Does BMC-32 Coverage Never Apply?

Does BMC-32 Coverage Never Apply?

Copyright 2007, Traffic World, Inc.


We filed a claim against a motor carrier''s BMC-32 endorsement (the minimum insurance required "for the protection of the public" for carriers providing common-carrier service).

The carrier''s insurance adjusters have declined the claim on the ground that the BMC-32 coverage doesn''t apply. In fact, the adjuster told me on the phone BMC-32 coverage never applies!

The carrier in question holds only common-carrier authority from the Federal Motor Carrier Safety Administration, and the shipment moved on a standard bill of lading.

But the adjuster says a bill of lading is a contract, and therefore it was contract service. He says although the law refers only to "motor" carriage, without a common/contract distinction, FMCSA has never implemented the rulemaking required by the law and continues to distinguish between common and contract service.

"Accordingly," his letter finishes, "we conclude that the BMC-32 endorsement does not provide any protection to contract shippers either before or after the [Interstate Commerce Commission Termination Act]. We are not aware of any authority to the contrary."

When I asked him if there could ever be a BMC-32 endorsement claim since every load has (or should have) a B/L, his answer was "no."

The claim involved a load where the driver signed for case count and delivered short with no intact seal record. The adjuster told me drivers are forbidden by law to sign for case count; they can only sign for pallet count. When I asked him to send me that law he said he didn''t have it in front of him.

You have such a wonderful way with words; I was hoping you could help me figure out how best to respond to this guy.


Well, insurance adjusters, too, sometimes have "a wonderful way with words" when it comes to declining claims, but this is about the pinnacle of creativity that I''ve heard.

How can you respond? There are only two classes of people who can make such a convoluted argument -Talmudic scholars, who thrive on the niceties of such arguments, and morons, who are too dumb to appreciate the intricacies they''re propounding. Since I doubt this fellow would know the Talmud if it walked up and bit him, guess where I class him.

And you don''t argue with morons, you bypass them.

Let''s get rid of that nonsense about the law forbidding drivers to sign for case count. Of course he didn''t have it in front of him; he also doesn''t have it in back of him, beside him or anywhere else in his office, because there''s no such law. The fact that he says there is merely serves to confirm his mental status. As for the silliness about all motor service being contractual because it''s documented by a bill of lading, well, that''s certainly going to be news to the rest of the transportation industry.

For decades the former ICC maintained the distinction between common carriage - defined as involving shipments documented individually by B/Ls - and contract carriage, which involved standing or "continuing" shipper-carrier agreements. And that was in an era when the difference was a serious regulatory matter.

Now, the ICCTA did change a lot of things, including sunsetting the ICC itself, but this distinction wasn''t one of them. The "transition rule" allowing FMCSA to maintain the difference between the two forms pending its now long-delayed rulemaking simply kept the original meanings in place, it didn''t alter them; indeed, 49 U.S.C. ? 13102(d)(2) expressly says as much.

Indeed, if the adjuster''s argument were accurate, 49 CFR ? 377.303(c) requiring the BMC-32 insurance would be, as he actually had the gall to say, meaningless. By his reasoning, all motor carriage is contractual, and I do agree with him that BMC-32 coverage has never been found to apply to contract carriage (although if you read the regulatory language carefully you''ll find that it covers only "motor" carriage, without distinguishing common from contract service).

So how do you deal with this? First, although this twit signs himself "senior adjuster" (you sent me a copy of his inventive letter), I bet he has a boss. Talk to that boss; among the most powerful phrases in the English language is "may I speak to your supervisor, please?" With any luck said boss won''t also be a moron, although anyone who employs this individual in a job requiring actual thinking is himself or herself a bit suspect.

You can also threaten to tell the FMCSA and ask that the adjuster''s insurance carrier be disqualified. You can even do that, although I doubt you''ll accomplish much; the agency isn''t interested in enforcing its cargo insurance requirements and has no administrative mechanism for doing it anyway. But the adjuster and/or his boss may not know that. If none of this avails, though, I''m afraid you''ll have to go to court. I know it''s not a lot of money to sue for (BMC-32 coverage maxes out at $5,000 per shipment), but check with your own attorneys, you may be in a position to ask for punitive as well as actual damages for this frivolous denial. There ought to be some limits to what insurers can get away with.

-- 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, Contact him to order the 536-page compiled edition of past Q&A columns, published in 2001, at $80 plus shipping. Later compilations by request.