Safety Regulations and Paradigm Shifts

Transcription

1 Safety Regulations and Paradigm Shifts by Henry E. Seaton, Esq. Seaton & Husk, L.P. Transportation and Logistics Council 41 st Annual Conference March 23-25,

2 30 years ago, deregulation: Created increased truckload competition and supply; and Initiated procurement law as a reaction to the filed rate doctrine fiasco. New safety regulations 30 years later will irrevocably change shipper/broker/carrier relations and the use of shipper dictated terms in procurement contracts. 2

3 Pending Safety Regulations and Supply and Demand Issues 3

4 1. Sleep Apnea STOP-BANG (Snoring, Tiredness during daytime, Observed apnea, high blood Pressure, Body mass index, Age, Neck circumference, Gender) Average age of drivers is 50 Early retirement of road warriors 4

5 2. Insurance ANPRM: Proponents advocate as much as $9,000,000 to $10,000,000 insurance minimum Insurance market has no appetite Would raise settlement value of all suits Giving competitive advantage to only largest carriers 5

6 3. Driver Training Reg-Neg: Driver training school and safety advocates want CDL training requirement Would substantially raise entry barrier requiring new entrant scholarship or contracts with future employer requiring repayment 6

7 4. Hours of Service Requirements Circadian rhythms and nighttime driving 34 hour restart and new study Reduces productivity/frustrates owner-operator model and 1 truck, 1 driver 7

8 5. FDA Rules All parties agree increase cost of transporting perishable foodstuffs/cargo claims Increased costs must be passed on to shipper and ultimate consumer 8

9 6. URS Unified Registration System 40 page application will frustrate new applicants. Required evidence of insurance and agents for all (private and exempt). System has been outsourced and will implode. 9

10 7. Agency has Sought Authority over Shippers and Brokers Requiring or permitting will stifle delivery demands beyond reasonable dispatch. Prepare to pay detention and to accommodate carrier unloading upon arrival. 10

11 8. CSA 2010 / SMS Methodology Liability runs up the supply chain Shippers and brokers duped into becoming willing stakeholders Failure of the industry to timely examine SMS methodology Warmed over SafeStat Enforcement anomalies (5 states produce 45% of unsafe driving) Peer group creep No correlation to safety Insufficient data to measure 90% of carriers Cannot determine crash preventability Profiling of non-fleet trucks / ISSP 11

12 Crash Ratios and the Law of Large Numbers 10 truck operator involved in 2 non-preventable accidents is over 1.6 million crashes per million threshold. Carriers with 3 Alerts Accidents / Million Miles % of small carriers with 3 had no accidents in past 2 years. Proves volatility point, the larger the size, the less fluctuation. Power Units 12

13 FMCSA Regression of Averages Fatigued Driving Fatigued Driving Plot of 35,933 Carriers 13

14 FMCSA Regression of Averages Unsafe Driving Unsafe Driving Plot of 26,435 Carriers 14

15 Rigged to Fail Law of large numbers / insufficient data 90% of carriers cannot be measured (GAO) Agency cannot determine crash preventatiliby (3/4 th of crashes are not carriers fault) 15

16 Now all stakeholders recognize methodology is fatally flawed, but: Some seek competitive advantage; and Shippers asleep at the wheel No recognition it is the Agency s job to certify safety 16

17 Legislation and Congressional Oversight Proposed in 2 bills last Session. Will be reintroduced. What is needed is a simple affirmation of preemption of state laws / it is the FMCSA s job. No second guessing required. State law causes of action up the supply chain trumped under

18 Double Brokerage and MAP-21 Increase in bond to $75,000 may have helped but is no remedy. Chain of custody issues and double payment liability is largely shipper s fault: Don t confirm retained carrier actually picks up shipment at point of origin and delivers at destination Do not require broker to maintain constructive trust as required by regs Ostrich like approach is not winsome 18

19 Shifting Paradigm Resulting from Restricted Supply Carriers will no longer sign take it or leave it procurement contracts. The just sign it, everybody does argument will not work. 19

20 How Aggressive Procurement Contracts are Counterproductive for Carriers and Brokers Vicarious liability Shippers insist broker accept carrier duties Shipper places on broker the duty to ensure : Driver is qualified Equipment is in good working condition Hours of service are complied with; and Worker s compensation benefits are paid, etc. This type of language makes the broker vicariously liable under variety of state law theories (e.g.): In control of carrier Joint venture with carrier In a contractor/subcontractor relationship with carrier Assumes non-delegable duty as de facto carrier 20

21 Simple Requirement that broker is solely responsible for carrier selection and indemnity is sufficient. 21

22 Use of SMS Methodology Shipper requires that carrier or broker (when selecting carrier) use arbitrary SMS threshold higher than safety fitness standard imposed by FMCSA Shipper in effect has admitted state law credentialing obligation Opens the door for plaintiff s bar (e.g., watermelons and bricks) 22

23 Cargo Claims in Excess of Carmack Broken seals Reject it, crush it and dump it Shippers insist on sole discretion with respect to salvage Shipments rejected for broken seals are dumped without inspection Shipper fails to recognize carrier s insurer will not pay claim!! Shipper and broker attempt to enforce by offset liability which exceeds Carmack Creates spiral of death for small carrier Need for joint inspection and collaborative effort to deal with issue in context of FDA rules 23

24 Unilateral Offset Driven by defective cargo insurance Yet leads to unadjusted claims / no insurance settlement Carriers cannot accept 24

25 Indemnity and Buy Me Insurance Shipper insists on broadly worded indemnity without reference to breach or negligence by carrier including for shippers own negligence. Ignore affect of anti-indemnity statutes and need for evenhanded bilateral indemnification. Risk transfer device broker cannot promise shipper everything and expect to be held harmless by poor man s indemnity from small carrier. Broker unlike carrier is not beneficiary of state anti-indemnity laws. 25

26 Freight Payment Shippers selecting a 3PL must recognize that 3PL is its agent. Protracted payment terms in excess of 30 days without interest and no shipper recourse is unacceptable to carriers. Broker is not a bank and should not be required to finance the float or to accept surety obligation to carriers if shipper does not pay. Outsourcing without accountability is frivolous. 26

27 Conclusion FMCSA has no appetite to encourage or protect the shipping community. It abandoned the simple cargo insurance requirement years ago. Views shippers and brokers as a source of recovery for plaintiff s bar. Procurement contracts designed for general vendors by corporate counsel: Will not withstand carrier scrutiny when truckload supply and demand is balanced. Shippers and brokers need to be proactive in insisting on enforcement of federal rules of commerce that: protect the shipping public against upstream liability for truck accidents in the absence of direct shipper negligence; exercise great care to avoid self-inflicted wounds and lengthy procurement contracts. 27