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before the recession out of the LTL indus-try, Stotlar said. Even so, Con-way Freight was rocked by a flood of low-priced freight that clogged its network when it engaged in a 2009 pricing war. It took a change of management and a back-to-basics reorga-nization focused on productivity and LTL yield to restore balance.

The surviving LTL carriers are more sophisticated, running streamlined, more efficient networks, and were much better companies as a result, Stotlar said.

As the economy shifted from recession to recovery, LTL carriers shifted their re-engineering efforts from taking out capacity to bolstering margins by improving service, Pierce said. The industry spent some time last year trying to improve its margins, and the real results are evident, he said. The public carriers reported improved yields. Now the market is flattening out, and if you want to continue to hold onto your higher margins, the best thing to do is improve ser-vice through network enhancements, rather than going back to lower rates.

Those enhancements may include hir-ing drivers, upgrading automated dispatch systems and freight management systems, merging terminals and closing or opening facilities but to shippers, they boil down to better transit times. From the top down, carriers have been vying to get freight to shippers and to end markets quicker, whether they operate national, interregional or regional networks.

In April, Reliance Network member LTL carrier Pitt Ohio launched its first TRNet Express Lane providing two- to three-day service from its Mid-Atlantic region to Cali-fornia, Arizona and Nevada. In September, Pitt Ohio launched a TRNet Express Lane to Texas, in cooperation with Averitt, while Averitt launched an Express Lane to the West Coast in combination with partner carrier Mountain Valley Express.

Were running teams from our gate-way in Nashville to Los Angeles, and anyone shipping next-day to Nashville on a Thursday or Friday can have their shipment delivered in LA on Tuesday, a two- to three-day transit time, Pierce said.

Thats been very appealing to customers, he said. Were looking at running gateway teams out of Dallas to Portland in the North-west. In designing the express network, We try to select lanes in certain markets where the data tell us opportunities lie. Its a regional concept with a national reach. JOC

Contact William B. Cassidy at wcassidy@joc.com.

bmC-32EndORSEmEnT: R.I.P.?ThE bmC-32 CARgO LIAbILITy EndORSEmEnT has been gone for more than a year, extinguished in March 2011 by the Federal Motor Carrier Safety Administration. But does anyone really miss it? Many of you probably have no idea what the BMC-32 Endorsement was or what it meant, let alone that its no longer with us. So first, we should look at why it existed. The BMC-32:

l Provided proof of a motor carriers cargo insurance policy to a shipper.

l Was originally required by the Interstate Commerce Commission after many trucking companies expe-rienced financial problems.

l Was an endorsement to a carriers cargo liability policy that guaranteed a minimum level of coverage for loss or damage in transit at $5,000 per shipment and $10,000 per incident.

l Protected shippers with an ironclad assurance that no matter what the financial condition of their car-rier, their cargo had the minimum level of insurance.

l Meant a shipper could file a damage claim directly against the carriers insurer if the carrier went out of business.

l Was one of the last vestiges of federal economic regulation of motor carriers.

l Now only exists in the world of movers of household goods.

The problem with this protection was that the $5,000/$10,000 minimums remained fixed and became unimportant as inflation and technology raised the value of shipments well beyond the mandated protection. A full truckload of cell phones, for example, can easily be worth more than $1.5 million, while a truckload of paper used for printing business cards might be worth $100,000. Full trailerloads of less-than-truckload ship-ments could easily exceed $2 million in total value.

For most shippers, the order of insurance recovery precedence further diminished the value of BMC-32 protection to the point of irrelevance. A shipper collects on cargo loss and damage claims in this order: First, a claim is filed with the carrier to invoke the carriers coverage up to the maximum shipment value specified in the carriers rules tariff or shipper-carrier contract. If, after receiving payment from the carrier, the loss is still not satisfied, the shippers own deductible comes into play. If there is still unrecovered loss, a claim for the balance would be filed with the shippers outside insurance company.

If a shipper is self-insured up to a certain amount, the order of payment changes to insert the shippers corporate-insurance-program-imposed deductible in essence, a second, corporate level of self-insurance before filing a claim for the remainder against the shippers insurance company. What follows is an example of the tortuous route a loss

byTHOMAsL.TANELANdGEORGEA.yARUsAvAGE

Thomas L. Tane

George A. Yarusavage

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and damage claim can take, with typical amounts used for clarity.

Some shippers, especially divisions of large corporations, have tried to get around their imposed corporate deduct-ibles by purchasing shipment-specific valuation coverage from their carrier to insure against losing that deductible. Carriers cannot sell insurance or they would be bound by each states cumber-some insurance regulations, but they can and do sell valuation coverage in thousand-dollar increments, which repay a shipper for higher damage or loss due to the carriers fault. Because the looks like a duck discussion on valuation would consume another article by itself, lets acknowledge that the valuation charges of a carrier raise the carriers loss and damage liability.

However a division or plant might try to insure away their deductible expo-sure, corporate insurance departments quickly clamp down on this practice, and still require their operations to absorb the standard deductible before any corporate coverage can be accessed. Therefore, many operations will simply purchase valuation coverage for the entire shipment value, in violation of Insurance Department rules, because their budget cant afford even the shared loss (deductible) their insurance process mandates, while the relatively low extra-valuation charges can be absorbed with little financial pain.

We havent mentioned the BMC-32 yet because it would have been irrelevant to the shipper, because only the shippers deductible is at risk even if the carrier went bankrupt, the low $5,000 provided by the BMC-32 isnt significant. Granted, individual small shipments made by smaller shippers might theoretically be covered by a $5,000 policy, but in a trailerload of LTL shipments, the BMC-32-mandated $10,000 per incident could have ended up as pennies on the dollar shared among all affected shippers.

When the FMCSA stated in its deci-

sion to end the BMC-32 requirement that shippers are like any other party in a transaction where one party will be providing services to another party and that shippers should ask carriers for copies of their policies, including all endorsements, exclusions, and dec-larations, to see whether the shippers property or interests will be served by a particular motor carrier, they placed cargo insurance in the same category as every other element of inter-company transactions, even though, in that final rule, the FMCSA stated that elimina-tion of the BMC-32 endorsement would make it less convenient to confirm the existence of cargo insurance.

Better-managed large shippers and others with leverage in the form of traf-fic that carriers want or need to haul have specified, for years, in their long-term contracts with their carriers insurance minimums at levels much higher than the BMC-32s $5,000/$10,000. And the best-in-class contracts have required the carrier or his agent to provide proof of cargo and general liability coverage, plus add the shipper as a named insured on these policies. This is prudent because it offers the following advantages over the traditional Certificate of Insurance:

l It gives the shipper full rights to cov-erage for losses arising out of the services the carrier provides.

l It requires the insurer to notify the shipper of any material changes to, or cancellation of, the policy.

l It increases the probability the insurer will accept the claim more quickly.

As you can see, and probably already knew, most shippers today dont miss the BMC-32, if they ever cared about it, because their standards of due diligence for all suppliers would include confirming the existence of adequate insurance in all

critical categories. Some smaller shippers, however, without the protection of an overall contract, and who therefore must rely on the carriers paperwork or tariff rules for loss and damage recovery, would be limited to whatever their carrier speci-fies in their tariffs unless those shippers have purchased their own overall cargo insurance policy.

Finally, of far greater importance to shippers than cargo loss and damage coverage are the automobile and liability coverage their carriers maintain. In our increasingly litigious society, the search for the deepest pockets when people are harmed or property is damaged invari-ably leads to the shipper being named in whatever legal actions result, so having carriers with sufficient coverage in all of these areas is critical. And only each shipper can determine, under its own risk management program, what levels of insurance should be required of all their carriers, as well as their other suppliers.

The BMC-32 in its final years wasnt really protecting many shippers or ship-ments against cargo loss and damage, and offered nothing to protect against the far greater exposures of a carriers insufficient general liability coverage. Since the 1981 deregulation of the motor carrier industry, the cargo-loss coverage situation, like carrier pricing, routing and other insurance protections, has evolved into the basic buyer beware relation-ship. And so the BMC-32, like other transportation economic regulations, is gone and forgotten resting in peace and not missed. JOC

Thomas Tanel is founder and CEO of CATTAN

Services Group and chair of the Institute for Supply

Managements Logistics and Transportation Group.

Contact him at tanel@cattan.com. George Yarusavage

is a principal with Fortress Consulting and treasurer

of the ISMs Logistics and Transportation Group

as well as a member of the board for the American

Society of Transportation and Logistics. Contact him

at gyarusavage@yahoo.com.

COmmEnTARy

Since the 1981 deregulation of the motor carrier industry, the cargo-loss coverage situation, like carrier pricing, routing and other insurance protections, has evolved into the basic

buyer beware relationship.