FREIGHT CLAIMS & CARGO INSURANCE: AN OVERVIEW

Presented by: Michael Stoll Vice President GSIS Inc. MICHAEL@GSIS.COM Phone: 972-923-1971

I. KNOW THE LEGAL ROLES & LIABILITIES OF THE PARTIES YOU ARE DEALING WITH.

WE DEFINE SHIPPER – AS A PERSON OR COMPANY THAT TRANSPORTS OR RECEIVES GOODS BY LAND, SEA OR AIR.

OXFORD DICTIONARIES

I. KNOW THE LEGAL ROLES & LIABILITIES OF THE PARTIES YOU ARE DEALING WITH

A CARRIER IS DEFINED BY LAW AS -- “A MOTOR CARRIER, A WATER CARRIER AND A FREIGHT FORWARDER”. “A PERSON PROVIDING COMMERCIAL MOTOR VEHICLE TRANSPORTATION FOR COMPENSATION.” THEY “… ARRANGE OR OFFER TO ARRANGE THE TRANSPORTATION OF SHIPMENTS WHICH THEY ARE AUTHORIZED TO TRANSPORT AND WHICH THEY HAVE ACCEPTED AND LEGALLY BOUND THEMSELVES TO TRANSPORT.” THEY “SHALL PROVIDE SAFE AND ADEQUATE SERVICE, EQUIPMENT, AND FACILITIES,”

49 U.S.C. § 13102, Definitions (3) & (14) , 49 C.F.R. §371.2 (a) & 49 U.S.C. §14101 (a)

I. KNOW THE LEGAL ROLES & LIABILITIES OF THE PARTIES YOU ARE DEALING WITH

A FREIGHT FORWARDER IS DEFINED AS -- A PARTY " HOLDING ITSELF OUT . . . TO PROVIDE TRANSPORTATION OF PROPERTY FOR COMPENSATION AND

IN THE ORDINARY COURSE OF ITS BUSINESS (A) ASSEMBLES AND CONSOLIDATES OR PROVIDES FOR ASSEMBLING AND CONSOLIDATING AND PERFORMS OR PROVIDES FOR BREAK-BULK AND DISTRIBUTION OPERATIONS OF THE SHIPMENTS; (B) ASSUMES RESPONSIBILITY FOR THE TRANSPORTATION FROM THE PLACE OF RECEIPT TO THE PLACE OF DESTINATION; AND (C) USES FOR ANY PART OF THE TRANSPORTATION A CARRIER SUBJECT TO JURISDICTION UNDER THIS SUBTITLE." 49 U.S.C. § 13102, Definitions (8)

A PARTY MEEETING THIS DEFINITION IS DEFINED LIABLE AS A CARRIER. “a freight forwarder is both the receiving and delivering carrier.” 49 U.S.C. § 14706,

(a)(1) & (2): Chicago, Milwaukie, St. Paul and Pacific R. Co. v. Acme Fast Freight, Inc., 336 U.S. 465, 69 S.Ct. 692, 93 L.Ed. 817 (1949). “the freight forwarder shall be deemed Both the receiving and delivering transportation company”.

I. KNOW THE LEGAL ROLES & LIABILITIES OF THE PARTIES YOU ARE DEALING WITH

FREIGHT BROKER -- “THE TERM “BROKER” MEANS A PERSON, OTHER THAN A MOTOR CARRIER OR AN EMPLOYEE OR AGENT OF A MOTOR CARRIER…, THAT SELLS, OFFERS FOR SALE, NEGOTIATES FOR, OR HOLDS ITSELF OUT … AS SELLING, PROVIDING, OR ARRANGING FOR, TRANSPORTATION BY MOTOR CARRIER FOR COMPENSATION.” 49 U.S.C. § 13102 (2).

“MOTOR CARRIERS, OR PERSONS WHO ARE EMPLOYEES OR BONA FIDE AGENTS OF CARRIERS, ARE NOT BROKERS WITHIN THE MEANING OF THIS SECTION WHEN THEY ARRANGE OR OFFER TO ARRANGE THE TRANSPORTATION OF SHIPMENTS WHICH THEY ARE AUTHORIZED TO TRANSPORT AND WHICH THEY HAVE ACCEPTED AND LEGALLY BOUND THEMSELVES TO TRANSPORT.”

49 C.F.R. §371.2(a). THIS DEFINITION EMPHASIZES THE CONGRESSIONAL INTENT THAT A CARRIER IS NOT A

BROKER EVEN WHEN IT ACTS LIKE ONE --TO “ARRANGE OR OFFER TO ARRANGE THE TRANSPORTATION…” -- AND THAT BROKER & MOTOR CARRIER ROLES ARE DISTINCTIVELY DIFFERENT

A BROKER & FREIGHT FORWARDER MAY ALSO BE REFERED TO AS A NON ASSET INTERMEDiARY

I. KNOW THE LEGAL ROLES & LIABILITIES OF THE PARTIES YOU ARE DEALING WITH

THE PARTIES TO A LOGISTICS TRANSACTION ARE DEFINED AS DISTINCTLY DIFFERENT UNDER LAW AND ASSUME DIFFERENT LIABILITY. Infinity Air, Inc. v. Echo Global Logistics, Inc., No. 3:13-cv-00307-MO (U.S. District Court for the District of Oregon, June 20, 2013), RULED THAT (“§ 14706 [CARMACK] imposes liability on a carrier for all losses relating to goods it transports in Interstate commerce. It imposes no liability on brokers, and brokers and carriers are distinct under the Act.”)

I. KNOW THE LEGAL ROLES & LIABILITIES OF THE PARTIES YOU ARE DEALING WITH - INSURANCE

BECAUSE LIABILITY IS DEFINED AS DISTINCTLY DIFFERENT BY ROLE -- EACH LEGAL ENTITY TO THE LOGISTICS TRANSACTION SHOULD HAVE AN INSURANCE POLICY WITH A DISTINCTLY DIFFERENT COVERAGE TRIGGER DESIGNED FOR & RESPONSIVE TO THE UNIQUE LIABILITY OF EACH PARTY.

I. KNOW THE LEGAL ROLES & LIABILITIES OF THE PARTIES YOU ARE DEALING WITH – FEDERAL JURISDICTION

49 U.S.C. § 14501(c)(1) AND SUPPORTIVE COURT DECISIONS STIPULATE THAT CARRIERS, FREIGHT FORWARDERS AND FREIGHT BROKERS ARE SUBJECT TO FEDERAL JURISDICTION – THEREBY PRECLUDING STATE COMMON LAW TORT CLAIMS. “ROUTINE BREACH OF CONTRACT ACTIONS… ARE NOT PREEMPTED.” Deerskin Trading Post, Inc. v. United Parcel Service of America, Inc., 972 F. Supp. 665, 669 (N.D. Ga. 1997)

AMERISWISS TECHNOLOGY v. MIDWAY LINE OF ILLINOIS CIVIL NO. 11-CV-148-LM. 888 F.Supp.2d 197 (2012)2012 DNH 173 (“the court need not determine whether Robinson was a carrier or a broker because … Ameriswiss’s negligence claim and all three of MB Insurance’s claims are impliedly preempted by the Carmack Amendment and expressly preempted by the ICCTA [49 U.S.C. § 14501(c)(1)].”

A CASE THAT I MANGAGED, RULING ON POINT TO THIS IS Perry Ellis International Inc, v ACT Fulfillment Inc. Et Al, Superior Court of CA, County of LA, BC515742, (2014). -- citing Ameriswiss v. Midway

H R CONF REP NO 103-677 103d Cong 2d Sess 85 (1994): “Section “14501(c)(1) was originally codified at 49 U.S.C. 11501(h)(1) (1994).See FAAA Act § 601(c), 108 Stat. 1606. It was amended and recodified in 1995.See ICC Termination Act of 1995, Pub. L. No. 104-88, § 103, 109 Stat. 899.

I. KNOW THE LEGAL ROLES & LIABILITES OF THE PARTIES YOU ARE DEALING WITH - LIABILITY

CARRIERS AND FORWARDERS ARE GOVERNED BY CARMACK -- A FREIGHT BROKER IS NOT. 49 U.S.C. § 14706(a)(1) [CARMACK] STIPULATES THAT “The liability imposed under this paragraph is for the actual loss or injury to the property caused by (A) the receiving carrier, (B) the delivering carrier, or (C) another carrier…” InTransit, Inc. v. Excel North American Road Transport, Inc., 426 F.Supp.2d 1136, 1140-1141 (D.Or. 2006), RULED THAT “this [Broker] relationship falls outside of the shipper-carrier relationship and outside of the preemptive field of the Carmack Amendment.”). Edwards Bros., Inc. v. Overdrive Logistics, Inc., 581 S.E. 2d 570 (Ga. 2003). HELD THAT (“the Carmack Amendment was enacted to protect the rights of shippers suing under a receipt or bill of lading, not brokers.”)

I. KNOW THE LEGAL ROLES & LIABILITES OF THE PLAYERS YOU ARE DEALING WITH - CARMACK

THE CARMACK AMENDMENT IS INTENDED TO GOVERN & PROVIDE CERTAINTY AND UNIFORMITY IN THE SHIPPER - CARRIER TRANSACTION CONCERNING CARGO DAMAGE IN TRANSIT

AND IS HELD TO PREEMPT STATE AND COMMON LAW CLAIMS – INCLUDING CONTRACTUAL BREACH Hughes v. United Van Lines, Inc., 829 F.2d 1407 (7th Cir. 1987) & Hoskins v. Bekins Van Lines, 343 F.3d 769, 777 (5th Cir. 2003).

I. KNOW THE LEGAL ROLES & LIABILITIES OF THE PARTIES YOU ARE DEALING WITH - CARMACK

UNDER CARMACK A PLAINTIFF MUST SHOW 1) DELIVERY TO THE CARRIER IN GOOD CONDITION; 2) ARRIVAL IN DAMAGED CONDITION; AND 3) THE AMOUNT OF DAMAGES CAUSED BY THE LOSS. THERE ARE 5 DEFENSES TO CARRIER LIABILITY UNDER CARMACK:

THAT THE ESTABLISHED DAMAGE WAS CAUSED BY (A) THE ACT OF GOD; (B) THE PUBLIC ENEMY; (C) THE ACT OF THE SHIPPER HIMSELF; (D) PUBLIC AUTHORITY; OR (E) THE INHERENT VICE OR NATURE OF THE GOODS A CARRIER MAY WAIVE CERTAIN CARMACK RIGHTS & REMEDIES BY EXPRESS WRITTEN AGREEMENT. 49 U.S.C. §14101 (b)

I. KNOW THE LEGAL ROLES & LIABILITIES OF THE PARTIES YOU ARE DEALING WITH – CARMACK TIME THRESHHOLDS

CARMACK PROVIDES THAT SHIPPER CLAIMS AGAINST CARRIERS MUST BE MADE WITHIN 9 MONTHS OF SHIPMENT DATE AND CIVIL ACTIONS MUST BE INSTITUTED WITHIN 2 YEARS OF A CLAIM DENIAL

49 U.S.C. Section 14706(e). Consolidated Rail Corp. v. Primary Industries Corp., 868 F.Supp. 566, 577 (S. D. NY 1994).

I. KNOW THE LEGAL ROLES & LIABILITIES OF THE PARTIES YOU ARE DEALING WITH COMMON SOURCES OF PROBLEMS

A COMMON SOURCE OF PROBLEMS IS A GAP BETWEEN SHIPPER EXPECTATIONS AND CARRIER OBLIGATIONS. THIS GAP IS CREATED BY

DISCREPANCIES BETWEEN SHIPPER CONTRACTS WTH NON ASSET

INTERMEDIARIES VERSUS NON ASSET INTERMEDIARY CONTRACTS WITH CARRIERS.

THESE AGREEMENTS MUST CORRELATE

I. KNOW THE LEGAL ROLES & LIABILITIES OF THE PARTIES YOU ARE DEALING WITH – COMMON SOURCES OF PROBLEMS

IT SHOULD BE NOTED THAT TARIFF LIMITATIONS REQUIRE A WRITTEN DECLARATION OF THE SHIPPER OR A WRITTEN AGREEMENT." 49 U.S.C. §14706(C)(1)(A) & 42 U.S.C. 13710(a)(1)

ON POINT TO THIS ARE, Converting Systems Inc. v. Hot-Line Freight System Inc., 2003 Ill.App. Lexis 1393 (1st Dist.,

Nov. 26) (“anything less than explicit language on the bill of lading appears insufficient to provide a shipper with actual notice of a carrier's liability limitations”).

AND Hughes Aircraft v. North American Van Lines, 970 F.2d 609, 611-612 (9th Cir). (“This [tariff]

agreement must be in writing and must contain an "inadvertence clause," which specifies the "released rate" and states that such a rate will apply unless the shipper expressly declares otherwise.”)

THE COURTS CONSISTENTLY AGREE THAT THERE MUST BE MUTUAL

AGREEMENT BETWEEN SHIPPER & CARRIER FOR A VALID TARIFF.

I. KNOW THE LEGAL ROLES & LIABILITIES OF THE PARTIES YOU ARE DEALING WITH – COMMON SOURCES OF PROBLEMS “SUB-BROKERING” -- BY A NON ASSET

INTERMEDIARY TO ANOTHER NON ASSET INTERMEDIARY OR BY A CARRIER TO ANOTHER CARRIER OR NON ASSET INTERMEDIARY – IS A COMMON SOURCE OF PROBLEMS

SUB-BROKERING CREATES ENHANCED RISK INSOFAR AS IT PRECLUDES ANY DUE DILIGENCE OR QUALIFICATION TOUCH POINT WITH THE ULTIMATE CARRIER SUB-BROKERING FOR INTERMODAL SHIPMENTS MAY INCUR ADDITIONAL UNANTICIPATED NON-COMPLIANCE COSTS IMPOSED BY RAIL RULES & CIRCULARS

I. KNOW THE LEGAL ROLES & LIABILITIES OF THE PARTIES YOU ARE DEALING WITH – COMMON SOURCES OF PROBLEMS

MOTOR CARRIERS WHO HAVE INSUFFICIENT OR NO APPLICABLE CARGO INSURANCE IS A COMMON SOURCE OF PROBLEMS

IT SHOULD BE NOTED THAT NON ASSET INTERMEDIARY CONTINGENT CARGO LEGAL LIABILITY INSURANCE INURES TO THE INTEREST OF THE INSURED NON ASSET INTERMEDIARY AND DOES NOT DIRECTLY PROTECT THE SHIPPER

-- SOLUTION -- A SHIPPER CAN PROVIDE CARGO INSURANCE -- SOLUTION -- A SHIPPER CAN REQUIRE AN INTERMEDIARY TO

PROVIDE ALL- RISK SHIPPER’S INTEREST CARGO INSURANCE DESIGNATING THE SHIPPER AS A NAMED INSURED

PREFERABLY BOTH SOLUTIONS MAY APPLY

I. KNOW THE LEGAL ROLES & LIABILITES OF THE PARTIES YOU ARE DEALING WITH – COMMON SOURCES OF PROBLEMS

WHEN ROLES AND LEGAL OBLIGATIONS OF THE PARTIES ARE INACCURATELY STATED, PROBLEMS INEVITABLY RESULT, SUCH AS:

THE OTHER PARTY’S INSURANCE IS NOT DESIGNED TO PROVIDE COVERAGE FOR AN INACCURATE AND UNINSURED ROLE ASSUMED UNDER CONTRACT HENCE -- THE OTHER PARTY IS NOT FINANCIALLY PREPARED TO LIQUIDATE ASSUMED CONTRACTUAL OBLIGATIONS -- AS ARISES WITH BROKERS AND FREIGHT FORWARDERS

I. KNOW THE LEGAL ROLES & LIABILITES OF THE PARTIES YOU ARE DEALING WITH – IT SHOULD BE NOTED THAT

BROKERS AND BROKER AGREEMENTS ARE RULED NOT SUBJECT TO CARMACK, INCLUDING BOL RELEASED VALUE LIMITATIONS AND TARIFFS. A CASE THAT I MANAGED, RULING ON POINT TO THIS IS RLI Insurance Company v. G S Transport Inc., 9th. (2012) and ALSO ON POINT IS Edwards Bros., Inc. v. Overdrive Logistics, Inc., 581 S.E. 2d 570 (Georgia, 2003).

THE COURT IN RLI Insurance Company v. G S Transport Inc., ALSO HELD THAT A BROKER MAY HAVE AN INSURABLE INTEREST IN CARGO , INDEPENDENT OF A BENEFICIAL INTEREST, OR LEGAL LIABILITY.

IF A SHIPPER HAS A BOL RELEASED VALUE ARRANGEMENT WITH CARRIERS, IN ORDER TO OBTAIN A PREFERRED RATE, AND ALSO USES A BROKER, THIS RELEASE ARRANGEMENT DOES NOT PREEMPT THE BROKER OR THEIR INSURER FROM ENFORCING A CARRIER’S CONTRACTUAL INDEMNITY OBLIGATION TO THE BROKER FOR FULL VALUE PAID. HENCE, IF YOU ARE A SHIPPER USING A BROKER -- A MUTUAL UNDERSTANDING OF ANY BOL RELEASE TERMS IS PREFERRED

II. USE & MANAGEMENT OF AGREEMENTS

IT IS IMPORTANT: IF YOU USE CONTRACTS – CONTRACT WITH A PARTY ON TERMS CONSISTENT WITH THEIR LEGALLY DEFINED ROLE.

CONTRACTING WITH A PARTY TO PERFORM A ROLE FOR WHICH THEY NOT LEGALLY AUTHORIZED, AND NOT CAPABLE OF PERFORMING, AND CAUSING THEM TO ASSUME OBLIGATIONS THAT ARE NOT COMMERCIALLY FEASIBLE FOR THEM TO INSURE OR TO LIQUIDATE -- IS INHERENTLY PROBLEMATIC BECAUSE

II. USE & MANAGEMENT OF AGREEMENTS

A NON-ASSET INTERMEDIARY CONTRACTUALLY ASSUMING THE ROLE AND OBLIGATIONS OF A MOTOR CARRIER -- FOR WHICH IT IS NOT AUTHORIZED BY LAW AND UNABLE TO PERFORM -- MAY LEAD TO DISPUTE OF ENFORCEABILITY PREDICATED ON THE ARGUMENT OF UNCERTAINTY BETWEEN THE PARTIES … AN UNLAWFUL OBJECT…or IMPOSSIBILITY OF PERFORMANCE IN WHOLE OR IN PART.

AND BECAUSE

IT IS NOT CUSTOMARY PRACTICE FOR SUCH AN INTERMEDIARY TO ASSUME THIS ROLE AND PERFORMANCE OBLIGATION.

II. USE & MANAGEMENT OF AGREEMENTS

IT IS IMPORTANT TO CONTRACT WITH A PARTY ON TERMS CONSISTENT WITH THEIR LEGALLY DEFINED ROLE

TO AVOID DISPUTES AS TO WHAT THE OTHER PARTY MAY MUTUALLY CONSENT TO IN THE AGREEMENT

AND TO AVOID UNCERTAINTY & ENSURE ENFORCEABILITY OVER THE PERFORMANCE AND LIABILITY CONDITIONS OF THE CONTRACT

II. USE & MANAGEMENT OF AGREEMENTS

PERHAPS MOST IMPORTANTLY, IT IS IMPORTANT TO CONTRACT WITH A PARTY ON TERMS CONSISTENT WITH THEIR LEGALLY DEFINED ROLE BECAUSE

IF THE OTHER PARTY IS UNABLE TO OBTAIN INSURANCE FOR THEIR CONTRACTUAL

OBLIGATION – THERE MAY BE NO MEANS OF LIQUIDATING THIS OBLIGATION.

AND YOUR BUSINESS RELATIONSHIP MAY THEREFORE NOT BE PREDICATED ON SOUND CRITERIA.

II. USE & MANAGEMENT OF AGREEMENTS

THEREFORE, IT IS IMPORTANT TO CONTRACT WITH A PARTY ON TERMS CONSISTENT WITH THEIR LEGALLY DEFINED ROLE BECAUSE IT IS PRUDENT BUSINESS TO ASCERTAIN

THAT THE PARTY YOU CONTRACT WITH IS ABLE TO LIQUIDATE THEIR LIABILITY UNDER THE AGREEEMENT BY - INSURANCE

OR CASH ASSETS

II. A SAMPLE PROBLEMATIC PROVISION – IN SHIPPER AGREEMENTS WITH A NON ASSET INTERMEDIARY

STIPULATES THE NON ASSET INTERMEDIARY ASSUMES DIRECT RESPONSIBILITY FOR SUPERVISION OF THIRD PARTY MOTOR CARRIER OPERATIONS, DRIVER HIRING, TRAINING, REGULATORY COMPLIANCE, PROVISION AND MAINTENANCE OF SAFE EQUIPMENT.

THIS OBLIGATION IS PROBLEMATIC BECAUSE IT IS NOT COMMERCIALLY FEASIBLE FOR A NON ASSET INTERMEDIARY TO PERFORM.

II. A SAMPLE PROBLEMATIC PROVISION – IN SHIPPER AGREEMENTS WITH A NON ASSET INTERMEDIARY

STIPULATES THE NON-ASSET INTERMEDIARY ASSUMES DIRECT LIABILITY AS A MOTOR CARRIER

THIS OBLIGATION IS PROBLEMATIC

BECAUSE IT IS NOT COMMERCIALLY FEASIBLE FOR A NON ASSET INTERMEDIARY TO DIRECTLY INSURE OR TO LIQUIDATE BECAUSE

II. A SAMPLE PROBLEMATIC PROVISION IN SHIPPER AGREEMENTS WITH A NON ASSET INTERMEDIARY

THE NON ASSET INTERMEDIARY

CANNOT DIRECTLY INSURE A MOTOR CARRIER FOR THEIR THIRD PARTY BODILY INJURY OR PROPERTY DAMAGE LIABILITY, AND

II. A SAMPLE PROBLEMATIC PROVISION IN SHIPPER AGREEMENTS WITH A NON ASSET INTERMEDIARY

CONTINGENT AUTOMOBILE LIABILITY OR “TRANSPORTATION BROKER” LIABILITY TYPE OF INSURANCE POLICIES WRITTEN FOR NON ASSET INTERMEDIARIES ARE DESIGNED TO COVER THE INTEREST OF THE INSURED NON ASSET INTERMEDIARY – THESE POLICIES DO NOT DIRECTLY COVER THE INTEREST OF THE CARRIER OR THE SHIPPER. SUCH POLICIES DO NOT EXTEND COVERAGE TO THE SHIPPER -- UNLESS THE SHIPPER IS DESIGNATED AN “ADDITIONAL INSURED” ON THE

NON ASSET INTERMEDIARY’S POLICY.

II. SAMPLE PROBLEMATIC PROVISIONS – IN CARRIER AGREEMENTS WITH BROKERS & SHIPPERS

PRECLUSION of CARRIER RESPONSIBILITY TO INSPECT CARGO PRECLUSION of CARRIER LIABILITY ARISING FROM THE ACTS OR

OMISSIONS OF THE BROKER OR SHIPPER “ WITH OR WITHOUT SHIPPER OR BROKER NEGLIGENCE", WHICH MAY ARGUABLY INCLUDE THE VERY "ACT" OF TENDERING CARRIAGE

PRECLUSION of CARRIER RESPONSIBILITY FOR TIMING OF DELIVERY

LIMITS CARRIER LIABILITY TO DAMAGES THAT ARE “DIRECTLY CAUSED” BY THE CARRIER’S “WILLFUL ACTS”, AND PRECLUDES ANY LIABILITY ATTRIBUTED TO “FORCES BEYOND CARRIER CONTROL.”

LIMITS CARRIER LIABILITY TO UNDISCLOSED TARIFF LIMITATIONS, VERSUS LIABILITY AS DEFINED UNDER LAW, AND AS EXPRESSLY UNDERSTOOD BY THE SHIPPER.

CAUSES THE SHIPPER OR BROKER TO INDEMNIFY THE CARRIER FOR ALL COST, ”LIABILITIES AND DAMAGES IN EXCESS OF THOSE AGREED BY CARRIER.”

II. SAMPLE PROBLEMATIC PROVISIONS – IN CARRIER AGREEMENTS WITH INTERMEDIARIES & SHIPPERS

THERE ARE RISK CONSEQUENCES CREATED BY THE CARRIER’S IMPOSITION OF SUCH LIMITATIONS AND OBLIGATIONS IN A CONTRACT, INCLUDING, INADEQUATE CARGO INSURANCE TO PROTECT THE SHIPPER UNINSURABLE THIRD PARTY BODILY INURY AND PROPERTY DAMAGE RISKS FOR THE INTERMEDIARY AND PERHAPS THE SHIPPER. IF THE AGREEMENT IS WITH THE INTERMEDIARY, IT DOES NOT PRECLUDE ACTION AGAINST THE CARRIER FROM THE SHIPPER OR THIRD PARTIES. HENCE THE INTERMEDIARY’S OR SHIPPER’S INABLITY TO INSURE SUCH LIMITIATIONS DOES NOT BENEFIT THE CARRIER, AS INTENDED.

III. INSURANCE ISSUES

YOU SHOULD DETERMINE THAT YOU HAVE THE RIGHT INSURANCE -- WHETHER HELD BY YOU OR THE OTHER PARTY -- AND DETERMINE THAT IT COVERS YOUR INTERESTS, AND IS NOT EXCLUSIVE TO THE INTERESTS OF THE OTHER PARTY

AS CITED EARLIER -- EACH OF THE LEGAL ENTITIES TO THE LOGISTICS TRANSACTION ARE DISTINCTLY AND DIFFERENTLY DEFINED UNDER LAW, AND REQUIRE DISTINCT & SEPARATE INSURANCE POLICIES THAT ARE DESIGNED TO RECOGNIZE THOSE DISTINCTIVE DIFFERENCES

III. INSURANCE ISSUES-- POINTS FOR EVALUATING INSURANCE POLICIES INCLUDE

WHO IS STIPULATED AS THE INSURED PARTY? THE EXACT LEGAL ENTITY SHOULD BE NAMED ON THE POLICY. WHAT DOES THE INSURING AGREEMENT SAY ABOUT WHAT IS INSURED?. --

-- WHAT ARE THE STIPULATED INSURED SERVICES? WHAT ARE THE WARRANTIES & PRECONDITIONS OF COVERAGE THAT MUST BE SATISFIED FOR COVERAGE TO EXIST? WHAT DOES THE EXCLUSIONS SECTION SAY ABOUT WHAT IS EXCLUDED? --

-- WHAT ARE THE EXCEPTIONS TO THE EXCUSIONS? UNDERSTAND THE “DEFINTIONS” SECTION PERTAINING TO KEY WORDS & ACCENTUATED OR CAPTIALIZED WORDS WHAT ARE THE LIMITS OF COVERAGE?

– DO THEY MATCH YOUR MAXIMUM ‘AT-RISK’ VALUE PER LOAD AS RESPECTS CARGO INSURANCE?

– ARE THE THIRD PARTY BODILY INJURY & PROPERTY DAMAGE LIMITS ADEQUATE? WHAT IS THE DUTY TO DEFEND? DOES IT COVER “ON BEHALF OF” THE INSURED PARTY OR MERELY “INDEMNIFY FOR DAMAGES INCURRED? NOTE THE USE OF CONJUNCTONS -- “OR” VERSUS “AND”.

III. INSURANCE ISSUES – AN ABBREVIATED FORMULA FOR EVALUATING INSURANCE

THE INSURING CLAUSE MINUS (PRECONDITIONS OF COVERAGE, WARRANTIES & EXCLUSIONS) = COVERAGE

DO NOT MAKE THE MISTAKE OF READING THE INSURING CLAUSE, BUT IGNORING THE CONDITIONS, PRECONDITIONS, WARRANTIES & EXCLUSIONS.

III. INSURANCE ISSUES – WHEN TENDERING FREIGHT TO A NON ASSET INTERMEDIARY

IF YOU ARE A SHIPPER TENDERING FREIGHT TO A NON ASSET INTERMEDIARY, DO NOT OVERLOOK THE NEED FOR

SHIPPERS INTEREST INSURANCE TO PROTECT YOUR CARGO AND

VALID THIRD PARTY BODILY INJURY AND PROPERTY DAMAGE INSURANCE COVERAGE – I.E. A CONTINGENT FREIGHT BROKER OR CONTINGENT AUTO LIABILTY POLICY. SUCH INSURANCE SHOULD ADD THE SHIPPER AS AN ADDITIONAL INSURED - TO DEFEND THE SHIPPER IN THE EVENT OF SUIT ARISING FROM CARRIAGE - AND PROVIDE LIMITS THAT YOU ARE COMFORTABLE WITH – UP TO $15 or $20 MILLION.

III. INSURANCE ISSUES UNINTENDED INSURED PARTIES ON YOUR INSURANCE POLICY

IF YOU ARE A SHIPPER THAT RELEASES CARGO IN YOUR CONTAINERS OR TRAILERS, WITH A CHASSIS & PLATE, YOUR COMMERCIAL

AUTO INSURANCE POLICY MAY UNINTENTIONALLY EXTEND DIRECT COVERAGE TO THE MOTOR CARRIER.

PLEASE NOTE -- THE INSURANCE POLICY IS A CONTRACT THAT STANDS ON ITS OWN -- SEPARATE AND APART FROM OTHER CONTRACTUAL INDEMNITY AGREEMENTS

AS A CASE EXAMPLE: A SHIPPER’S COMMERCIAL AUTO & UMBRELLA LIABILITY POLICY WAS REQUIRED TO PAY NEARLY $8 MILLION OF APPROXIMATE TOTAL DAMAGES OF $10 MILLION, ARISING FROM A MOTOR CARRIER ACCIDENT – DUE TO THE DEFINTION OF ‘WHO IS INSURED’ AND THE ‘OTHER INSURANCE’ PROVISION IN THE SHIPPERS COMMERCIAL AUTO POLICY . THIS WAS IN SPITE OF CLEAR INDEMNITIES FROM THE MOTOR CARRIER & ADDITIONAL INSURED STATUS FOR THE SHIPPER ON THE CARRIER’S INSURANCE POLICY

YOU MAY WISH TO CAREFULLY EXAMINE YOUR POLICY TO DETERMINE WHETHER THE CITED PROVISIONS HAVE BEEN AMENDED TO PRECLUDE UNINTENDED COVERAGE OF A MOTOR CARRIER

III. INSURANCE ISSUES – REGARDING CLAIMS

SUBMIT ALL CLAIM RELATED DOCUMENTS AS TIMELY AS POSSIBLE COMMUNICATE CLEARLY TO ALL PARTIES AS TO THEIR DEFINED LEGAL OBLIGATIONS: IN PARTICULAR, CARMACK OBLIGATIONS FOR LOSS OR DAMAGE, SALVAGE & TIMELY REPORTING BETWEEN SHIPPER & CARRIER RESPOND TO ANY INFORMATION REQUESTS FROM YOUR INSURER IF YOU RECEIVE A RESERVATION OF RIGHTS LETTER FROM YOUR INSURER, RESPOND TO ANY OPEN QUESTIONS OR INFORMATION NEEDS IDENTIFIED. A RESERVATION OF RIGHTS LETTER IS NOT NECESSARILLY A DENIAL OF CLAIM. YOU SHOULD PROCEED AS THOUGH YOU ARE COVERED UNTIL SUCH TIME AS YOU RECEIVE A FORMAL DENIAL OF CLAIM

IV. REGULATORY WATCH -- REGULATIONS THAT AFFECT INSURANCE & CLAIMS

AS AN EXAMPLE, THE PROPOSED NATIONAL HIRING STANDARD FOR MOTOR CARRIERS – H.R. 1120 (formerly H.R. 4727): WOULD IMPOSE A STRICT STANDARD OF LIABILITY ON SHIPPERS FOR THIRD PARTY BODILY INJURY, PROPERTY DAMAGE AND CARGO LOSS OR DAMAGE – WHERE NO SUCH LIABILITY STANDARD CURRENTLY EXISTS. IF THIS BILL IS ENACTED IT COULD RESULT IN RESTRICTED SHIPPER AND INTERMEDIARY INSURANCE TERMS AND/OR INCREASED INSURANCE COST COULD INCREASE DAMAGE AWARDS COULD THEREBY INCREASE COSTS OF CARRIAGE COULD THUS NARROW THE PLAYERS AVAILABLE TO HANDLE TRANSPORTATION OF SHIPPER FREIGHT.

V. IN SUMMARY

CARMACK IS HELD TO GOVERN THE RELATIONSHIP BETWEEN SHIPPER & CARRIER, INCLUDING CONTRACTUAL BREACH IT HAS BEEN HELD THAT CARMACK DOES NOT GOVERN THE RELATIONSHIP BETWEEN BROKER & CARRIER OR THE RELATIONSHIP BETWEEN BROKER & SHIPPER IT HAS BEEN HELD THAT CARRIERS. FREIGHT FORWARDERS & BROKERS ARE SUBJECT TO FEDERAL JURISDICTION, THEREBY PRECLUDING STATE COMMON LAW TORT LIABILITY CLAIMS (49 U.S.C. § 14501(c)(1)) CARRIERS ARE DEFINED UNDER FEDERAL LAW AS HAVING LIABILITY FOR LOSS, DAMAGE AND PROVIDING SAFE AND ADEQUATE SERVICE, EQUIPMENT AND FACILITIES – NOT BROKERS A BROKER MAY HAVE AN INSURABLE INTEREST INDEPENDENT OF A BENEFICIAL INTEREST OR LEGAL LIABILTY

V. IN SUMMARY

KNOW THE LEGALLY DEFINED ROLE OF THE PARTY YOU ARE DEALING WITH CONTRACT IN ACCORDANCE WITH THE LEGALLY DEFINED ROLE OF THE PARTIES AVOID THE COMMON CAUSES OF PROBLEMS OBTAIN RESPONSIVE INSURANCE FROM THE PARTY TO WHOM YOU TENDER FREIGHT PROVIDE ALL REQUIRED INFORMATION TO YOUR INSURER EXPEDIENTLY IN THE EVENT OF A CLAIM

Michael Stoll

Vice President, GSIS, Inc.

972-923-1971 THANK YOU!