Arizona Transportation Corridor

The American Transportation Research Institute just released findings of its 2017 update to the operational cost of Trucking, aptly called, An Analysis of the Operational Costs of Trucking. Some interesting excerpts:

The analysis found that the average CPM was $1.592 for 2016, up one percent from the costs of $1.575 found in 2015. The total marginal costs for TL was $1.42; for LTL, it was $1.74; and Specialized was $1.83.

As we know, the trucking industry hauls most of freight in the United States, accounting for 66 percent of the nation’s freight tonnage and 73 percent of freight value. A typical truck-tractor in the ATRI sample was reported to have driven 103,945 miles per year, compared to just 25,511 miles for straight trucks.

Respondents reported holding equipment for more miles, but slightly fewer years compared to the previous year’s analysis. This indicates that trucks are being used more intensively each year and are likely wearing out in less time than before

Though new truck models are becoming more fuel efficient, indications of an increase in fuel economy have lagged. For example, the overall fuel economy of the respondent sample held steady at an average of 6.3 MPG

Fuel costs have consistently been the biggest MC line-item expense across most of the years ATRI has conducted this research, and generally account for approximately 30 to 40 percent of a motor carrier’s CPM.24 However, due to the continual steady decline of fuel prices in 2015 and early 2016, fuel’s share of a carrier’s MC was lower than historically experienced and was in fact surpassed by driver wages for the second consecutive year.

Many industry shifts have continued to exert upward pressure on driver pay. In fact, in 2016 both driver wages and benefits grew for the fourth consecutive year, and are now ranked as the biggest cost center for motor carriers in ATRI’s sample for the second consecutive year. Chief among these shifts has been the much-discussed shortage of qualified drivers, a shortage that continued to plague the industry in 2016. Truck insurance costs increased to 7.5 cents per mile.

Most truckload drivers are paid on a per-mile basis while LTL P&D drivers are generally paid by the hour. Survey respondents indicated that average truck driver pay per mile was 52.3 cents in 2016, marking four years of continuous increases. In terms of hourly wages, the 2016 CPM figure translated to $20.91.

 

Regards,

Jim.mahoney@jfm-lawfirm.com

 

ELD Mandate and Compliance 

The ELD compliance requirement will present several operational speedbumps, which will slow velocity and economics of motor carriers, large and small.

How to record yard moves, and is moving a trailer to a dock, dropping it and going bobtail back against the wall count as “on duty, driving,” or “off duty.” It matters because savvy drivers will figure out how not to record “on duty, driving,” because the DOT penalty for driving over hours is 10 hours out-of-service.

ELDs record time in 1 minute increments, incorporate cameras, record hard braking, speeding, and hard cornering.

Who’s to say detention time is on duty, not driving, or personal conveyance usage. Certainly detention time plays a huge role in efficiencies and drivers can be caught using long/lat placements.

Will the FMCSA address the issues of detention or the inability to find parking in a reasonable amount of time? Detention affects driver fatigue, but there’s not much done about it by the Agency. The FMCSA was authorized to do something under MAP 21.

Don’t forget, if you’ve leased a rental truck for less than 30 days, you don’t need an ELD; paper logs will suffice.

Regards,

Jim.Mahoney@jfm-lawfirm.com

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

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

 

 

 

 

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.

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.

 

107 - Copy

Los Angeles and Long Beach turn times are causing shippers to look elsewhere to land cargo – what does this mean to you?

The average turn time for southern California terminals is now more than 90 minutes. And you ask, “How does this affect my costs – how much will shippers pay for the ‘convenience of California?'” and “Who would ever want to be a contract dray driver now?” considering these slow turns deliver meager pay on leased or owned trucks that cost so much to comply with California and Port clean air rules. It’s no wonder the Teamsters are having so much success in the short term… That’s short term.

Who will pay? Shippers, cargo owners, motor carriers.

Shipper alternatives?

The Mexican port of Lázaro Cárdenas is home to a deep-water port handling containers, dry bulk and liquids. APM’s new Terminal 2 project has direct access to US and Mexican corridors handling a million TEU’s. The US is the destination of 78% of Mexican exports, and also provides 49% of Mexico’s imports.  The U.S. and Mexican railroads pass freight from one jurisdiction to the other at six major border crossings. The U.S. sides of these crossings are in San Ysidro and Calexico, Calif.; Nogales, Ariz.; and El Paso, Eagle Pass, and Laredo, Texas.

We saw Kansas City Southern play this port more than ten years ago, gearing up their Mexican sub to bring direct rail access to Texas and all up into the Midwest. But why should you not think about more western crossings?

There’s also the small Port of Ensenada in Baja that’s siphoning cargo bound for the maquila manufacturing operations further inland in Mexico and the US.

Each offers transportation corridors to California, Arizona, and Nevada, bypassing the Los Angeles Basin and its problematic labor, over-the-top regulations, and expensive breakbulk warehouses.

How May This Affect Your Transportation Business?

Your customers will be looking for transport cost reductions. They may already be using Mexican ports. You may want to consider an alliance with a Mexican motor carrier. I can help with that.

If global trade is not currently part of your business, 2016 may be the year to think and act beyond U.S. borders. If you are already doing business internationally, that’s good, because approximately 95 percent of the world’s consumers live outside the United States, and the IMF estimates 87 percent of all economic growth will occur in the next five years.

The rise of e-commerce, combined with advances in shipping and logistics, allows even small organizations to reach customers abroad. If you can help the transportation needs of the nearly 300,000 American businesses that presently engage in global trade, you’re on the right track.

 

 

http://jfm-lawfirm.com