Medical marijuana laws present unique challenges to employers.

Almost all states will soon have similar laws as to medical marijuana usage, and generally no employee can be fired just for having medical authorization to use marijuana.

The Americans with Disabilities Act even prevents employers from asking about it because that would presume the employer is asking about an underlying disability.

While it’s still illegal under federal law to possess or use it, there have been more than 60 peer-reviewed studies with an overwhelming majority finding marijuana helpful as palliative care in debilitating diseases or for those with chronic pain.

What is an employer to do? Re-write your employee handbook; be vigilant and drug test under the defense of reasonable suspicion.

Current Arizona law is typical of many states’ view: unless a failure to test would cause an employer to lose a monetary or licensing-related benefit under law, an employer may not discriminate against a person in hiring, terminating, imposing a condition of employment, or otherwise penalizing a person for having medical marijuana privileges, or producing a positive test for marijuana.

Safety-sensitive work in the transportation industry – or any industry – allows the employer to discipline / terminate employees with medical marijuana prescriptions if intoxicated on duty.

Regardless of the industry, no employee with a medical marijuana card may use, possess, or be impaired at work.

Why should you be concerned / have a policy / conduct reasonable suspicion testing?

Because of exposure to the legal risk of negligent hiring or negligent retention claims brought by third persons; and because your medical card employee could challenge you for discrimination if you do not treat every employee the same.

The Gig Economy Just Got Giggier

On June 7, 2017, Labor Secretary Alexander Acosta announced that the U.S. Department of Labor has withdrawn two informal guidance documents on independent contractor misclassification and joint employment, which had been issued by President Obama.

These involved the “economic realities” test used for contractors; and an expansive interpretation for joint employment under the Fair Labor Standards Act.

Presumably, the absence of these guidance documents, along with various test factors delineated by the DOL, courts likely will revert to prior interpretations of independent contractor classification and joint employment as had been determined by courts in each jurisdiction.

The Causes and Occurrences of Fatal Road Accidents by State

The Auto Insurance Center presented its second look at fatalities in all states and broke out some interesting statistics. It’s worth a few minutes to scroll through their findings.

Click this link:

www.autoinsurancecenter.com/fatal-crash-causes.htm

 

Drones in Accident Reconstruction

Drone technology brings a significant advantage over current crash data collection methods in litigated matters.

The falling costs of drones and associated software, combined with reduced expert costs, time saved, access to traffic areas, and the superb visualization of the collected data make drones desirable and useful for accident reconstruction.

Post- crash investigations have always been a challenge for the transportation and insurance industries, particularly crashes occurring in, or because of, temporary traffic routing that can change daily. Some traffic plans fail to meet MUTCD standards and that failure could contribute to the cause of a crash.

A recent experiment with drone technology in relation to crash reconstruction proved to be a positive experience. A drone was used to collect images of the scene; and a 3D model was built with software. The technology produced amazingly clear and accurate scene details. It was also less time consuming and less expensive than traditional reconstruction methods. An exemplar reenactment proved to be of great value. It’s not for every case, but it should be considered.

Freight Recession Over?

DAT Solutions reported that last week the overall load to truck ratio was the highest it’s been since March 2014. Last week was also the second week in a row when rates rose on more than 70 of the top 100 dry van lanes. DAT suggests that the ratio and rates offer strong evidence that the freight recession is over and that spot rates may likely continue to rise, with the June California produce shipments making for a good start to Summer.

Jim Mahoney serves transport clients in all states and he has joined with Resnick & Louis PC, which has offices in: NM, CA, TX, CO, NV, FL, AZ, UT, UK, where he is Chair of Transportation cases.

JMahoney@rlattorneys.com serving the transportation industry – 602-900-1800

Denial of Cargo by Consignee is Becoming More Common Because of Concern About the Viability of the Freight Itself.

But that’s not always the motor carrier’s fault – in fact the motor carrier generally has no fault for the condition of the lading.

If the consignee refuses the lading tendered by a carrier or if the carrier is unable to deliver the lading because of fault or mistake of shipper or the consignee, or if the shipper advises and instructs carrier to stop movement of the lading and to hold it in transit, what is a carrier’s liability?

The carrier has a lien upon the goods for its lawful charges, arising when it picks up the freight. The lien is discharged when the carrier is paid for the goods. This discharge contemporaneously entitles the consignee to the goods.  A carrier loses its lien when it voluntarily delivers the goods or unjustifiably refuses to deliver. Importantly, a carrier does not have the right to lien and withhold delivery of cargo because of a shipper’s failure to pay freight charges on separate, different and unrelated prior shipments. The Uniform Straight Bill of Lading (at §4(a)(2)) provides that if the property is not accepted by the consignee, the carrier may store the property subject to its lien for all freight and other lawful charges, including reasonable storage charges. If not retrieved and paid for, the carrier may then sell the property at public auction in certain circumstances, and apply the proceeds of the sale to the payment of freight, demurrage, storage and other lawful charges

Under the Bill of Lading Act and all state’s Uniform Commercial Code (Section 7-307) the carrier has a lien on goods covered by a bill of lading for freight charges. The usual language in the accepted bills of lading confirms the carrier’s lien rights with language noting that “nothing herein shall limit the right of the carrier to require at time of shipment the prepayment or guarantee of the charges.”

Under common law, if a shipper delivered goods covered by a bill of lading to a common carrier for transport, the carrier had a lien on such goods so long as (i) the freight charges were not paid by the shipper and (ii) the goods remained in the carrier’s possession. In addition to common law rights, carriers have been protected by statutory law. For example, certain states have enacted various carrier lien statutes and all states have adopted Section 7-307 of the Uniform Commercial Code (the “UCC“). UCC Section 7-307 provides a carrier with a lien on goods and the proceeds thereof so long as the carrier maintains possession of the goods or proceeds.  The UCC lien covers transportation charges and expenses and is effective against the consignor or any person entitled to the goods; provided, however that a carrier loses its lien on any goods that it voluntarily delivers or unjustifiably refuses to deliver.

The carrier immediately becomes a warehouseman with obligations limited to ordinary negligence. The carrier must use only ordinary care (as opposed to the liability under Carmack rules) to keep the lading in a safe or suitable place or to store the lading properly.

Thereafter, the carrier shall (a) attempt to give shipper notice as soon as possible  and, (b) place the lading in public storage, if available, unless the carrier receives contrary disposition instructions from the shipper within twenty-four (24) hours, and (c) if disposition instructions are not given by the shipper within ten (10) days of carrier’s initial notification to the shipper (the “10 day on-hand” notice), the carrier may offer the cargo for public auction or best offer among salvors.

In the case of perishable cargo, the carrier may dispose of the freight at a time and in a manner that the carrier deems appropriate. The shipper will be responsible for storage costs and reasonable costs that the carrier incurs in acting as a warehouseman.

To the extent any sale or disposal revenues exceed the storage costs and the costs the carrier incurs as a warehouseman and freight charges, the motor carrier shall remit the balance to the shipper.

If the shipper had given the carrier timely disposition instructions within the 10 days, then the carrier shall use any commercially reasonable steps to work within those instructions. That said, the shipper shall pay the carrier’s freight costs and additional costs incurred in doing so.

The 10-day notice should be in writing (email) to the shipper or the party noted on the BOL to receive notice. To be safe, notify all parties to the Bill.

Storage charges, based on most carriers’ tariff, shall start no sooner than the next business day after the 10 days. Storage may be, at carrier’s option, in any location that provides reasonable protection against loss or damage. Public storage companies work well because it’s at the owner’s expense and without liability to the carrier.

The proceeds of the sale shall be first applied to the carrier’s invoice for transportation, secondly for the storage and other lawful charges. The owner of the cargo is responsible for the balance of charges not covered by the sale of the goods. If there is a balance remaining after all charges and expenses are paid, that balance will be paid to the owner of the property, upon receipt of proof of ownership.

If the carrier attempts to follow the procedure above, but the situation becomes impossible to accomplish, there’s no regulation or rule to stop the carrier, at its option, to sell the property in a salvage bid manner.

Obviously fresh produce or other perishables may not have a shelf life of ten days sitting in storage, so if the cargo is refused at destination, and disposition is not given within a reasonable time, the carrier may dispose of the perishables to the best advantage, i.e. to salvage or consignment sale.

Jim Mahoney is a partner and Chair of Resnick & Louis’ tucking and transportation practice across all its serviced states. Jim can be reached at 602 900 1800 or jmahoney@rlattorneys.com. You can read more on trucking or transportation issues http://www.jfm-lawfirm.com/

 

Excess, Umbrella, and multi-Insurer Coverages. Deductibles and Self-insured Retention policies; Control over Safety; Insurance Pricing in 2017.

You’ll buy insurance this year for your transportation business, and perhaps  a large percentage of it will be from multiple insurers. Pricing may be an issue (see below), or your clients may require certain policy features.

Insurance policies themselves are always bilateral, not multi-lateral agreements. So, when you buy into a multi-insurer program, you should be aware of the gaps and inconsistencies that may occur. Your insurance broker is assembling a program that is complex, multi-layered, and multi-insurer. So ask a lot of questions.

Never will two insurers jointly issue one policy that will provide whole coverage to you. But although policies are not multi-lateral that does not mean they operate only individually. Excess and umbrella policies, which you may need to fulfill customer demands, refer to other policies by their nature, generally calling them the underlying coverage – and are contingent in some ways on the provisions of that underlying coverage.

A primary policy pays the first dollar of a covered claim, perhaps subject to your deductible or self-insured retention. You buy the primary and then add other policies that are excess of the primary as you deem necessary. An excess policy means the insurer only begins coverage after the pre-determined primary limits. Excess is available for just about all primary lines and there is no requirement you buy only from one underwriting company.

An umbrella policy is more of a stand-alone excess policy that offers a bit broader scope than the primary. Umbrella policies stand out over plain excess covers: like an excess policy, umbrellas provide additional amounts of cover once the primary is tapped out; but umbrellas sit more broadly, and provide cover over other types of coverage, for example, your auto or employer’s liability policies; and umbrellas can serve as primary cover outside the scope of some primaries.

Consider that excess policies “follow form” of the underlying coverage – the exact provisions of that policy – but no more. Sometimes “follow form” language takes a detour and conflicts with terms of the underlying policy, narrowing the scope with additional terms. That may be excess, but it sure ain’t what you expected.

A “DIC” policy is a stand-alone excess policy that typically drops down and serves as primary where there is a difference in policy conditions or scope, or when the underlying is exhausted. These DIC policies are often seen in D&O coverage programs.

Generally, however, excess policies attach and pick up the claim and defense when the pre-determined limits of the primary coverage are exhausted, when the primary throws in the towel.

In umbrella situations, some of the coverage may be excess to the primary, and other coverage could be first dollar.

Umbrella policies should provide additional limits over the underlying liability and, as said, they usually provide broader coverage than an Excess Liability policy.

Excess Liability policies provide additional limits over the underlying liability, but this can be more restrictive and they do not provide coverage that was unavailable to you in the underlying policy.

 What About Retentions and Deductibles? Under an SIR, the insurer generally has nothing to do with losses that do not penetrate its attachment point. The insurer may, however, require notification when a claim comes in to you or when it is perceived by you and/or the insurer the claim may pierce the attachment point. Under a deductible, however, the insurer pays every loss up to its limits, and then – in theory –  is reimbursed by you up to the amount of your deductible. In practice, however, if you can manage to do so, pay losses that are within the deductible from your pocket. Remember, numerous and frequent losses are considered more unfavorably than cat losses, and next year’s insurance looks for frequency.

Who pays Defense Costs? A policy with a deductible provision requires an insurer to investigate each claim and pay to defend it. The insurer controls the defense.

With an SIR policy, you can be in control of the defense. In theory since it’s your money up front, you can control your  own investigation, defense, and settlement of claims within the SIR. You may be better suited to investigate than the insurance adjuster. Presumably, you’ll know of the claim first. Until the SIR has been satisfied by you, or the claim is clearly going  to exceed the SIR, the insurer, in true SIR policies, has no obligation to provide or pay for the insured’s defense.

Unless the policy otherwise provides (e.g. eroding limits), the deductible relates to the damages for which the insured is indemnified, not to defense costs, so the insurer pays defense costs from the beginning. The insurer is fully responsible for defense costs regardless of the amount of the deductible, assuming there is a potential for coverage under the policy.

In an SIR policy, until the insurer becomes obligated for a loss over the SIR, the insured will pay its own defense costs. In this situation, you’re not bound to use the services  of the insurer’s stable of lawyers. You can choose.

Settlement. A policy with a deductible allows the insurer to defend and settle claims against the insured without the insured’s consent. An insurer cannot settle a claim within the SIR without the insured’s consent.

Which One Should I pick? In the current insurance climate, first-dollar coverage is a luxury we can’t afford. You should go for either a deductible or SIR policy. You’ll be more in charge  with an SIR.

This is not new. Policies with large self-insured retentions and deductibles have always been available, but if you have a better hand at managing your day-to-day risks, that is, you’re better at conducting a safe operation than an insurer, an SIR policy may be more attractive than a deductible. This is especially true if your CSA scores are well within limits and you preach and practice safety.

Your Insurance Market for 2017. With sagging growth and under-performing investments, the insurance industry is likely to continue consolidation, leaving you with fewer choices. There is an expected outflow of some 70,000 insurance workers – of all stripes – so insurers will need to attract and train workers and count more on algorithms (yes, CSA is only an algorithm, and a poorly functioning one at that).

Then there’s the uncertainty of the new Administration and its effects on domestic growth and trade. Expect increasing insurance costs this year.

Regards,

Jim Mahoney

602 900 1800

Transportation Chair

Louis & Resnick PC

 

 

 

 

Baseball has always had statistics. They’ve been studied to excess and its auditors have immense data directly related to every player. Not so with CSA BASICs.

The FMCSA built CSA and it routinely lacks the complete data tov reveal the behaviors the Agency – and insurers, and shippers – are interested in. What the Agency does instead is substitute stand-in data, or what we might call proxy data. They draw statistical correlations between a  motor carrier’s type of operations and its potential for safety. These correlations discriminate. Whereas baseball stats pour in daily for more than 6 months a year; and they can feed back inconsistencies into the model, redefining it as they progress, CSA scores are static; there is no mechanism to correct errors (let’s not even bring up dataQ appeals). Conditions and outcomes change or evolve in court somewhat closer to the truth, so must the model the penalties are based on.

CSA, cloaked as it is in a great deal of mystery, with only chance encounters delivering outsized results, relies heavily on a handful of “test” results, which is so very far from algorithmic modeling.  But yet, CSA purports to predict outcomes – i.e., crashes. These “predictions,” unfortunately, guide the discussions of shippers, DOT inspectors, and insurers.

There will always be miscalculations in CSA evaluations because the models used are just simplifications. No model can include all the world’s complexities or nuances of human behavior. Inevitably, a lot of important stuff gets left out – like communications in operations, variable ground conditions, and interactions with other parties, namely shippers and receivers.

To be frank, CSA BASICs is a toy algorithmic model that abuses truckers who all operate on the slimmest of margins. The Agency makes choices about what’s important enough to include, simplifying the world of trucking into its own version of reality, not a true life version where real life decisions and actions are and can be made every day. CSA reflects the goals and ideology that the Agency imposes onto its “safe trucking” mandate. CSA scores are opinions embedded in arbitrary mathematics. What the Agency is trying to accomplish  – saving lives – the very definition for its existence, is, of course, more than simply admirable. But by blending in arbitrary measures of “success,” the CSA model hunts down arbitrarily determined data. The CSA model itself becomes a belief, relied upon by those who serve and use the trucking industry. It has not eliminated DOT-based human bias; it’s only camouflaging its bias with its mysterious predictive math calculations.

To sum up, CSA presents three elements of false beliefs: it’s opaque; it uses false scales to measure safety, and reliance upon it definitely causes damage. When the volume of data multiplies, CSA scores-can’t decipher a meaning. They just generate more inaccuracies. Carriers are being coerced, threatened with livelihood – and no recourse exists in the system that shuts down a carrier or imposes an onorous penalty.

People  – not algorithms – still decipher meaning from events. CSA, for all its supposed magical abilities, is still not equal to a group of people who can sift through false indicators and bypass CSA’s wishful thinking.

CSA, with great fanfare, was simply a human-derived formula deliberately wielded to impress, rather than clarify the data it receives. In the insurance world, its created a flock of underwriters who are in the rubber stamp business, formulating opinions by proxy, and which opinions become self-reinforcing. When you create models from proxies, it’s easy for users to game it to their desires.

CSA suggests it relies on its efficiencies. It feeds off data that can be counted and measured. But not necessarily fairly or accurately because that data are incomplete qualities and subjective concepts that were built into the original algorithm, and now are essentially unassailable DOT “truths.” Fairness is not calculated; instead CSA calculates great unfairness and causes collateral damage. Many truckers are not singled out  as others are, either because of the overly zealous commercial enforcements efforts in known jurisdictions, or perhaps the size (small or large) of the operation doesn’t warrant the time needed to truly gauge a safe operation.

These primitive algorithms have a real, deleterious effect on motor carriers, shutting some down; causing others to pay exorbitant insurance premiums and fines. All based on incomplete, human-biased algorithms.   Knowledgeable persons can and do a much better job at determining safe operations and crash predictability. The scores should come with an explanation that they are entirely based on opinion, innuendo, influence groups, and are not to be taken literally, as there is no scientific basis to the conclusions.

Call for help. 602 900 1800

Who’s Exempt From Overtime – the Motor Carrier Exemption

The Fair Labor Standards Act (FLSA) provides that employers must pay non-exempt employees at “one and one-half times the regular rate” for time worked in excess of forty hours per week. 29 U.S.C. § 207(a)(1). The FLSA exempts “any employee with respect to whom the Secretary of Transportation has power to establish qualifications and maximum hours of service” under the Motor Carrier Act (MCA). 29 U.S.C. § 213(b)(1) (“the MCA Exemption”). Mr. Williams brought this action alleging that Central Transport LLC violated the FLSA’s overtime requirements when it employed him as a “switcher” at its St. Louis terminal. He tried to make the claim into a class action suit.

The question of how Williams spent his time working for Central Transport is a question of fact; the ultimate issue of whether his work activities exempted Central Transport from paying FLSA overtime is one of law.

In United States v. American Trucking Ass’ns, 310 U.S. 534, 553 (1940), the Supreme Court rejected the contention of that all employees of interstate motor carriers were exempt, concluding that the jurisdiction to regulate maximum hours “is limited to those employees whose activities affect the safety of [motor carrier] operation.” Later, the rule was expanded that motor carrier drivers, mechanics, loaders, and drivers helpers who “perform duties which affect the safety of operation… are therefore subject to the authority conferred [by the MCA] to prescribe qualifications and maximum hours of service.” MC-2, 28 M.C.C. 125, 126 (1941).

Mr. Williams was a “city loader” by title with Central Transport. However, he also did some minimal loading of trailers that affected the motor carrier’s safe interstate operation, including balancing loads and stacking cargo “high and tight.” The 8th Circuit Court of Appeals in a decision published July 28 2016 seems to have expanded a ruling from 1947 that even randomly assigned drivers, loaders, mechanics whose operations are quite minimally in interstate commerce (“3 or 4%”) are under the MCA exemption for overtime.

FMCSA Delays Unified Registration System

The Federal Motor Carrier Safety Administration has delayed the final implementation of its Unified Registration System until Jan. 14, 2017.

Dr. Kelly Regal, FMCSA associate administrator of research and information technology, said the agency is updating its IT systems and migrating existing data to new servers, which is causing the delay from the previous implementation date of Sept. 30.

Since December, new applicants for registration have been required to use the new streamlined online form. Existing carriers were supposed to begin using the system to do their biannual updates, name changes and transfers of authority on Sept. 30, but now won’t be able to use the system until the January 2017 implementation.

California Workers’ Comp – What Ails You?

In California, where reforms were implemented in 2013, medical trends are seen as stabilizing with fewer spine surgeries and a reduction in the use of opioids. According to the State this shows that many elements of the reform effort are working. Hmmm…not so sure. When compared with other states California has the highest rate and frequency of permanent and partial disability claims and has the highest Workers’ Comp premium rates in the country. Nothing to brag about there.

I used to think that injured workers got high quality care in the Comp system. I don’t know why I thought that. Maybe because some care was better than crawling home to a bandaid. However, the focus on quality of care  – with as much oversight as we see in the health care industry – could be a way to improve patient outcomes and limit rising premiums. But insurers often see Work Comp and its mandatory coverage as a loss leader in selling other, more profitable lines. It doesn’t appear that any insurer – despite their sales puffery to their customers – really look at clinical quality at all to determine provider quality and performance.

Literally, on the Work Comp side of healthcare, there are no standards. Just overburdened claims adjusters.

Tough to Make a Buck in Trucking 

Truckload linehaul rates in June were nearly the same as the month before, but they are still below levels from a year ago, while there seems to be no end to the recent drop in rates for intermodal shipments. I expect to see a big dropoff in capacity in fresh produce reefer business as the Food Safety regs come along. Current spot reefer rates of $2.00 a mile will go up no doubt, but it’s still not going to be an easy line to make a buck.

 

MEDICAL MARIJUANA AND THE TRANSPORTATION WORKPLACE

 

Colorado – crystal clear

Employers are allowed to regulate or prohibit the use, consumption, possession, transfer, display, transportation, sale or growing of marijuana in the workplace. Employers may also enact policies restricting the use of marijuana by employees. Simple. No need to drag in DOT issues. Clear-headed.

 

Nevada – oddly sensible, but it’s complicated by reasonable accommodation.

Nevada Revised Statutes 453A.800. Costs of medical use of marijuana is not required to be paid or reimbursed; medical use of marijuana not required to be allowed in workplace; medical needs of employee who engages in medical use of marijuana to be accommodated by employer in certain circumstances.  The provisions of this law do not: 1. Require an insurer, organization for managed care or any person or entity who provides coverage for a medical or health care service to pay for or reimburse a person for costs associated with the medical use of marijuana. 2. Require any employer to allow the medical use of marijuana in the workplace. 3. Except as otherwise provided in subsection 4, require an employer to modify the job or working conditions of a person who engages in the medical use of marijuana that are based upon the reasonable business purposes of the employer but the employer must attempt to make reasonable accommodations for the medical needs of an employee who engages in the medical use of marijuana if the employee holds a valid registry identification card, provided that such reasonable accommodation would not: (a) Pose a threat of harm or danger to persons or property or impose an undue hardship on the employer; or (b) Prohibit the employee from fulfilling any and all of his or her job responsibilities.

 

California – typical psychosis.

A tortured, psychotic path in California now suggests a concern when the employee explains positive test results by mentioning a medical condition that led to the marijuana use.

The employer can still choose not to hire the applicant, or to fire the employee.

But the decision would be the least risky when the employer applies a zero tolerance policy for marijuana use across the board, and when the position is safety-sensitive (like operating machinery or DOT safety related).  The decision is to be made only on the drug test results, and not on the underlying medical condition.

But, if an applicant for an office job fails a drug test due to off-duty medical marijuana treatment for cancer, the employer may decide to hire anyway.

Arizona – hazy – with a chance of general legalization.

The Arizona Medical Marijuana Act (“AMMA”) already prohibits employers from discriminating against individuals who are authorized to use medical marijuana. The principal exception to this prohibition applies if the hiring or retention of a medical marijuana user would cause the employer to lose a monetary or license-related federal benefit, e.g., hampering your FMCSA authority via workers in safety-related functions.

Employers may certainly test employees and applicants for marijuana and other controlled substances, but the AMMA protects authorized medical marijuana users testing positive for marijuana from adverse employment action based solely on the test results.

Arizona employers can discipline an employee with a positive test even if the employee is authorized to use medical marijuana, but only if there is additional objective evidence of possession or impairment during working hours. Where it gets even hazier is the evidence of workplace impairment: a workplace incident reflecting negligence, obvious signs of intoxication: decreased coordination, slurred speech, blood shot eyes, and/or empty bags of Cheetos (jk).

As some of us may know from Cheech and Chong movies, off-duty usage effects can linger into the workday. The fact that an employee’s off-duty use of medical marijuana may be protected by Arizona state law does not alter the fact that such use may have adverse results and occasionally may cause an injury. This clouds the challenge for employers: Hmmm…does evidence of workplace intoxication, despite the employee having a medical marijuana card mean the employee goes home until the fog clears? No clear answer. Legislature was too busy lining up to sue Feds for clarification of who gets to use which bathroom.

http://jfm-lawfirm.com

 

 

 

Uninsurable Contract Clauses

          We all receive draft contracts from our customers with clauses that are absolutely or mostly uninsurable and often unenforceable – and many are so often throwaways. Some terms to avoid and suggested alternatives:

  • You shall defend, indemnify, and hold harmless [Customer], its officers, directors and employees from and against any and all claims, damages, causes of action, or allegations in any way arising out of or relating to Your work on the project. Your liability policies may only provide coverage, including a legal defense, for your negligence. I can count on one hand the number of times insurers have willingly picked up a defense that’s this broad.

 

  • You shall perform the services in accordance with the highest standard of care. This proposed language changes the coverage standard—it essentially requires perfect performance. Insurers are not in the business of insuring against a sure thing. Use alternative language.

 

  • You shall name [Customer] as an additional insured on all policies. Not all policies allow this – Work Comp, professional e&o, etcetera have exclusions for several reasons, including insured vs. insured battles.

 

  • You warrant that the [service, project, etc.]will comply with all laws, codes and regulations. Much more palatable: You shall make reasonable efforts to comply with applicable laws, codes, and regulations.

 

  • Then there’s the ominous clause: prevailing party shall be awarded its attorneys’ fees and costs. Delete the clause. There are no great alternatives here. Are “we” really going to go to the mattresses all the way to verdict? Negative. We want to fix anything certainly before suit and very little gets to verdict. What does “prevailing” mean in that regard?

 

  • You shall inspect the Work to ensure that it is in strict accordance with the contract documents. To the extent that this contractual language amounts to a guarantee of the Work, it is very possibly uninsurable. There is alternative language.
  • You shall report all safety hazards at the job site to Us. Sounds innocent enough, but by agreeing to this language, you are possibly taking responsibility for a duty that belongs to the Owner to protect visitors or its own employees.

 

When negotiating contracts, the argument that a clause is “not fair” may be of limited value, kinda like the playground arguments that usually fell on deaf ears. “It’s my ball. If you want to play, you gonna play by my rules.” 

It’s much more effective to point out that the Customer has as much interest as you do in having liability insurance coverage for the scope of work under the contract. That’s a valid argument and that’s easy for me to say, but sometimes difficult to get across. Many large and small legal departments review contracts by demanding these uninsurable / unenforceable terms. Rational, measured reasoning generally works out some of these problems.

Temperature controlled Food Transportation

The rule pertaining to transportation under the Food Safety Modernization Act – FSMA – is called the Sanitary Food Transportation Act – SFTA. Effective date is April 6 2017.

  • The final rule applies to shippers, receivers, loaders, and carriers who transport food in the United States by motor or rail vehicle, whether or not the food is offered for or enters interstate commerce. An entity is subject to the regulations in several ways – a shipper can also be a loader; a freight broker can be a shipper. Contractual shifting of responsibilities is allowed – be aware of what you’re signing.
    • Transportation regulations apply to:
      • Foods transported in bulk, e.g., juice, animal feed
      • Packaged foods not fully enclosed by a container, fresh produce
      • Foods that require temperature control for safety

      Key requirements:

      • Transportation operations must be conducted to prevent food from becoming unsafe during transport, including: assuring proper temperature controls; preventing contamination by contact with non-food items or raw food, or allergens. If a shipper, loader, broker, receiver, or carrier becomes aware of a possible material failure of temperature control or other condition that may render the food unsafe during transportation, the food shall not be sold or otherwise distributed. A shipper must develop and implement written procedures – which will then, of course, be contractually transferred to brokers and motor carriers – to assure vehicles and equipment are in appropriate sanitary condition; that previous cargo does not make food unsafe; that food requiring temperature control is transported under adequate temperature control (designation of required temps on the Load Sheet and proof of temperature control at delivery).While the enforcement and effective dates are still a year out, most if not all requirements will start to be enforced by shippers. I see a number of companies gearing up and using compliance as a selling point. You can expect to see language in contracts almost immediately.
      • Small reefer carriers are most likely the first affected. One or two losses in this new environment (of very conscious receivers) will hurt too much. Cargo insurance for reefer loads has too many unscrupulous exceptions to coverage. Freight brokers will see more claims for which they will be responsible – either by contract or contingent to the absence of underlying carrier coverage.
      • The burden will fall onto the motor carrier (and by extension, the broker) to prove – via USDA inspection – that the temperature deviation or other condition did not render the food unsafe.
      • Brokers will look more often to contingent cargo insurance
      • Carriers should buy better cargo coverage; brokers must monitor those policies.

If you own or manage a transportation company, the URS, or Unified Registration System, is about to become reality for you.

It’s the FMCSA’s new, “streamlined” registration system that will improve our collective looks, smooth wrinkles, and do away with paperwork.

It requires regulated transport businesses to register online. It eliminates the MC number, FF or MX number.

As of September 30th new registrants will use this system to obtain a DOT number and register operating authority. Established companies will thereafter edit or update registrations online.

The URS is a single, online federal information system that transport businesses use to register and update their information with the Federal Motor Carrier Safety Administration.

Don’t confuse it with that other registration system, UCR. The Unified Carrier Registration system is not part of the FMCSA; instead, it’s a federally mandated, annual state-administered registration program that exists to collect funds from trucking companies and give funds back to the states to support DOT officers’ ability to write violations and give drivers costly citations that often have nothing to do with safety.

The URS applies to all interstate motor carriers, including private and for-hire passenger and property motor carriers, freight forwarders, brokers, intermodal equipment providers (IEPs), hazardous materials safety permit (HMSP) applicants/holders, and cargo tank manufacturing and repair facilities under FMCSA’s jurisdiction. Mexican-domiciled carriers conducting long-haul, non-cabotage operations into the U.S. are exempt.

Again, the URS will require online registration for all filers, will use only your DOT number as identifier, will have a new fee schedule, and will maintain your records of financial responsibility and statutory process agency…umm, just like it does now, only…umm…better.

Applicants will begin using URS for registrations and changes starting Sept. 30. If you’re already registered with the FMCSA “the old way,” you will have until December 31st to start using the new system – but only as you update biennially or edit your registration.

There will undoubtedly be some changes, so read the FAQs and website updates. I wouldn’t work up a sweat over all of this just yet, though.


Oh, by the way, the Governor of Arizona did sign the independent contractor bill, so, as said previously, it’s effective August 6th.  Arizona-based carriers should review, negotiate, and rewrite their ICOAs with their OOs. And those interstate entities domiciled elsewhere, but who now wish to be Arizona-based carriers – should consider re-domiciling and changing operations a bit to take advantage of  the new law.

 

Anticipating the Governor’s signature on HB2114 this week, Arizona should have a very strong law defining independent contractors. To paraphrase:

ANY EMPLOYING UNIT CONTRACTING WITH AN INDEPENDENT CONTRACTOR MAY PROVE THE EXISTENCE OF AN INDEPENDENT CONTRACTOR RELATIONSHIP FOR THE PURPOSES OF THIS TITLE BY THE INDEPENDENT CONTRACTOR EXECUTING A DECLARATION OF INDEPENDENT BUSINESS STATUS, and by the contractor declaring the following:

… THE CONTRACTOR is operating an independent business and providing services as an independent contractor; the contractor acknowledges the absence of an employment relationship without any claim to UI benefits or other rights arising from an employment relationships; that the contracting party is not responsible to withhold any tax; the contractor is responsible for his or her tax obligations, for obtaining licensing, registrations, or other authorizations that would be necessary for rendering the contracted services.

There will be six of ten categories that the contractor acknowledges as existing in the relationship, most of which can  – or already are – in practice with our transport partners.

Perhaps the best benefit for those of us in the trenches who spend time educating courts and state agencies to the distinction between independent contractors and company employees is the explanation in the new law that “any supervision or control exercised by the employing unit to comply with any statute, rule, or code adopted by the federal government, this state …may not be considered for the purposes of determining the independent contractor or employment status of any relationship…”

This will eliminate the hang-up that judges and agencies see as indicia of employment control. Since all motor carriers and freight brokers – to some degree – are obligated to enforce drivers to adhere to FMCSR regulations for hours of service, safe operations on the road, off-duty, and in pre-trip operations, as well as in communications with dispatch personnel, customers and general safe and efficient routing, this phrase eliminates that argument.

I would recommend that each of us review and amend – slightly, but quite importantly – our ICOAs with our owner-operators so as to comply with this law. Thereafter I expect a slight learning curve in educating state agencies, Work Comp insurance underwriters, courts and, not the least, negotiating with our contractors.

But this new law – expected to be signed by Governor Ducey this week, and effective August 6th – will unburden Arizona businesses from the vestige of impossible compliance with conflicting federal and state laws, and some costly litigation efforts.

Perhaps another benefit, which was envisioned bringing this Bill to fruition, is making Arizona more attractive to businesses across the West, particularly California companies escaping burdensome – and conflicting – regulations and insurance rates.

Re-domestication efforts can be considered. There are a few boxes to check off as companies consider this, and the benefits and detriments should be considered individually.