Contract- vs. Common-Carrier Insurance

Q: I’ve read with much interest your columns regarding so-called BMC-32 motor carrier insurance, because I recently tried to invoke payment of a claim under the BMC-32 endorsement.

The response I received from the carrier’s insurance company was: “(XYZ Transport) has contract-carrier authority, per the Federal Motor Carrier Safety Administration. As such, no cargo filing is required. We do not have a BMC-32 endorsement on our policy.”

Should your responses have specifically stated if you have used a common carrier, and not a contract carrier, then “you can collect a pittance” on the BMC-32 endorsement, or is the ruling on this still up in the air?

A: Well, it’s still up in the air. Not very high, though — or, if you prefer, so high it probably won’t ever hit the ground — because as matters stand, the question simply cannot be answered.

Let me clarify. Long ago there used to be a legal distinction between “common” and “contract” motor carriage. Each had to obtain operating authority in its particular domain, and they were in law separate and apart (although admittedly some carriers, in later years, were afforded both types of operating authority — these days, FMCSA registrations).

It was in this era that the old Interstate Commerce Commission wrote the regulation requiring so-called BMC-32 insurance. That rule, now set forth in the Code of Federal Regulations at 49 CFR Section 387.303(c), requires “motor common carriers” to maintain cargo insurance payable directly to a claimant in fairly small amounts — $5,000 per shipment, or $10,000 for the “aggregate” of all shipments lost or damaged “at any one time and place.”

The endorsement derives its name from the old ICC Bureau of Motor Carriers form by which insurers were required to make the filing.

The ICC Termination Act, however, did away with any legal distinction between common and contract motor carriers; these days they’re simply “motor carriers” without any additional soubriquet. The agency inheriting the ICC’s operating authority regime, the Federal Highway Administration, was given two years — until Jan. 1, 1998 — to do away with the distinction.

The FHWA ignored the directive. When Rep. Frank Wolf, R-Va., got irritated with the FHWA in 1999 over an unrelated matter and spearheaded the congressional action that shifted this authority to the new Federal Motor Carrier Safety Administration on Jan. 1, 2000, that agency continued to ignore the law in this respect.

As a result, the FMCSA still requires separate registrations for “common” and “contract” motor carriers — even though either may legally engage in both forms of relationships with shippers. One can, that is, have a “common” carrier entering into standing contracts with shippers, and a “contract” carrier hauling freight without any contractual agreements other than the bill of lading.

Yet the FMCSA continues to apply the strictly bureaucratic distinction between the two forms of carriage in its enforcement of the BMC-32 requirement. That is, a carrier that registers as a “common” carrier must have that endorsement; one registered as a “contract” carrier need not.

Which brings me at last to the nuts and bolts of your question: why your carrier didn’t have BMC-32 insurance.

You don’t specify the basis on which you did business with the carrier in question, whether under a standing contractual agreement (“contract” carriage) or shipment-by-shipment per bills of lading. But it doesn’t matter.

Evidently, your carrier had an FMCSA registration only as a “contract” carrier. With the statutory change, that allowed it to do business either way. But it also brought your carrier below the FMCSA’s radar for the BMC-32 insurance, so the FMCSA didn’t require it to have that coverage.

(It’s also possible your carrier had both types of FMCSA registrations, and the carrier ignored the requirement without somehow attracting agency notice. Rather a lot slips between the cracks at the FMCSA, and it doesn’t matter a lot anyway.)

If you did business with the carrier shipment-by-shipment per bills of lading, you have a valid legal complaint against the carrier. But so what? If the carrier could pay your claim, you wouldn’t be in this position, and there’s little point to suing an empty pocket.

Thus, whether the FMCSA should have required your carrier to have the coverage or not, the fact remains it didn’t and the carrier didn’t — which leaves you, I’m afraid, hung out to dry. At least now, however, you know the bureaucratic excuse. I’d vote against ’em come the next election — except, oh, bureaucrats don’t run for office, do they? Pity.

Consultant, author and educator Colin Barrett is president of Barrett Transportation Consultants. Send your questions to him at 5201 Whippoorwill Lane, Johns Island, S.C. 29455; phone, 843-559-1277; e-mail, BarrettTrn@aol.com. Contact him to order the 536-page compiled edition of past Q&A columns, published in 2001, at $80 plus shipping.
 

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