Frankart “only for the limited instances in which his tractor is not being used in the business of any carrier-lessee.” Id. at 1060. The court interpreted section (b) of the exclusion as not applicable since Frankart was deadheading and not carrying property for the motor

carrier. Section (c) of the exclusion, however, was found applicable because Frankart’s trailer was being used in the business of the carrier “even if, at the time of the accident, the tractor is pulling an empty trailer.” Id. at 1061. Because the policy did not define the term “in the business of,” the court turned to the facts of the case to construe the term according to its common usage.

The court also found that the lease agreement was pertinent in that it gave Wilson exclusive possession, control, responsibility and use of the equipment when its ICC permit was attached. The court considered the following facts to determine whether the equipment was being used in Wilson’s business:

“Wilson, a licensed interstate carrier, had 17 terminals scattered throughout the country. Owner-operators, operating pursuant to a lease with Wilson, could report to any of the terminals to obtain loads to haul under Wilson’s ICC permit. Frankart customarily reported in to Wilson’s terminal in Cleveland because it was near his home in Findlay, Ohio. An owner-operator might pick up a load at any of the terminals or he might be instructed by telephone to pick up a load in transit and proceed to the point of delivery without having to drive his tractor-trailer to a terminal. It was common practice for Wilson’s owner-operators to deliver a load and either to report to a nearby terminal for another load or to return home and call in to the terminal nearest his home for the next assignment.”

Id. at 1061-62. The court found compelling the testimony of Wilson’s vice-president, who testified that Wilson (1) allowed the owner-operators to choose their own routes, (2) had no written policies and procedures in place to limit or direct the use of the leased equipment, and (3) that an owner-operator was considered to be in the business of Wilson while in route to pick up an assigned load or while returning to a terminal after hauling a load. Id. Moreover, the court determined that the original assignment to Frankart did not terminate at the point of delivery, or Tulsa. Id. at 1062. The assignment “continues at least until the owner-operator returns to the point where the haul originated (Coatesville, Pennsylvania), to the terminal from which the haul was assigned (Cleveland, Ohio), or to the owner-operator’s home terminal from which he customarily obtained his next assignment (Findlay, Ohio). Id.; see Empire Fire & Marine Ins. Co. v. Liberty Mutual Ins. Co., 699 A.2d at 496 (recognizing Frankart as establishing the rule for recognizing the point in time when the business of the motor carrier is completed).

Interestingly, the court rejected the argument that Frankart’s route through Peoria to buy fuel was an activity performed for his personal use. The court

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reasoned that had “Frankart chosen to buy the fuel in East Peoria in the course of hauling the load to Oklahoma, Wilson could not have claimed that Frankart was no longer using his tractor-trailer in Wilson’s business.” Id.

Frankart is a straightforward decision. Numerous jurisdictions concur with its outcome. See, e.g., Cox v. Bond Transp., Inc., 249 A.2d 579 (1969), cert. denied, 395 U.S. 935, 89 S.Ct. 1999, 23 L.Ed.2d 450 (1969) (lessor acting in furtherance of the lease if accident occurs after he has finished work for the day and is driving home); cf., Felbrant v. Able, 194 A.2d 491 (N.J. App. 1963) (driver “in the business of motor carrier when informed there were no further work assignments and he obtained permission to return home). Some jurisdictions, however, require some direct instruction from the motor carrier directing the owner-operator to go home or to be on call at home before a finding that the driver is acting “in the business of” the carrier is made. See, e.g., McLean Trucking Co. v. Occidental Fire & Casualty Co., 324 S.E.2d 611 (N.C. App. 1985); MGM Transport Corp. v. Cain, 249 A.2d at 824-25 (applying respondeat superior principles). Typically, a requirement that the owner-operator keep the leased tractor at his home, rather that at the carrier’s terminal, or that the driver be on call and ready to pick up a load, falls within the concept of “in the business of” the carrier. Id. So long as the motor carrier gives the instruction, these courts will find that going to and from home constitutes “in the business of.” Id.

On the other hand, if the driver is returning home after delivering a load for a third party, the return home without an assignment from the motor carrier may considered as an activity that is not furthering the business interests of that carrier. See, e.g., Acceptance Ins. Co. v. Canter, 927 F.2d 1026 (8th Cir. 1991); Grimes v. Nationwide Mutual Ins. Co., 705 S.W.2d 926, 931-32 (Ky. App 1986). The case of Grimes presents an interesting and unusual fact situation. (2) Deadheading/Bobtailing To The Point Of Origin

After Delivery Is Completed A category closely related to instances where the

driver is driving to and from home, is the scenario where the owner-operator has completed delivery and is returning to the point of origin. As discussed above, most courts agree that the exclusion applies when the owner-operator is returning from a trip on the grounds that the trip is an integral part of the lessee’s business. See Frankart, 370 N.E.2d at 1062; Connecticut Indemnity Co. v. Harris Transport Co., 909 F. Supp. at 1223; see also, American Transit Lines v. Smith, 246 F.2d 86 (6th Cir. 1957) (both the journey and the return journey are part of the same trip). The reasoning is that the equipment must return from its destination to be of further use to the lessee. Harris Transport Co., 909 F. Supp. at 1223.

A different result, however, occurs when the owner-operator is dispatched by the lessee to pick up a load, and on his way, he agrees to haul a load for a third party. See, e.g., Occidental Fire & Cas. Co. of North America v. Padgett, 446 N.E.2d 937 (Ill. App. 1983); Grimes, 705 S.W.2d at 931-932. In Occidental, a day before the accident, the owner-operator was notified by the authorized motor carrier that the company had a load available in Galesburg. The owner-operator proceeded to Indiana, where he picked up a load for another carrier under a “trip lease” and continued to Galesburg. For some unknown reason, that load was apparently delivered to the authorized motor carrier’s terminal. After arriving at the terminal, the owner-operator waited for the trailer that he was dispatched to pick up by the lessee. He was later advised that the load was not ready and was instructed by the terminal manager to go home and return the next day. While driving back home, the accident occurred.

At the time of the accident, the carrier’s name and permit number were on the tractor. The Non-Trucking Use policy at issue contained Endorsement CA-2309 excluding coverage when the tractor was used “in the business of any person or organization to whom the automobile is rented.” The court found that the owner-operator was “in the business of” the motor carrier because he was directed to return home and intended to return for the load. Id. at 940.

Deviations on the way back to the point of original present interesting coverage issues. Most courts agree that if the driver is returning to the origin point as instructed by the motor carrier, but the driver deviates from these instructions, then the “in the business of” exclusion is not triggered. Some deviations are minor while others are substantial. The controlling issue is whether the driver departs from the business of the motor carrier. For example, one court concluded that the driver was acting on his own behalf when on his way back to the point of origin; he decided to deviate from his trip a few miles to wash the tractor. Connecticut Indemnity Co. v. Stringfellow, 1997 WL 86092 p. 7 (M.D.Pa. Feb. 25, 1997).14 Due to this deviation, the exclusionary language “in the business of” the motor carrier was not triggered. But see Planet Ins., 711 A.2d at 903.

14 Although Stringfellow is an unpublished opinion, the case stands for the proposition that “cleaning a tractor is qualitatively different from inspection or maintenance” in that inspection or maintenance “has an important impact on the success of the lessee’s business. Id. at 6. “[T]he appearance of the tractor, even over the 1-year period of the lease, would not necessarily matter to the lessee.” Id. Notwithstanding that washing the tractor is not in “furtherance of the lessee’s business,” it is evident from the Stringfellow opinion that the court would have reached a different result if the lessee had instructed the driver to wash the tractor.






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In Wenkosky v. Protective Ins. Co., 698 F. Supp. at 1227, the deviation was so substantial that exclusionary language in a Truckmen’s Endorsement15 was held not applicable. In this case, after a load was delivered, the motor carrier advised the owner-operator that he could deadhead back to the point of origin because he did not have other loads for him. The owner-operator did not return to the point of origin. Instead, he went to pick up a load of logs to be delivered on behalf of a log shipper. On his way to deliver the logs, the logs fell and caused an accident. The Non-Trucking Use carrier denied coverage and a declaratory judgment was filed for a determination of coverage. The Wenkosky court found as controlling that hauling logs for another person was outside the scope of the lessor’s contractual relationship with the authorized motor carrier. Id. at 1229. Accordingly, the court held that the exclusions contained in the “Non-Trucking Use” Endorsement did not apply. Id. at 1230. (3) Do Maintenance, Repair And Inspection Activities

Fall Within The Concept Of “In The Business Of” The Authorized Motor Carrier?

Another controversial coverage issue is whether the owner-operator is “in the business of” the motor carrier when maintenance to the tractor is required. The cases fall under two main categories: (1) when the owner-operator is under dispatch at the time of the repair or is instructed by motor carrier to perform the repair, and (2) when the lease agreement provides for repair responsibilities. (a) Repairs Performed While on Dispatch or by

Instruction of Motor Carrier It is generally accepted that when the motor carrier

instructs the owner-operator to inspect the equipment, then coverage under the Non-Trucking Use Policy is excluded. Carriers Ins. Co. v. Griffie, 357 F. Supp. 441 (W.D.Pa. 1973) (accident occurred during an inspection required by carrier, pursuant to carrier’s company policy at a garage selected by carrier, and at the cost of carrier). It is also generally accepted that, if repairs are needed while the driver is on dispatch, then the driver is “in the business of” the motor carrier. See Hartford Ins. Co. v. Occidental Fire & Cas. Co., 908 F.2d 235 (7th Cir. 1990) (accident occurred while driver was in process of making

15 The exclusionary language of the endorsement provided that coverage was excluded “(a) [t]o any person or organization, or any agent or employer thereof other than the insured owner-operator, engaged in the business of transporting property by AUTOMOBILE for others; (b) [w]hile the automobile or any trailer attached thereto is used to carry property in any business; (c)[w]hile the automobile is being used in any business of Daily Express, Inc. [the lessee] or any organization engaged in the business of transporting property by automobile for others.” Id. at 1230.

a delivery for lessee and was en route to pick up trailer that required repairs in order to complete delivery); Empire Fire & Marine Ins. Co. v. Insurance Co. of the State of Penn., 638 So.2d 102 (Fla. App.), cert. denied, 513 U.S. 1051, 115 S.Ct. 655, 130 L.Ed.2d 558 (1994) (accident occurred when a trucker bobtailed to a service station to obtain oil change between assignments).

In Hartford, at issue was the exclusionary language “in the business of an . . . organization to who the automobile is rented.” The court found that the language referred to occasions when the truck was being used to further the commercial interests of the authorized motor carrier. The court then focused on the activities of the driver at the time of the accident for a determination of whether they constituted “in the business of” the motor carrier.

The motor carrier dispatched the driver to deliver a load of frozen orange juice concentrate. Before he completed the delivery, the lessor instructed him to have a faulty Freon valve on the trailer repaired after he completed the delivery. When the driver attempted the delivery, the buyer refused to accept the juice because it was too warm. After the lessee was informed of the rejection, he instructed the driver to take the juice to a cold-storage facility nearby. After placing the juice in storage, the driver was told by the lessee to wait for further instructions. The driver, following the lessor’s instruction, then took his trailer to a repair facility to have the Freon valve repaired. He left the trailer there and bobtailed his tractor to a truck stop, where he remained until the following afternoon. In the meantime, the lessor contacted the lessee to request permission to use the driver to pick up another load for his return trip. The lessee refused because it needed the truck to return the orange juice if the buyer again rejected the load.

When the driver was on his way to pick up the trailer from the repair shop, he collided with a car. The accident must not have been of great consequences, because after the police report was completed, the driver proceeded to pick up the trailer. He was then instructed by the lessee to retrieve the juice and deliver it to the buyer. The buyer, however, refused the load a second time. At the lessee’s direction, the driver returned to his home base with the juice.

The issue before the Hartford court was whether, at the time of the accident, the driver was operating for the lessor or for the lessee. The court found that, as a matter of law, the facts showed that the truck was being used “in the business of” the lessee at the time of the accident. The court reasoned that the driver was furthering the lessee’s commercial interests at the time of the collision because the driver (1) had not completed his delivery, (2) remained in the city of delivery at the lessee’s command, and (3) was en route to pick up his trailer in order to complete his delivery of the orange juice when the collision occurred. Id. at 238; see also Central Nat’l Ins. Co. v. Liberty Mutual Ins. Co.¸685 F. Supp. 123 (D.S.C.



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1988) (driver pulling empty trailer between terminals in furtherance of lessee’s business).

In Empire Fire & Marine Ins. Co. v. Brantley Trucking, Inc., 220 F.3d 679 (5th Cir. 2000), the driver was determined to be in the “business of” the trucking company even though, at the time of the accident, he was bobtailing. Of importance in this case was that the driver arrived at the trucking company’s terminal the night before pulling a load. He slept at the yard, and the following day he waited there for a load. While waiting for a load, he decided to take his truck to be serviced. He left the facility bobtailing, had the oil changed, picked up some auto parts, and had some maintenance work done on the tractor. On his way back to the yard, he collided with a car. The Non-Trucking Use Policy issued to the owner-operator provided the following “business use” exclusion:

“Bodily injury” or “property damage” while a covered “auto” is used to carry property in any business of while a covered “auto” is used in the business of anyone to whom the “auto” is leased or rented.

Id. at 681, n. 3. The lower court found the exclusion ambiguous, and therefore providing coverage. The Fifth Circuit disagreed, clarifying that the fact that the “activity” was ambiguous, did not make the insurance exclusion ambiguous as well. Id. at 681. The Fifth Circuit then focused on the exclusionary language finding that the language “while the covered ‘auto’ is used in the business of anyone to whom the ‘auto’ is leased . . .” referred to occasions when the truck was used to further the “commercial interests of the lessee.” Id. at 682. The driver was “only biding his time while the cargo loaded, had the truck maintained, and was en route back to [the yard] . . . to pick the load when the accident occurred.” Id. The Fifth Circuit viewed as significant the fact that the lease agreement contemplated occasions that rig would not be engaged in the business of another. Id. (b) The Lease Agreement Allocates Repair

Responsibilities When the responsibilities for the repair of the leased

equipment are not ascertainable from the facts, some courts turn to the lease agreement to determine the responsibilities of the parties. Under this view, when the lease delineates the responsibilities for maintenance and repairs, the language in the lease controls. The decisions, however, are divided.

Some jurisdictions adhere to the rule that if the lease agreement requires the owner-operator to keep the tractor in “roadworthy condition and repair,” the exclusion does not apply when the tractor is not attached to any trailer, and is being driven to a facility for repairs by the owner-operator. Zurich-American Ins. Co. v. Amerisure Ins.

Co., 547 N.W.2d 52, 56 (Mich. App. 1996); see also Protective Ins. Co. v. Dart Transit Co., 197 N.W.2d 668 (Minn. 1972). The allocation of responsibility for maintenance and repairs in the lease will be given effect, even though the lease also provides that the authorized motor carrier has exclusive possession, use, and control of the tractor and agrees to assume full responsibility for the operation of the equipment. Amerisure, 547 N.W.2d at 54; Empire Fire, 699 A.2d at 497; Neal v. St. Paul Fire & Marine Ins. Co., 250 N.W.2d 648 (Neb. 1977).

Other courts reject the theory that repairs by the owner-operator, made pursuant to the lease responsibility, are performed in a lessor’s business. See, e.g., Planet Ins. v. Anglo American Ins. Co., 711 A.2d at 903; Freed v. Travelers, 300 F.2d 395 (7th Cir. 1962) (when lease requires lessor to keep tractor prepared for use, accident that occurred while owner-operator was taking leased tractor to garage is excluded); cf., Assicurazioni Generali, 64 F.3d at 983 (activities undertaken to enable repair of brakes constitutes engaging in the business of transporting property because it furthers the commercial interests of lessee). Planet represents the extreme view. (4) Under Dispatch by the Trucking Company

The owner-operator is usually considered to be in the business of the motor carrier when picking up a load. See Guaranty Nat’l Ins. Co. v. Vanliner Ins. Co., 1998 WL 351743 (E.D.Pa. Jan. 30, 1998). The general rule is that leased equipment is being used in the business of the motor carrier when a load is going to be picked up. See Liberty Mutual Ins. Co. v. Connecticut Indemnity Co., 857 F. Supp. at 1300. The problem arises when there is an interruption in the course of a dispatch, or the accident occurs between dispatches.

In Vanliner, the day before the accident, the owner-operator completed a delivery for the motor carrier. He was instructed to pick up an empty trailer at the terminal and drive it to Philadelphia to pick up another load. The following day, he arrived at the Philadelphia terminal with the empty trailer. There, he was told that the load would not be ready for transport for another three to four hours. So, he decided to go to a Mall hoping that he would find his brother. He drove approximately ten miles from the terminal to the Mall. There, he looked for this brother without success. He then left the Mall a headed back to the terminal planning to stop for coffee on the way. On the way to the store, he was involved in an accident. The court found that the owner-operator was “in the business of” the motor carrier at the time of the accident. Id. at 5. The court reasoned that the driver had accepted a transport from the motor carrier, and was therefore under dispatch.

Where the owner-operator is in between dispatches, as a general rule, the owner-operator is not in the business of the motor carrier. The exception to the rule is when a motor carrier provides sleeping facilities to its


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driver. If such facilities are provided, the fact that the driver is in between dispatches does not put him outside of the business of the motor carrier. Wright v. Transus, Inc., 434 S.E.2d 786 (Ga. App. 1993). In Wright, the owner-operator dropped a load at the motor carrier’s terminal. He then went to the sleeping headquarters provided by the motor carrier for the drivers. While sleeping, the owner-operator was considered to be off-duty. After sleeping eight hours, and while he waited to be dispatched, he took his tractor to service. He then drove to get a sandwich. The accident occurred on his way to or back from getting the sandwich. Notwithstanding that the lease obligated the owner-operator to be responsible for the maintenance of the rig; the court found that the activity of getting the sandwich was an operation routine while he was at the terminal awaiting dispatch. Id. at 787-88.

The above case demonstrates that when the motor carrier does not restrict the activity of the driver in between dispatches, more than likely the activity will be considered to be “in the business of” the motor carrier. When the carrier allows its drivers to engage in personal activities (e.g., shopping, eating, etc.) in between dispatches, the activity will be viewed as part of the motor carrier’s business. VII. STATUTORY ENDORSEMENTS: FORMS E

AND F AND THE MCS-9016 This is another area that few attorneys are familiar

with. This area provides protection to the public when the there is no coverage under any policy of insurance.

As background, to operate as a motor carrier in interstate commerce, either as a private carrier or as a for hire carrier, registration with the FMCSA is required. Motor Carrier Act of 1980, 49 U.S.C.A. §10927 (West 1994). These regulations stipulate that no motor carrier shall operate a commercial motor vehicle in interstate commerce until the motor carrier has first obtained and has in effect the minimum levels of financial responsibility established by the FMCSA. U.S.C.A. §10927 (a)(1) (West 1994). The legislative purpose of insurance requirements is to ensure that permitted motor carriers have independent financial means to pay for injuries to the general public arising out of trucking operations. Travelers Ins. Co. v. Transport Ins. Co., 787 F.2d 1133, 1139 (7th Cir. 1986).

What happens, however, when the insurance policy does not provide coverage because, for example, the equipment is not listed in the policy? If the insurance

16 For an excellent explanation of Forms E and F and of the MCS-90, please refer to Richard Mosher’s paper entitled STATUTORY INSURANCE REQUIREMENTS, MCS-90 ENDORSEMENT AND OTHER MINIMUM COVERAGE REQUIREMENTS, Texas State Bar Prosecuting and Defending a Trucking Accident (2002).

policy does not cover the accident or event, state or federal regulations include an automatic endorsement. Under the federal regulations, the endorsement is referred to the MCS-90, and it applies to all interstate transportation. For intrastate commerce in Texas, the endorsement is referred to as Forms E and F. A. MCS-90 Endorsement:

The Federal Regulations automatically include in all trucking policies the MCS-90 Endorsement. This endorsement is best understood as an unconditional suretyship that inures to the benefit of the public and rests on top of the motor carrier’s liability policy. See Minter v. Great American Ins. Co. of N.Y., 423 F.3d 460 (5th Cir. 2005); see also Canal Ins. Co. v. Carolina Cas. Ins. Co., 59 F.3d 281, 283 (1st Cir. 1995); John Deere Ins. Co. v. Truckin’ U.S.A. 122 F.3d 270 274–75 (5th Cir. 1997). The MCS-90 Endorsement is triggered only when there is no coverage under the policy. Minter, 423 F.3d at 470-71.

It is widely agreed that the endorsement is not insurance coverage per se. The endorsement does not obligate an insurer to defend a motor carrier accident. Rather, the endorsement stipulates only that the insurer will pay any judgment awarded against the insured subject to reimbursement from the motor carrier. The endorsement runs directly to the public, to pay judgments resulting from negligence in the operations, maintenance, or use of motor vehicles, even if the vehicle is not identified or covered under the policy. Canal Ins. Co. v. First Gen. Ins. Co., 889 F.2d 604, 614 (5th Cir. 1989); Industrial Indem. Co. v. Truax Trucklines, Inc., 45 F.3d 986, 991 (5th Cir. 1995) (endorsement obligated insurer to pay $750,000 limits even though policy did not cover lessor’s truck); National Am. Ins. Co. v. Century State Carriers, Inc., 785 F.Supp. 793, 795 (N.D. Ind. 1992) (unlisted, borrowed tractor operated by insured driver while on drinking binge held covered by endorsement on policy of driver’s employer). The endorsement applies only when no other policy provides coverage. John Deere Ins., 122 F.3d at 275. Pursuant to this endorsement, • it is triggered only when the underlying policy does

not provide coverage • it only applies to a judgment • the insurer has to pay that portion of a judgment

resulting from negligence in the operation, maintenance or use of motor vehicle

• the insurer only pays up to the required statutory limits of insurance.

• the insurer may seek reimbursement through indemnification from the motor carrier

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To be effective, the endorsement must be issued in the exact name of the motor carrier and must be maintained at the motor carrier’s principal place of business. The MCS-90 endorsement is subject to special cancellation requirements that operate independently of the policy’s cancellation provisions. The endorsement must remain in effect continuously until canceled or replaced. Cancellation may be effected by either the insured or the insurer with 35 days’ notice, in writing, to the other party. If the insured carrier is subject to FMCSA jurisdiction, 30 days’ notice must also be given to the FMCSA; beginning on the date notice is received by the FMCSA. 49 C.F.R. §387.15. All endorsements and filings are deemed public information. Registered DOT carriers must keep a copy on file at their principal place of business and produce such information to the public for inspection. 49 C.F.R. §387.7.

For the MCS-90 to apply, the accident must have occurred when the truck was engaged in interstate commerce. Thompson v. Harco Nat’l Ins. Co., 120 S.W.3d 511 (Tex. App. – Dallas 2003), cert. denied, 543 U.S. 876, 125 S.Ct. 100, 160 L.Ed.2d 127 (2004) (truck transporting paper intra-state not engaged in interstate commerce at time of accident, and, thus, MCS-90 endorsement and its requirement of liability coverage not applicable). B. Forms E and F

In Texas, motor carriers and private carriers otherwise exempt from the federal DOT jurisdiction, financial responsibility lies with the Texas Department of Transportation. See Tex. Transp. Code §642.002 et seq. (Vernons 1997). Texas has a suretyship similar to the MCS-90 named “Forms E and F.” These forms make the insurer an insurer of last resort when no other insurance applies. Nat’l Cas. Co. v. Lane Exp., Inc., 998 S.W.2d 256, 263 (Tex. App. 1999).

Although similar in effect to the MCS-90, Forms “E” and “F” are potentially broader obligations because these forms more directly incorporate financial responsibility laws into the insurance contract. R. Mosher, STATUTORY INSURANCE REQUIREMENTS, MCS-90 ENDORSEMENT AND OTHER MINIMUM COVERAGE REQUIREMENTS, Texas State Bar Prosecuting and Defending a Trucking Accident (2002). Unlike the MCS-90, Form “F” does not specifically express the limits of public liability within the endorsement itself. Not surprisingly, it has been widely argued that Form “F”, therefore, increases the limits in the body of the policy to the extent that the policy is greater than what the law would require. See Tri State Pipe and Equipment, Inc. v. Southern County Mutual Ins. Co., 8 S.W.3d 394, 398 (Tex. App. 1999).

Procedurally, to assure compliance with the insurance requirements, the motor carrier’s insurer must certify through FORM E that there is insurance, and through FORM F it submits the actual endorsement that

amend the contract of insurance. If the insurer cancels the policy, then it must file a Form K. If Form K is not filed, then the insurer is obligated to pay the judgment. See Nat’l Cas. Co. v. Lane Exp., 998 S.W.2d at 257-58.










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