In Transit

A Moment of History

Today, no well-informed and responsible business executive would consider opening the doors of a company until securing various kinds of liability coverage. However, 150 years ago the idea of liability insurance was revolutionary. The first policies of this kind were for employers liability (sometimes called accident insurance) which was a growing area of concern in light of legislation in Germany and England and early parallels in the United States. Gradually, as tort law expanded and new types of exposures were revealed, insurers developed new coverage forms directed at specific exposures - hospital liability, elevator liability, theater liability, druggists liability and so on. As automobiles became more common, auto liability policies increased in popularity. Gradually by about 1940, the modern commercial GL coverage emerged, covering a broad array of liabilities. However, these policies, just as they do today, specifically exclude various liabilities or perils for which specific policies or endorsements are available (e.g., professional liability, pollution liability, and auto claims).

A typical auto liability policy requires payment for:

all sums an ‘insured’ legally must pay because of ‘bodily injury’ or ‘property damage’ to which this insurance applies, caused by an ‘accident’ and resulting from the ownership, maintenance or use of a covered auto.

(ISO business auto form). In a future column, we will examine this provision in detail. For purposes of this article, the focus is on the requirement that the loss arise out of the use (broadly speaking) of a covered auto. Recall that the law places the burden of proof on the insured or other party seeking coverage to establish that the loss falls within the coverage grant of a policy.

The Commercial GL form has a much broader coverage grant:

We will pay those sums that the ‘insured’ legally must pay as damages because of ‘bodily injury’ or ‘property damage’ to which this insurance applies.

(ISO CG 00 01 (4/13)). We later learn that auto claims are not covered as a result of the following exclusion:

This insurance does not apply to:……

g. Aircraft, Auto or Watercraft

“Bodily Injury” or “property damage” arising out of the ownership, maintenance, use or entrustment to others of any aircraft, “auto,” or watercraft owned or operated by or rented or loaned to any “insured.” Use includes “loading or unloading.”

Note that because this is an exclusion, the insurer has the burden of proof that the loss is subject to the exclusion. This opens the possibility that the same claim might be deemed to fall within the auto policy’s coverage grant, and not to be excluded by the auto exclusion in the Commercial GL policies. Furthermore, the auto exclusion contained in the Commercial GL policy is not exhaustive. Certain scenarios could trigger coverage when the liability arises out of the use of an auto.

One test of the interrelationship between auto and GL policies arose in the 1990s with the growth of claims against trucking companies (and other defendants) for negligent hiring, negligent supervision, negligent entrustment, and a number of similar allegations. At least some lawyers for plaintiffs added separate counts for this type of claim specifically to trigger GL coverage. Responsible motor carriers have both auto and GL coverages; if the vicarious exposure of the trucker for the negligence of the driver fell within the auto coverage, and negligent supervision, et al., fell within the GL policy, then plaintiffs would have a relatively painless way of doubling their insurance recovery. In fact, a few early cases held that negligent hiring, et al., were covered by GL policies. Quickly though, the case law developed a consensus that these types of claims, to the extent permitted by state law, were auto claims and not covered by GL policies. Of course, there are cases in which there are legitimately two causes of action—one covered by an auto policy and one by a GL policy. In such a case both are potentially applicable—see the important decision by the California Supreme Court in State Farm Mut. Auto. Ins. Co. v. Partridge, 10 Cal. 3d 94 (1973). If the same insurer issued both policies, one would need to check whether either policy contains a provision limiting coverage to the higher of the two limits in any one accident.
In some cases, the issue is whether a particular loss will be covered by defendant X’s auto policy or defendant Y’s GL policy. In Wakefern Ford Corps. v. General Accident Group, 188 N.J. Super 77 (App. Div. 1983), Harold Ruby, a truck driver for CitrusBowl, a distributor, delivered a load of orange juice to Wakefern’s facility. After backing in, and shutting his engine, Ruby was required to hook up his refrigerated trailer to a wall socket with a cable provided by Wakefern; that way the juice would not spoil as he waited for the juice to be unloaded.

Ruby was in the process of finalizing the electrical hookup when he slipped on some debris that Wakefern had allowed to accumulate on the floor of its facility. Ruby sued Wakefern for bodily injury; Wakefern in turn, sought coverage under the auto policy issued to Citrus by General Accident on the theory that it qualified as an additional insured since it was engaged in unloading a covered truck. (It was not clear that Wakefern employees were doing anything with the truck prior to Ruby’s injury).

The trial court ruled in favor of Wakefern:

All right, I understand [General Accident’s] argument but I do find that your company is looking at their policy too technically. Policy is designed to cover someone who’s loading or unloading and it’s all part of the same loading or unloading process that this man was hurt. I can see that if he got back in his truck, shut his motor off, went down to the end of the pier, smoked a cigarette, fell into the river, that’s one thing. But here he was doing what he was supposed to do; that’s when he was hurt, that’s covered. Submit an order.

Notice that the court focused on what Ruby was doing which was quite irrelevant to the issue before him—was Wakefern using the truck so as to qualify as a permissive user.

The appellate court held that not every loss that occurs during the process of loading or unloading is covered by the motor carrier’s auto policy. Unlike the trial court, the appellate court also understood that the relevant inquiry was whether Wakefern’s employees were unloading, not the actions of the injured party.

The court observed that pragmatically, the dispute was between Wakefern’s GL insurer which covered the premises and Citrus’s auto liability insurer—one or the other would cover the loss. The auto insurer covered losses arising out of the use (including loading and unloading) of the auto. The GL insurer would cover injury to an inviter (such as Ruby) that was caused by negligent maintenance of the premises. Here, while the loss took place during the period in which the unloading occurred, the loss was related to Wakefern’s failure to maintain the premises. The court concluded that there was no public interest in shifting the responsibility to the auto insurer; instead, judgment was entered in favor of General Accident which, practically, meant that the GL insurer would bear the loss.

Of course, the same type of issue arises often enough with respect to a GL, and an auto policy issued to the same insured—not that this makes deciding the cases any easier. A generation after Wakefern, a similar case worked its way through the layers of the New Jersey court system. The New Jersey Supreme Court ultimately ruled in favor of the auto insurer citing primarily to the Wakefern decision. Penn National Ins. Co. v. Costa, 198 N.J. 229 (2009). The GL coverage in Penn National was a homeowner’s policy. The auto coverage was a personal lines policy, but the principle was the same. The homeowner ran a truck repair shop adjacent to his home and plaintiff was employed as a mechanic. One day, as the employee was heading out on his lunch break, he saw his boss fixing a flat tire on a pickup truck in the driveway of his home. The employee offered him help, which was declined. As the employee began to walk away, he slipped on some ice in the driveway and hit his head on the bumper jack that the owner was using sustaining serious injuries. The trial court ruled that the loss fell under the homeowner’s policy, not the auto policy. Ultimately, the Supreme Court agreed. However, in the interim, the appellate court held that the loss was directly connected to the work being done on the pickup and found that the auto policy applied. In reversing that ruling the Supreme Court held that in order to trigger auto coverage there must be a substantial nexus between the injury suffered and some negligent use of the covered auto. Some courts formulate the rule as follows—in order for the loss to fall within the auto policy it must arise from the use of the auto as an auto. This language has been adopted into certain auto coverages. Here there was no such linkage; the alleged negligence was a failure to clean the driveway of ice and snow which was not auto-related.

Does any of this help resolve the question of coverage for the ambulance service for a claim for the wrongful death of Roger, the man who froze to death outside his own home? The question is complex and turns on several factors including the meaning of “completed operations” in the context of unloading a vehicle. By removing Roger from the transport vehicle and placing him on the porch of his own home, had the driver severed the connection between the vehicle and the tragedy that followed? Or had the unloading operation never reached its end because Roger never made it into the house? We do not know how the claim—if there was a claim—was resolved. The case demonstrates, in any event, that the line between auto coverage and GL coverage, clear enough in certain contexts, can be very murky indeed.

Laurence J. (Larry) Rabinovich has focused on transportation coverage and regulatory issues since he joined the Schindel Farman trucking law boutique in 1986. After that firm closed, Larry brought his practice to Barclay Damon where he became the leader of the firm’s transportation team. His clients include many of the leading transportation insurers. He works with underwriters on risk assessment and policy forms, and with claims managers and adjusters. Among the services Larry and his insurance coverage colleagues provide are opinion letters, reservation of rights letters and declinations, declaratory judgment actions and appeals. He is also a frequent lecturer and CE provider offering classes in handling truck claims,  commercial UM/UIM, the MCS-90, non-trucking risks, UIIA/UIIE and other topics. Larry also works directly with motor carriers on their contracts with brokers and shippers and compliance issues.

(This is the second installment in an occasional series. The first installment appeared in In Transit | Volume 23, Issue 3 at 5.)

The Ongoing Debate: How Litigation Funding May Interfere with a Lawyer’s Independent Judgment

Rule 5.4 of the Model Rules of Professional Conduct (the “Rules”) prohibits a lawyer from sharing legal fees with a nonlawyer and from permitting any person who recommends, employs, or pays a lawyer to render legal services for another to direct or regulate the lawyer’s professional judgment in rendering such legal services. ABA MODEL RULES OF PROFESSIONAL CONDUCT, 5.4(a) and (c). The purpose of the foregoing rule is to “protect the lawyer’s professional independence of judgment.” Id. at Comment 1.

In 2018, the New York City Bar Association issued a controversial opinion concluding that funding agreements between lawyers and funding companies were unethical under Rule 5.4 because the Rule forbids a funding arrangement in which the lawyer’s future payments to the funder are contingent on the lawyer’s receipt of legal fees or on the amount of legal fees received. Formal Opinion 2018-5: Litigation Funders’ Contingent Interest in Legal Fees, New York Bar Association, p. 4. The Bar Association explained that “when non-lawyers have a stake in legal fees from particular matters, they have an incentive or ability to improperly influence the lawyer.” Id.

In essence, the New York City Bar Association’s opinion suggests that funding agreements between lawyers and funding companies may interfere with the lawyer–client relationship and the duties owed by the lawyer to the client. However, in 2020 the New York City Bar Association issued another report on litigation funding, which endorsed the practice of litigation funding and proposed changes to the Rules “to regulate portions of the burgeoning industry.” Report to the President by The New York City Bar Association Working Group on Litigation Funding. The Arizona Supreme Court took this concept one step further and completely eliminated Rule 5.4 effective January 2021. The Arizona Supreme Court explained that “lawyers have an ethical obligation to assure that legal services are available to the public and that if the rules stand in the way of making those services available, the rules should change. At the same time, the changes must maintain the professional independence of lawyers and protect the public from unethical and unprofessional conduct.” News Release, Arizona Supreme Court, Arizona Supreme Court Makes Generational Advance in Access to Justice, Aug. 27, 2020.

While those in favor of litigation funding argue that there is no ethical difference between a non-lawyer’s security interest in a contract right (fees not yet recovered from the lawyer) or accounts receivable (fees earned by the lawyer) and that regulation of such relationships undermines the ability of non-wealthy people to prosecute civil claims, it is not irrational to worry that litigation funding companies may be improperly influencing a lawyer’s representation of her clients. Anthony E. Davis and Anthony J. Sebok, New Ethics Opinion on Litigation Funding Gets it Wrong, August 31, 2018. As explained by the Institute of Legal Reform, litigation funding “undercuts plaintiff and lawyer control over litigation because the [funding] company, as an investor in the plaintiff’s lawsuit, presumably will seek to protect its investment, and can therefore be expected to try to exert control over the plaintiff’s and counsel’s strategic decisions.” U.S. Chamber Institute for Legal Reform, Stopping the Sale on Lawsuits: A Proposal to Regulate Third-Party Investments in Litigation (2012) at p. 3.

To better illustrate the control that a third-party funder may exercise over a pending litigation, let’s consider a real-life example from Gbarabe v. Chevron, 14-cv-00173-SI (N.D. Ca. 2014), where plaintiffs’ counsel entered into a funding agreement with Therium Litigation Funding LLC (“Therium”). Id. at Declaration of Craig E. Stewart in Support of Chevron Corp.’s Motion to Compel Plaintiffs to Produce Litigation Funding Documents and Comply With Rule 3-15, at ¶ 20, Exhibit 19; see also a copy of the Litigation Funding Agreement.

Pursuant to the Gbarabe funding agreement, plaintiffs’ counsel agreed that they (1) would provide accurate information regarding the litigation to Therium; (2) would not fail to disclose any information, document, or evidence relevant to Therium’s decision to enter into and remain bound by the agreement; (3) would prosecute the case according to the litigation plan and budget in the agreement and would not make changes thereto without Therium’s consent; (4) would not hire any experts without the prior approval of Therium; and (5) use all “reasonable endeavors, consistent with the professional conduct of the Claim in accordance with the terms of this Agreement, to recover the maximum possible Contingency Fee in respect to the Claim.” See Litigation Funding Agreement, at p. 6–7. The funding agreement also allowed Therium to receive traditionally privileged attorney–client information, challenge any invoice for services that it did not consider “reasonable,” and terminate funding for any material breach of the agreement. Id. at pp. 8–10.

If we unpack the legal terms in this agreement, we can easily see that it allows Therium (a non-party to the litigation) to exercise a significant amount of control over the litigation and the litigation strategy. For example, while the agreement does not specifically state that Therium has the ability to “control” the decisions being made in connection with the litigation, the agreement allows Therium to pull funding if it doesn’t agree with any decision, including the overall litigation strategy or the experts hired. The terms of the agreement essentially ensure that counsel will run every decision by Therium in an effort to maintain the funding needed to continue with the litigation.

Another cause for concern is the fact that plaintiffs’ counsel owes a contractual duty to Therium, which is independent from the duties owed to the plaintiffs. Id. at p. 6, ¶ 3.1.2 (stating that the lawyers must “comply diligently with the terms of, and their obligations under this Agreement.”). Because plaintiffs’ counsel must jump through certain hoops to fulfil their contractual obligations owed to Therium, there is a potential that counsel would be unable to fulfill their duty of independent judgment owed to their clients. For example, counsel would most likely discuss the hiring of any expert with Therium and may even decide to forego hiring an expert they believed critical to their clients’ case if they knew Therium did not approve of the proposed expert to be hired. In fact, one of plaintiffs’ expert witnesses testified at his deposition in the Gbarabe case that his report had not yet been provided because plaintiffs “were putting the money in place for the work to proceed.” Ben Hancock, How Jones Day Unmasked a Litigation Funding Deal and Won, October 29, 2017. Thus, it appears that the expert’s work would not have proceeded if plaintiffs did not receive the necessary funding, which we know was coming from a non-party to the lawsuit.

Additionally, the funding agreement requires the lawyers to recover the largest possible fee as soon as reasonably possible, which suggests that counsel was in communication with Therium regarding settlement offers made and the acceptance of any such offers and could promote prolonged litigation and the consideration of interests other than the best interest of their clients. Moreover, the fact that the lawyers had a financial stake in the outcome of the litigation beyond the recoupment of traditional legal fees suggests that a potential conflict of interest existed under Rule 1.7(a), which prohibits a lawyer from representing a client if there is a significant risk that the lawyer’s own interests or the lawyer’s duties to a third person will materially and adversely affect the representation of the client. (Model Rules of Professional Conduct, Rule 1.7(a)). There is no question that lawyers who are parties to funding agreements such as that in the case of Gbarabe v. Chevron could have a financial interest in the outcome of the litigation that interferes with their duty to provide honest, impartial advice to the client.

Additionally, the repayment terms of the funding agreement in Gbarabe v. Chevron could have influenced settlement recommendations made by Chevron’s lawyers, settlement decisions made by the plaintiffs, and how the case proceeded through litigation. For example, if the plaintiffs succeeded in the Gbarabe litigation, plaintiffs’ counsel would have been required to pay Therium $10.2 million plus all costs paid in connection with the litigation, which would have resulted in a total payment of $11.9 million to Therium. Hancock, supra. Although $11.9 million was nothing when compared to the purported value of the case, there is no world in which the repayment of $11.9 million does not play a part in the manner in which any settlement offer is presented to plaintiffs and the consideration of whether plaintiffs should settle or hold out for a larger settlement or verdict. The fact that the lawyers might take into account the amount they owed to the funder when discussing settlement options with their clients would render the lawyer incapable of providing unbiased advice as required under the Rules.

As you can see from a review of the funding agreement in Gbarabe, litigation funding agreements between lawyers and the funder have the potential to allow a non-party to influence and exercise control over various aspects of a pending litigation. While some litigation funding agreements may not be as far reaching as the terms in the agreement in Gbarabe, it is clear that the potential for influence by a non-party with a stake in the litigation should at the very least be discoverable in litigation and properly examined by the opposing party and the court.

How to Ensure that Litigation Funding Agreements Are Not Improperly Influencing the Trajectory of Your Litigation

Not every agreement involving a third-party funder will be relevant to your litigation or will disclose a relevant conflict, but, as you can see from the foregoing, it is imperative that defense counsel identify potential funding agreements and obtain copies of the agreements during discovery. To do so, defense counsel should incorporate questions about potential funding arrangements and agreements in their discovery to all plaintiffs, including individual plaintiffs. The request for such information and the receipt of any and all documents bearing on the issue of third-party funding are essential to the fairness of all parties involved in litigation.

However, if litigation funding is not discoverable in your state, parties can ask that the litigation funding agreements be disclosed to the court. For example, United States District Judge Dan Polster of the Northern District of Ohio issued an order to a multidistrict opioid litigation requiring the attorney to provide the third-party funding agreement to the court for an in camera review to confirm that the third-party funder was not controlling the litigation, influencing counsel’s judgment, or creating a conflict of interest. See In re Nat'l Prescription Opiate Litig., No. 1:17-MD-2804, 2018 WL 2127807, at *1 (N.D. Ohio, May 7, 2018). The Eleventh Circuit Court of Appeals went even further, requiring the disclosure of litigation funding to the jury. See, e.g., ML Healthcare Servs., LLC v. Publix Super Markets, Inc., 881 F.3d 1293, 1302–03 (11th Cir. 2018) (upholding required disclosure of litigation funding to jury so that defendant could probe potential bias).

In addition to discovering the third-party funding relationship and the role that it may play in your litigation, it is also imperative that we continue to educate other lawyers, courts, and state legislatures on the potential ethical concerns with regard to third-party ligation funding. Right now, a number of states have either made changes or are considering making changes to the Rules so as to allow third-party funding while also ensuring that the funder does not inappropriately influence a lawyer’s legal representation of her clients. See Report to the President by The New York City Bar Association Working Group on Litigation Funding, at pp. 16–18; see also Arizona Takes Next Steps Toward Scrapping Law Firm Ownership Rule, Jan. 31, 2020, Bloomberg Law. As the Georgia Court of Appeals stated, “while litigation funding engaged in by [parties to a lawsuit], with its associated fees and charges, may legitimately be labeled financially insidious, it is the General Assembly, not this Court, which must, if it so chooses, expressly promulgate laws to regulate this activity.” See Cherokee Funding LLC v. Ruth, 342 Ga. App. 404, 410 (2017).

Melody Kiella is an experienced civil litigator specializing in all aspects of complex civil litigation, including trucking/transportation law, catastrophic personal injury defense, premises liability, and negligent security. She has extensive experience in managing high-volume and high-profile cases from the pre-litigation stages through trial. Melody is the Chair of the Drew Eckl & Farnham Association of Women Lawyers and also serves on the firm’s Diversity Committee, Transportation Industry Committee, and Marketing Committee. Additionally, she is active in DRI and is a member of the Federation of Defense & Corporate Counsel. Specifically, Melody serves as the Online Programming Chair and the 2021 Trucking Law Primer Vice Chair for DRI’s Trucking Law Committee.

Not All Dust Storms Are Created Equal

Anyone seeking an answer to the question of what a truck driver should do if they find themselves in a dust storm that severely reduces visibility is going to come across various and seemingly contradictory answers depending on where they look. For example, the Federal Motor Carrier Safety Regulations state that when hazardous conditions such as dust adversely affect visibility, speed should be reduced, and if conditions become sufficiently dangerous, operation of the commercial motor vehicle should be discontinued until it can be safely resumed. 49 C.F.R. §392.14. The FMCSR further states that whenever a commercial motor vehicle is stopped upon the traveled portion of a highway or the shoulder of a highway for any cause other than necessary traffic stops, the driver of the stopped commercial motor vehicle shall immediately activate the vehicular hazard warning signal flashers. 49 C.F.R. §392.22. But compare these mandates with various online resources that publish dust storm safety tips instructing truck drivers to “not stop in the travel lane or in the emergency lane” and to “turn off all vehicle lights, including your emergency flashers.” See http://www.pullasidestayalive.org/.

This seemingly conflicting set of instructions appears to be a result of the fact that the dust storms that a truck driver or other motorist might encounter on the road generally fall into one of two categories. The first category consists of existing dust storms that motorists can see ahead in the distance or otherwise anticipate before driving into. The second category consists of sudden dust storms that engulf an area where the motorist is already driving.

It is important to distinguish between these two situations because dust storm safety tip resources like the one cited above appear to be addressing the first category of dust storms—i.e., those that can be appreciated ahead of time. These resources generally state that drivers should avoid driving into or through a dust storm, and that they should slow down and pull off the roadway and should not wait until visibility makes it difficult to safely do so. Such resources may be referenced by Plaintiffs’ attorneys as evidence that a truck driver’s actions in a dust storm were negligent, or that truck drivers and trucking companies have special training or knowledge of what to do in such circumstances. But these instructions and guidelines necessarily presuppose that the driver has some ability to appreciate the dust storm ahead of them.

Photos and videos of dust storms from these safety tip sites often show giant plumes of dust on the horizon that appear to be visible from long distances away. See http://www.pullasidestayalive.org/; https://azdot.gov. Such scenarios are arguably distinguishable from a sudden dust storm that comes on unexpectedly and reduces visibility with little or no warning in an area where the driver is already traveling. Indeed, in dust storm accident cases, the fact that the plaintiff was also caught on the road in the same dust storm should put to rest any argument that the truck driver should have been able to pull off of the roadway to safety before visibility became impaired. See Dickman v. Truck Transp., Inc., 224 N.W.2d 459, 464 (Iowa 1974) (“Practically every witness testified the dust storm came upon them suddenly and without forewarning.”); Carnation Co. v. Garrett Freightlines, 95 Idaho 803, 805, 520 P.2d 258, 260 (1974) (“It is difficult to follow the argument of appellant that the respondent's driver should have recognized the inherent danger and not driven into the dust storm when appellant's own driver had the opportunity to make the same evaluation but then drove into the dust storm.”).

Because not all dust storms are the same, it is crucial to secure evidence that can effectively demonstrate to the fact finder the nature of the dust storm your client encountered. Eyewitness accounts are obviously important, but visual evidence such as driver dash cam videos, police cruiser and body camera footage, or security camera footage from nearby businesses can be a particularly powerful means by which to visually demonstrate the situation your driver found themselves in. Weather records and 3D radar imaging such as those obtainable from the Next Generation Weather Radar (NEXRAD) system can likewise be effective tools for demonstrating the nature and extent of the storm.

Bear in mind that yours was likely not the only accident that resulted from the dust storm. Check police and emergency dispatch records for other reported accidents in the area and follow up as necessary to obtain information and records that may be useful to you and your experts in recreating the scenario your client encountered.

Also, do not overlook the possibility that third parties such as adjacent landowners may bear some responsibility if they were engaged in activities that stirred up loose soil or that were otherwise likely to result in foreseeable and dangerous dust conditions on the roadway under the circumstances. 

Addressing Negligence Per Se Issues

Lawsuits arising from dust storm accidents will often include allegations of negligence per se. The inherent nature of dust storms, however, can provide effective defenses to such allegations.

Commercial motor vehicle accidents in dust storms typically involve a truck either running into the back of the vehicle in front of it or being hit from behind after slowing or coming to a stop. Plaintiffs will often therefore include allegations that the defendant truck driver violated statutory prohibitions commonly invoked in rear-end collision cases, such as those against following too closely, failing to keep a proper lookout, or stopping in the traveled portion of the roadway. The specific evils meant to be confronted by these common rules-of-the-road, however, often do not apply in dust storm cases. When a driver suddenly cannot see beyond the hood of their truck, no amount of distance is going to prevent a rear-end collision with a slowed or stopped vehicle in front of them. Likewise, drivers who find themselves caught in dust storms are rarely guilty of failing to keep a proper lookout—most are being hypervigilant and straining to see the path ahead of them.

One of the legal excuses justifying violation of statutes regulating the law of the road is the existence of something over which one has no control which placed the motor vehicle in a position contrary to statute. Dickman, 224 N.W.2d 459, 466. Statutes prohibiting stopping on controlled access highways, for example, will often include an explicit exception for circumstances when stopping is necessary to avoid conflict with other traffic. See, e.g., Nevada Revised Statute §484B.450 (“ … except when necessary to avoid conflict with other traffic …”); Montana Code Annotated §61-8-354 (same); Idaho Code §49-660(a)(9) (same); Oregon Revised Statute §811.560 (“… this subsection exempts vehicles from prohibitions and penalties when the driver’s disregard of the prohibitions is necessary to avoid conflict with other traffic.”). See also Parker v. Couch, 145 Colo. 209, 358 P.2d 609 (1960) (where a truck stopped on a highway during the course of a severe dust storm because a second truck had stopped on account of the poor visibility, violation of statute forbidding the parking of a vehicle upon the traveled portion of highway was not necessarily negligence per se where there was evidence that the truck had stopped because the lane was blocked).

While the facts of a dust storm accident may appear to fit within common statutory proscriptions, the specific harm meant to be confronted by these common rules of the road often do not apply in dust storm cases.

Sudden Emergency, Act of God, and Unavoidable Accident Defenses in the Age of Comparative Fault

In the older dust storm cases from the contributory negligence days, one of the legal excuses that, if proven, provided a complete bar to recovery was known as the “sudden emergency” doctrine. See, e.g., Dickman, 224 N.W.2d 459, 466 (“Sudden emergency excuses conduct which would otherwise be negligent.”). The defenses of “act of God” and “unavoidable accident” were also regularly raised in these older cases, although these defenses are framed more as issues of proximate cause than legal excuse. See Id. (“The [sudden emergency] doctrine concerns the issue of negligence whereas the theory of act of God deals with the question of proximate cause.”); Parker, 145 Colo. 209, 214–15, 358 P.2d 609 (failure of trial court to give tendered instruction covering truck owner's defense of unavoidable accident in dust storm case was erroneous under evidence).

In more recent times, the adoption of comparative fault has modified how these defenses operate in most jurisdictions. See, e.g., Regenstreif v. Phelps, 142 S.W.3d 1, 5 (Ky. 2004), as modified (Sept. 17, 2004) (“The sudden emergency doctrine … expresses the notion that the law requires no more from an actor than is reasonable to expect in the event of an emergency.”); Moran v. Atha Trucking, Inc., 208 W. Va. 379, 390, 540 S.E.2d 903, 914 (1997) (the existence of an emergency requiring a rapid decision is one factor in the total comparative fault analysis); Lanz v. Pearson, 475 N.W.2d 601, 603 (Iowa 1991) (in comparative fault cases, the act of God defense may be used only when the act of God is alleged to be the sole proximate cause of the harm in question).

With regard to the sudden emergency doctrine, many courts have found that the principles underlying the doctrine remain applicable even after the adoption of comparative fault. See, e.g., Regenstreif, 142 S.W.3d 1, 5 (“The sudden emergency qualification was not subsumed by the comparative negligence doctrine. … [it] is merely an expression of the reasonably prudent person standard of care.”). The principles of the sudden emergency doctrine were well-articulated by the Iowa Supreme Court years ago:

When one is confronted with a sudden emergency, not brought about by his own fault, and because thereof is required to act upon the impulse of the moment without sufficient time to determine with certainty the best course to pursue, he is not held to the same accuracy of judgment as would be required of him if he had time for deliberation. Under such circumstances he is required to act only as an ordinarily careful and prudent person would act when suddenly placed in a similar position.

Dickman, 224 N.W.2d 459, 466.

The doctrines of sudden emergency, unavoidable accident, and act of God can still have a role to play in the defense of dust storm accident cases, even after the adoption of comparative fault. The doctrines can be asserted as affirmative defenses at the pleading stage when warranted, and can be used to fashion proposed jury instructions at the trial stage to properly frame the considerations regarding how the defendant’s actions are to be judged.

Conclusion

When drivers operating vehicles at highway speeds on densely packed roads suddenly lose all ability to see the path in front of them, even for a few seconds, the results can be catastrophic. The mere fact that dust storm safety tips have been developed and published does not mean that such accidents will always be preventable. The task of defense counsel in such cases is to marshal all available resources needed to present the fact finder with an accurate depiction of the situation the defendant found themselves in, and make sure that the defendant’s actions and decisions are judged in light of the information available to them as the scenario was unfolding in real time, rather than with the benefit of hindsight. 

Joe Aldridge is a founding member of Scanlan Griffiths Aldridge + Nickels in Boise, Idaho. Joe’s practice focuses primarily on transportation law, medical and professional malpractice defense, insurance defense, and product liability litigation. A significant portion of Joe’s practice includes the defense of complex commercial motor vehicle accidents. Joe frequently conducts rapid responses to serious accidents to help ensure preservation of evidence and early evaluation of accidents involving commercial motor vehicles.

Relevant Statutes and Regulations: The Federal Motor Carrier Act

The Federal Motor Carrier Safety Administration (“FMCSA”) was established as a separate administration within the United States Department of Transportation on January 1, 2000. See https://www.fmcsa.dot.gov/mission/about-us. The FMCSA publishes the set of regulations that govern the trucking industry, known as the Federal Motor Carrier Safety Regulations, 49 C.F.R. Parts 300–399 (“FMCSR”).

To determine liability, it is first necessary to define the parties in play. To start, there are usually two major parties in a trucking transaction, the motor carrier and the shipper. Motor carriers are entities responsible for hiring, supervising, training, assigning, or dispatching drivers and employees concerned with the installation, inspection, and maintenance of motor vehicles. FMCSR §390.5. On the other hand, a shipper is the party who tenders the cargo to the motor carrier for transport in interstate commerce. Id. There is also a third potential player in a trucking transaction, the third-party broker, who, for compensation, arranges or offers to arrange property transportation by an authorized motor carrier. Id. at §371.2(a).

Second, it is necessary to determine who has the responsibility to ensure that the cargo is secured at all times. The driver of a truck who is able to inspect the cargo prior to departure must assure him- or herself that the cargo is properly distributed and adequately secured. Id. at §392.9(b)(1). Specifically, that the cargo is immobilized either with securement devices or loaded in such a way so that it cannot shift or tip in a way that will affect stability or maneuverability. Id. at §393.102(c). After the vehicle departs, the driver is responsible for inspecting the cargo within the first 50 miles after the beginning of a trip to ensure that the cargo is not shifting or falling, even if this requires additional securement devices. See FMSCR §392.9(b)(2). The driver must reexamine the cargo any time that he (1) makes a change of his duty status; (2) has been driving for three hours; or (3) the vehicle has been driven for 150 miles, whichever occurs first. Id. at §392.9(b)(3)(i)–(iii).

However, the rules above only apply to unsealed loads where the cargo is able to be inspected. The driver is not responsible for these reexaminations if the cargo being transported is a sealed load or where the cargo is loaded so that it makes the inspection of the cargo impossible. Id. at §392.9(b)(4). Courts have incorporated the gist of these regulations in crafting their own common law rules for liability between carriers and shippers.

The Savage Rule and Its Applicability: The Traditional Duties of Cargo Loading

The seminal case relating to issues of cargo securement is U.S. v. Savage Truck Line, Inc., 209 F.2d 442 (4th Cir. 1953). Decided in the United States Court of Appeals for the Fourth Circuit, Savage dealt with a collision in Virginia between a truck owned by Brooks Transportation Company, Inc., and a truck owned by Savage Truck Line, Inc (“Savage”). Id. at 443. Savage’s truck was carrying airplane engines in cylindrical containers. One of these cylinders fell off the Savage truck and onto the Brooks Transportation Company, Inc., truck, killing its driver instantly. The United States, the shipper, appealed the trial court’s verdict against it on the ground that it was entitled to indemnity from Savage Truck Lines because the driver knew that the cargo was not properly secured. Id. The Fourth Circuit noted that it is the responsibility of the carrier to “see that the packing of goods received by it for transportation is such as to secure their safety.” Id. at 445 (citing Hannibal & St. J. R. Co. v. Swift, 79 U.S. 262, 273–74, 20 L. Ed. 423 (1870)). The court then articulated the responsibilities of the shipper and the motor carrier as:

The primary duty as to the safe loading of property is therefore upon the carrier. When the shipper assumes the responsibility of loading, the general rule is that he becomes liable for the defects which are latent and concealed and cannot be discerned by ordinary observation by the agents of the carrier; but if the improper loading is apparent, the carrier will be liable notwithstanding the negligence of the shipper.

Id.

Therefore, as the “principal fault” of the matter lay with the carrier, Savage was required to indemnify the United States. Id. at 447. The “Savage Rule” has been adopted or followed by a majority of jurisdictions. Jenkins v. Duffy Crane & Hauling, Inc., No. 13-CV-000327-CMA-KLM, 2017 WL 4326484 at *1 (D. Colo. June 9, 2017). The Savage Rule also falls in line with the regulations outlined above, which are traditionally used by Courts to determine the duties of parties involved in trucking transactions. Recker v. Grief Packaging, L.L.C., No 16-2232, 2018 WL 6521501, at *3 (C.D. Ill. Oct. 10, 2018).

The Broker’s Role in Cargo Securement

While a traditional trucking arrangement involves only the carrier and the shipper, there are arrangements where a third-party broker acts at an arm’s length between both parties to broker a trucking arrangement. 80 Fed. Reg. No. 229, p. 74,700 (Nov. 30, 2015). A broker does not have any responsibility in the cargo securement process per se. However, liability can be asserted against a broker for improper cargo securement under two theories.

First, that the broker acted similarly to an employer in a “negligent hiring” case. To defend against this, the broker must show that it used reasonable care in selecting the carrier. Schramm v. Foster, 341 F.Supp.2d 536 (D. Md. 2004). The plaintiffs pursued this theory in Schramm, which involved a catastrophic collision in Maryland between minor motorists and a truck driven by Goff Brothers Trucking, LLC. Id. at 540. The load was brokered between Goff and the shipper by C.H. Robinson Worldwide, Inc. (“Robinson”). Id. The plaintiffs brought claims against Robinson, in part, for “negligently hiring” the trucking company to transport the load. Id. at 551. The United States District Court for the District of Maryland found that Robinson, as the broker, had a duty to exercise reasonable care, including checking safety statistics for carriers that it is considering contracting with and maintaining internal records of carriers. Id. at 552. While the court noted that evidence of Robinson’s negligence was “very thin,” the record showed Robinson failed to inquire further into the trucking company’s qualifications after noting that the trucking company had a “marginal” SafeState safety rating when Robinson’s contract called for a “satisfactory” safety rating. Id.

The second theory of liability is that a broker asserted a “heightened” level of control over the carrier or the shipper that would allow the broker to assume the responsibility in cargo securement. Jones v. C.H. Robinson Worldwide, Inc., 558 F. Supp. 2d 630, 633 (W.D. Va. 2008). In Jones, the plaintiff was struck by a truck that was contracted by Robinson in Virginia. Id. at 633–34. The plaintiff sued Robinson, in part, on the theory that it was acting as a “motor carrier” in the trucking transaction by exercising undue control over the transporting trucking company. Id. at 635. After reviewing the record, the United States District Court for the Western District of Virginia held that Robinson did not exercise any “heightened level of control” over the trucking company’s operations. Id. at 639. While Robinson did arrange pickup dates and times, provided pickup and delivery addresses to the carrier, and communicated information from the shipper regarding the loading and unloading of cargo, it did not control the details of the carrier's operations, such as drivers' schedules during a trip, particular routes, or compensation plans. Id. This level of control was “incidental” to the cargo transportation process and did not go beyond the control typically exercised by the broker to determine where the load was going as requested by the shipper. Id.

Conclusion: Liability Depends on Role and Control

Liability for insufficient cargo securement depends on what role the party is playing. The motor carrier is potentially liable for cargo securement issues that are discoverable when given the ability to inspect the cargo pre-trip. The shipper is potentially liable for latent cargo securement issues when there is no such opportunity for inspection by the motor carrier. Finally, the broker is typically not liable for cargo securement issues unless it can be shown that the broker was negligent in selecting the motor carrier or exercised a heightened level of control beyond that of a normal broker. When defending brokers, it is key to have accurate records of how the carrier was selected and the investigation done as to the carrier’s safety record. Further, it is important that the broker not exercise control over anything more than pick-up and delivery times, dates and addresses and potential special unloading instructions as communicated to it by the shipper. The broker must not control driver scheduling, such as choosing the driver, routing as to how the driver is to get there, or compensation plans as to the drivers. 

Peter T. DeMasters is Managing Member in the Morgantown, West Virginia office of Flaherty Sensabaugh Bonasso PLLC. Pete has been practicing for more than 20 years and is head of Flaherty’s Transportation Practice Group. He concentrates his practice on the defense of transportation companies and construction litigation but has a varied practice in both State and Federal courts. He is a member of DRI and TIDA.

Michael A. Secret is an associate in the Morgantown, West Virginia office of Flaherty Sensabaugh Bonasso PLLC. Since 2016 Michael has represented large companies, local businesses, municipalities, and individuals in both state and federal court. During his time in practice, Michael has represented trucking clients in cases involving collisions as well as load securement issues. He is a member of Flaherty’s transportation practice group and rapid response team.