John C. Lane and William B. Pentecost, Jr.
Co-chairs
The significant growth in the international carriage of containerized goods by two
or more different modes of transport, i.e., “Multimodal Transport,” has given rise to
myriad legal issues, most commonly presenting as freight claims and casualty
litigation.
By Dustin M. Paul ………………………………......…………………………... 1
Chapter II.
The UIIA, Indemnity, and Insurance
By John C. Lane ………………………………………………………………… 18
Chapter III.
By John C. Lane ………………………………………………………………… 29
1
By Dustin M. Paul1
Growing up in Missouri, hours away from the nearest ocean, a small boy
does not dream of a life as an admiralty lawyer. But our careers take us in
unexpected directions, and so much of my practice focusses on maritime law.
But, if you do not know the aft2 from the bow3—fear not, your career will
probably not require you to learn the difference. But any transportation lawyer
needs to at least know the basics of maritime law. Even if that knowledge is only
used to get out of the way and know when to call a Proctor in Admiralty.4
1 Dustin is a partner at Vandeventer Black, LLP in Norfolk. His practice focusses on
transportation and commercial litigation.
2 Aft means the stern (or rear) of the ship.
3 Bow means the front of a ship.
4 According to the Maritime Law Association of the United States “The designation ‘Proctor in
Admiralty’ is of ancient origin and applied to lawyers entitled to handle maritime litigation. The
word ‘Proctor’ was derived from the Roman word ‘Procurator,’ which was translated into
English as ‘Proctor’ when the Admiralty Courts were set up in England in the 13th century with
jurisdiction over disputes within the Royal Navy as well as purely commercial maritime matters.
The designation was continued in the American colonies and, until recently, in our federal court
system. Though no longer in official usage, ‘Proctor’ was deemed appropriate for use in [The
Maritime Law] Association to designate the most distinguished class of membership for
practicing maritime attorneys. See “About the MLA” at https://mlaus.org/about-the-mla/.
The first obvious question for any non-maritime practitioner should be:
“Why is there even a separate maritime law?” The answer stretches back several
millennia to the Rhodes, and island between mainland Greece and Turkey. As a
historical matter, commercial shipping and seafaring were one of the few ways that
nation states interacted. That led to the need for rules that applied beyond the
borders of an individual state. Around 800 B.C., Rhodes developed a set of
maritime law that was extremely influential throughout the world. Emperor
Antoninus (138-161 A.D.) is reported in the Digest of Justinian, as saying "I,
indeed, am Lord of the world, but the law is lord of the sea. Let it be judged by
Rhodian Law, prescribed concerning nautical matters, so far as no one of our laws
is opposed." See William Tetley, Q.C., The General Maritime Law—the Lex
Martima, 20 Syracuse J. Int'l L. & Com. 105 Spring 1994. The law is described as
“quite uniform” throughout Europe. And thus, maritime law was treated as unique.
Indeed, it makes an appearance in the U.S. Constitution. “The judicial
Power shall extend to all Cases, in Law and Equity, arising under this Constitution,
the Laws of the United States, and Treaties made, or which shall be made, under
their Authority;—to all Cases affecting Ambassadors, other public Ministers and
3
Consuls;—to all Cases of admiralty and maritime Jurisdiction . . .” U.S.
Constitution, Art. III, §2 (emphasis added). In the United States, only the federal
government can address through legislation or through a legal proceeding an in
rem remedy against a vessel itself. As the U.S. Supreme Court has explained, “[a]
state may not provide a remedy in rem for any cause of action within the admiralty
jurisdiction.” Red Cross Line v. Atl. Fruit Co., 264 U.S. 109, 124, 44 S. Ct. 274,
277, 68 L. Ed. 582 (1924).
Are there Clear Lines About What Constitutes Maritime Law?
No! For example, the U.S. Supreme Court has noted the difficulty in
discerning between maritime and non-maritime contracts. Norfolk Southern
Railway Co. v. Kirby, 543 U.S. 14, 23, 125 S.Ct. 385 (“Our cases do not draw
clean lines between maritime and non-maritime contracts.”); Kossick v. United
Fruit Co., 365 U.S. 731, 735, 81 S. Ct. 886, 6 L.Ed.2d 56 (1961) (“The boundaries
of admiralty jurisdiction over contracts—as opposed to torts or crimes—being
conceptual rather than spatial, have always been difficult to draw.”). Maritime law
includes “claims that ‘arise out of maritime contracts or other inherently maritime
transactions.’” Barna Conshipping, S.L. v. 2,000 Metric Tons, More or Less, of
Abandoned Steel, 410 F. App'x 716, 722 (4th Cir. 2011) (citation omitted).
4
So, you have to be wary of running into maritime issues—even on land.
Indeed, one of the most recent U.S. Supreme Court opinions begins “This is a
maritime case about a train wreck.” Kirby, 543 U.S. at 18. And the opposite is
true, just because something occurs on navigable waters does not mean that
maritime law applies. See, e.g., Exec. Jet Aviation v. City of Cleveland, 409 U.S.
249, 274, 93 S. Ct. 493, 507 (1972) (holding “no federal admiralty jurisdiction
over aviation tort claims arising from flights by land-based aircraft between points
within the continental United States” even if they crash in navigable waters).
What are Navigable Waters?
Navigable waters often define the scope of admiralty law. As the Supreme
Court has noted, however, the term has different meanings in different contexts.
Kaiser Aetna v. United States, 444 U.S. 164, 170-172 (1979). Different tests and
different meanings apply when a court evaluates whether water is navigable for
purposes of the Commerce Clause, the Rivers and Harbors Appropriation Act of
1899, and in determining the jurisdiction of federal courts under Art. III, § 2 of the
Constitution. Id.
The most often cited definition of navigable waters comes from The Daniel
Ball, 77 U.S. (10 Wall.) 557, 19 L. Ed. 999 (1870) which states:
5
Those rivers must be regarded as public navigable rivers in law
which are navigable in fact. And they are navigable in fact
when they are used, or are susceptible of being used, in their
ordinary condition, as highways for commerce, over which
trade and travel are or may be conducted in the customary
modes of trade and travel on water. And they constitute
navigable waters of the United States within the meaning of the
acts of Congress, in contradistinction from the navigable waters
of the States, when they form in their ordinary condition by
themselves, or by uniting with other waters, a continued
highway over which commerce is or may be carried on with
other States or foreign countries in the customary modes in
which such commerce is conducted by water.
Or as the Second Circuit has more succinctly explained, water is navigable “if it is
presently used, or is presently capable of being used, as an interstate highway for
commercial trade or travel in the customary modes of travel on water.” LeBlanc v.
Cleveland, 198 F.3d 353, 359 (2nd Cir. 1999).
As the Fourth Circuit has explained, maritime law generally extends to
“waterways capable of use for transportation between the states or with foreign
nations. A body of water that is confined within a state and does not form part of
an interstate waterway is not an admiralty concern.” Alford v. Appalachian Power
Co., 951 F.2d 30, 32 (4th Cir. 1991). A finding of navigability requires more than
just that some vessels could traverse the water, it requires that the water could be
used for commercial shipping. Id. Motley v. Hale, 567 F. Supp. 39, 40 (W.D. Va.
1983) (navigable water requires that the body of water be “used for commercial
6
shipping or that there is a reasonable likelihood that it will be used for that purpose
in the future.”); Dunham v. DeMaine, 559 F. Supp. 224, 225 (E.D. Ark. 1983)
(“navigability in admiralty is limited to describing the current capability of waters
to sustain commercial shipping”).
Beware: The Limitation of Liability Act Can Sink a Case
In the interest of protecting shipping interests and shipowners from liability,
many nations have historically enacted a limitation of liability act that applies to
vessels. See Madeline Burke, “Duck and Cover: The Gross Attempts of Limiting
Liability in the Titanic, Deepwater Horizon, and Table Rock Lake Accidents” 50 J.
Mar. L. & Com. 379, 381 (October 2019). Faced with a competitive disadvantage,
the United States enacted its Limitation of Liability Act in 1851.
Under the Limitation of Liability Act, 46 U.S.C. §§ 30501 et seq., the owner
of a vessel can—under appropriate circumstances—limit its liability for injuries or
damage to the value of the post-casualty vessel. In the case of a catastrophic
accident, that may be absolutely nothing. 46 U.S.C. § 30505(a) provides that the
liability of a shipowner for any injury from a collision shall not exceed the value of
the vessel unless the owner has privity or knowledge of the negligence that caused
the loss. The burden of proof is on the Plaintiff to demonstrate negligence by the
Defendant or unseaworthiness of the vessel. In re Vulcan Materials Co., 369 F.
7
Supp. 2d 737, 741 (E.D. Va. 2005). Once negligence or unseaworthiness is
demonstrated, the burden of proof shifts to the vessel owner to prove it did not
have knowledge or privity of the cause of the accident. Id. But in the case of a
navigational error, the burden on the shipowner is “minimal.” Complaint of
Magnolia Marine Transport Co., Inc., 1986 WL 15674 at *13 (D. Kan. 1986).
The Limitation of Liability Act is intended to protect shipowners from
liability beyond the value of the vessel when accidents are caused by navigational
errors of the crew. In re National Shipping Co. of Saudi Arabia, 84 F.Supp.2d 716,
718 (E.D. Va. 2000) (“if the collision resulted from navigational errors that the
shipowner had no reason to believe were likely to occur, limitation is granted.”);
Complaint of Armatur, S.A., 710 F. Supp. 390, 398 (D. Puerto Rico
1988)(“[I]nstantaneous negligence such as navigational error is not within the
privity and knowledge of the shipowner.”).
So, in the case of a collision by a vessel, a vessel owner may be able to limit
its liability.
What are the Supplemental Rules for Admiralty?
It is hard to get through law school without at least knowing the general
outline of the Federal Rules of Civil Procedure. But few law school students
venture to the end of the rules and learn anything about the Supplemental Rules for
8
Admiralty. In 1966, the Federal Rules of Civil Procedure were amended and the
“Supplemental Rules for Certain Admiralty and Maritime Claims” were added to
“unify the civil and admiralty procedure” and eliminate the then existing Admiralty
Rules. See Fed. R. of Civ. P. Notes of Advisory Committee on Rule, Section XII.
The Supplemental Rules are lettered, rather than numbered, and provide some
unique procedural rules for maritime claims.
What is Rule B?
Rule B “permits a plaintiff to attach an absent defendant’s property if the
plaintiff has an admiralty or maritime claim in personam.” See Reibor Int’l, Ltd. v.
Cargo Carriers (KACZ-CO.), Ltd., 759 F.2d 262, 265 (2d Cir. 1985). Attachment
is a “quasi in rem” proceeding. Quasi in rem process can be used to attach or
garnish any tangible and intangible property. “Rules B(1) and B(3) refer to goods,
chattels, debts, credits and effects. The terms ‘goods,’ ‘chattels,’ and ‘effects’ have
been interpreted to apply to virtually all tangible property . . . In addition to
tangible property, service of quasi in rem process can also be used to reach a
variety of intangible property, such as bank accounts, accounts receivable, and
other debts owed to the defendant.” See 29-0705 Moore’s Federal Practice - Civil
§ 705.04. Further, under Rule B, an order of maritime attachment must issue upon
a minimal prima facie showing provided that the defendant cannot be “found
within” the district in which the property is sought to be attached. See
9
Supplemental Rule B. This procedure allows an ex parte pre-judgment attachment
of property and then eventual collection against the property when a Defendant—
usually foreign—would not ordinarily be subject to service of process.
What is Rule C?
Rule C allows an “arrest” of a vessel or other maritime property subject to a
maritime lien. American courts, by and large, have adopted a “personification”
theory in which the vessel herself is treated as a party as if it was the actor causing
tort damage or entering into certain contracts. Salazar v. Atl. Sun, 881 F.2d 73 (3d
Cir. 1989). It is a legal fiction that treats the vessel as an entity separate and apart
from the vessel’s owner. Thus, a vessel itself can be sued if there is a maritime
lien against that vessel.
What is a Maritime Lien?
Maritime liens are an ancient aspect of admiralty law and have existed for
hundreds of years. See, e.g., The Jefferson, 61 U.S. 393, 400 (1857). Liens can be
created in tort or contract. If the vessel is involved in a collision or cargo is
damaged aboard the vessel, a lien may be created against the ship for the loss.
Or they can be created when certain supplies are provided to the vessel. The
maritime lien was created as a “necessary incident” to the operation of vessels.
Piedmont & George's Creek Coal Co. v. Seaboard Fisheries Co., 254 U.S. 1, 9
(1920). The very purpose of a ship is to move from place to place, and the ship is
10
“peculiarly subject to vicissitudes which would compel abandonment of vessel or
voyage, unless repairs and supplies were promptly furnished.” Id. Thus, the lien
was created to allow supplies and other necessaries to be provided where
contemporaneous payment is not made. Veverica v. Drill Barge Buccaneer No. 7,
488 F.2d 880, 883 (5th Cir. 1974).
But until 1910, there was a conflicting patchwork of state law and federal
decisions under the general maritime law that led to uncertainty about the
availability and enforceability of maritime liens for necessaries in the United States.
Because of the confusion, Congress passed the Federal Maritime Lien Act in 1910.
It was subsequently amended by Congress, with the most significant amendment
occurring in 1971.5 The intention of the 1971 amendments was clear; Congress
intended to provide a more expansive right to a lien to those who provide
necessaries to vessels. As the Fifth Circuit explained, “the legislative history of
these sections [was] to mandate a more liberal application than that which existed
prior to the 1971 amendments to the Maritime Lien Act.” Atl. & Gulf Stevedores,
Inc. v. M/V Grand Loyalty, 608 F.2d 197, 201 (5th Cir. 1979). The intention of the
amendments to the Lien Act was to shift the risk of loss from the materialmen who
provided necessaries to the owner of vessels. Id. at n.7.
5 The relevant statute was eventually renamed from the “Federal Maritime Lien Act” to the
Commercial Instruments and Maritime Liens Act (“CIMLA”) during a recodification process.
11
There are only two requirements to establish a lien under the Lien Act.
“Under the Federal Maritime Lien Act, a lien arises by operation of law against a
vessel if there is a supply of necessaries to the vessel and there is authority to bind
the vessel to the lien.” O.W. BUNKER MALTA Ltd. v. M/V TROGIR, CV12-
05657R FFMX, 2013 WL 326993 (C.D. Cal. Jan. 29, 2013), aff'd, 2015 WL
1222534 (9th Cir. Mar. 18, 2015). To demonstrate its lien, Plaintiffs need only to
prove: (1) that they supplied necessaries; and (2) the necessaries were on order from
someone with authority to bind the vessel. Id.
The maritime lien can be a very powerful tool for collecting debts involving
ships.
Beware: Maritime Workers are Usually Not Subject to State Workers
Compensation Law!
“The seaman, while on his vessel, is subject to the
rigorous discipline of the sea and has little opportunity to
appeal to the protection from abuse of power which the
law makes readily available to the landsman. His
complaints to superior officers of unsafe working
conditions not infrequently provoke harsh treatment. He
cannot leave the vessel while at sea. Abandonment of it in
port before his discharge, to avoid unnecessary dangers of
employment, exposes him to the risk of loss of pay and to
the penalties for desertion. In the performance of duty he
is often under the necessity of making quick decisions with
little opportunity or capacity to appraise the relative safety
of alternative courses of action. Withal, seamen are the
wards of the admiralty, whose traditional policy it has
been to avoid, within reasonable limits, the application of
rules of the common law which would affect them harshly
12
calling.”
Socony-Vacuum Oil Co. v. Smith, 305 US 424, 431-432 (1939).
Land-based workers are subject to state workers compensation law, which is
usually a no-fault system intended to provide financial support for anyone injured at
work. In contrast, a “seaman” is subject to a fault-based regime based upon the
Federal Employers Liability Act (“FELA”) called the Jones Act.6 And those that
work on the jagged line between the water and the land are subject to the Longshore
and Harbor Workers Compensation Act (“LHWCA”). 33 U.S.C. § 902.
There is no statutory definition of the term “seaman” in the Jones Act. The
closest statutory definition of a seaman comes from the LHWCA. The LHWCA
provides recovery for certain land-based maritime workers, but explicitly excludes
from its coverage “a master or member of a crew or vessel.” Id. Because the
LHWCA and the Jones Act are viewed as mutually exclusive, a “seaman” under
the Jones Act is the same as a “master or member of a crew of any vessel” under
the LHWCA. See McDermott International Inc. v. Wilander, 498 U.S. 337, 347
(1991) (citing Swanson v. Marra Brothers, Inc., 328 U.S. 1 (1946) (“Thus it is odd
but true that the key requirement for Jones Act coverage now appears in another
6 There are also two unique maritime remedies that are also no-fault recoveries. Maintenance
and Cure requires a shipowner to provide housing and medical care to an injured seaman while
he recovers. And if a vessel is determined to be “unseaworthy,” a seaman can recover for his
injuries in tort in what is, in essence, a strict-liability regime.
13
statute.”)). The distinction between a seaman and an employee under the LHWCA
is based on the overall status of the worker. See Chandris, Inc. v. Latsis, 515 U.S.
347, 361 (1995). Therefore, land-based maritime workers, such as longshoremen,
do not become seaman under the Jones Act because they happen to be working on
board a vessel when they are injured, and a seaman does not lose Jones Act
protection when ashore. Id.
The Supreme Court in Chandris, outlined the principles used to determine
whether a worker qualifies as a seaman under the Jones Act. Chandris, Inc. v.
Latsis, 515 U.S. 347 (1995). An employee is considered a seaman if a two prong
test is satisfied: (1) the person’s “duties contribute to the function of a vessel or the
accomplishment of its mission” and (2) the person has “a substantial connection to a
vessel in navigation (or to an identifiable group of such vessels) that is substantial
in terms of both duration and nature.” Chandris at 368. Although this test has been
refined by subsequent decisions, it has become the accepted standard to determine
seaman status in the lower courts. See 1 Admiralty & Mar. Law §§ 6-9 (5th Ed.).
These two prongs essentially deal with two distinct aspects of being a seaman. The
first prong deals with the type of activities the worker must perform and the second
deals with the relationship the worker has to the vessel. Id; Chandris at 350.
The Supreme Court has noted the first prong is “very broad” and
encompasses all who work at sea in service of a ship. Chandris at 368. Historically,
14
the worker was required to aid in the actual navigation of the vessel, but this
requirement has been abolished by the Supreme Court. See McDermott Int'l, Inc. v.
Wilander, 498 U.S. 337, 348 (1991). Now all that is required is the person “does
the ship’s work.” Id. “The ship’s work” has been interpreted to cover almost all
responsibilities performed in connection with a ship. See e.g., Campbell v. Royal
Caribbean Cruises, Ltd., 2008 WL 6025977 (S.D. Tex. 2008) (both parties admitted
that a dancer hired to entertain guests on a cruise ship satisfied the first prong to be
considered a seaman under the Jones Act). Many courts have noted that this prong
is relatively easy to satisfy and it is rarely the subject of litigation. See Becker v.
Tidewater Inc., 335 F.3d 367, 387-88 (5th Cir. 2003) (citing Chandris at 368.)
The second prong—substantial connection to a vessel in navigation—
focuses heavily on the worker’s overall connection to a vessel and is often the
contested issue in Jones Act cases. The Supreme Court has explained that the
purpose behind this requirement is to separate the sea-based maritime employees
who are entitled to Jones Act protection and those land-based workers, who fall
under the protection of the LHWCA. See Chandris, at 368. Although the Court
has specifically warned against classifying a worker as a seaman based on a
“snapshot” test, no strict time-based definition for “substantial” has ever been
approved by the Supreme Court. Id. at 371. The Court has merely stated that a
15
maritime worker who spends only a “small fraction of his working time on board a
vessel” does not have a substantial connection to a vessel. Id. at 371. This has led
to multiple different interpretations of the substantial connection prong by lower
courts.
What is COGSA?
The Carriage of Goods by Sea Act (“COGSA”) is the statute that governs
most claims for damaged cargo aboard a vessel. Its most important feature is that
COGSA § 4(5)7 provides that a carrier will not “in any event be or become liable
for any loss or damage to or in connection with the transportation of goods in an
amount exceeding $500 per package” unless the shipper declares a higher value on
the goods. The provisions of COGSA will often limit the liability of marine
terminal operators and other parties involved in maritime transportation because
the terms of a maritime bill of lading often include a “Himalaya clause” that
contractually extends COGSA beyond merely cargo aboard a ship.
Although there may be a great disparity between the $500 per package
limitation and the actual damage, Courts do not hesitate to apply the limitation.
See, e.g., St. Paul Travelers Ins. Co. v. M/V Madame Butterfly, 700 F. Supp. 2d
7 COGSA was formerly located at 46 U.S.C. Appx. § 1301. Because of a recodification that
eliminated the appendix to Title 46, the text of COGSA is now located in the Notes of 46 U.S.C.
§ 30701.
16
496, 498, 2010 AMC 1299 (S.D.N.Y. 2010) (applying COGSA and affirming a
$500 limitation of liability on $4,179,938 in damage to a yacht); Fortis Corporate
Ins. v. M/V Lake Ontario, 2005 AMC 811 (N.D. Ind. 2005)(applying a terminal
operator’s $500 per package limitation to $1,998,370.22 in damage to metal coils);
Akiyama Corp. of Am. v. M.V. Hanjin Marseilles, 162 F.3d 571, 572, 1999 AMC
650, (9th Cir. 1998) (applying COGSA through a Himalaya clause and affirming a
$2,000 ($500 per package) limitation to $1,000,000 in damage to a printing press);
Royal Ins. Co. v. Sea-Land Serv., 50 F.3d 723, 726, 1995 AMC 1189 (9th Cir.
1995) (applying COGSA and affirming a $500 limitation on $600,000 in damage
to a yacht); Starrag v. Maersk, Inc., 486 F.3d 607, 615, 2007 AMC 1217 (9th Cir.
2007) (affirming a $1500 ($500 per package) limitation on approximately
$600,000 in damage to aerospace equipment).
Maritime Cases Can Have Special Rights of Appeal
Pursuant to 28 U.S.C. § 1292(a)(3), Circuit Courts have jurisdiction of
appeals of “[i]nterlocutory decrees of such district courts or the judges thereof
determining the rights and liabilities of the parties to admiralty cases.” Section
1292(a)(3) “is an exception to the final judgment rule and therefore is construed
narrowly.” Wallis v. Princess Cruises, Inc., 306 F.3d 827, 832 (9th Cir. 2002). The
statute permits appeals only when the order appealed from determines the parties’
rights and liabilities. Id. Maritime interlocutory appeals therefore have been
17
limited primarily to lower court decisions that either definitively decide liability or
impose severe limitations on liability.
Conclusion
There are a lot of unique aspects of maritime law, and a lot of uncertainty as
to when it applies. A careful practitioner, especially one who practices other
aspects of transportation law, must always be alert to possible maritime law issues.
18
The Uniform Intermodal Interchange & Facilities Access Agreement –
The UIIA, Indemnity, and Insurance
Prepared by John C. Lane, Law Offices of John C. Lane
Adapted from a Presentation to the Through Transport
Mutual Insurance Association, Ltd., on June 14, 2017
Background
We call it the UIIA, because that was once its name – the Uniform
Intermodal Interchange Agreement. The abbreviation has stuck, despite the
expansion of the Agreement and, thus its expanded name. The signatories to the
Agreement are, for the most part, steamship companies, railroads, Facility
Operators, and Motor Carriers. The capitalized terms are expressly defined by the
Agreement. In many instances, especially in times of simpler business models, the
steamship companies were the Providers. The UIIA contains material rights of
indemnity, and obligations to maintain insurance, which have governed the
relationships among the Parties (also defined by the Agreement), and also the
Equipment Owners. The latter are generally not signatories, but are protected as
third-party beneficiaries of the most vital provisions.
19
management agreements, equipment interchange agreements, and more, governing
the relationships and responsibilities among the many involved parties. Those
agreements contain their own Indemnity and Insurance requirements. Some are
patterned after the UIIA language, while others are different. All have insurance
requirements intended to cover the various liability and indemnity obligations of
the parties. Some expressly provide protection for Third Party Beneficiaries, in
more expressly worded terms than the UIIA. And as to Motor Carriers’ indemnity
and insurance obligations, some agreements actually refer to and incorporate the
UIIA obligations.
The importance here is that principles of law that have interpreted the UIIA
provisions in courts in various States will also be applied to the interpretation of
the agreements that have developed and are in place in the more complex business-
model world. So, a discussion of the UIIA provisions, and the courts’ treatment of
them, is relevant and worthwhile.
Summary of the UIIA Provisions Relating to Indemnity and Insurance
The Agreement defines the “Provider” as the Party to the Agreement that
interchanges a Chassis to a Motor Carrier. That could be a steamship company, a
20
Facility Operator, or as the business has developed, a pool manager (not defined in
the UIIA). Importantly, the term “Indemnitees” in the Agreement means the
Provider, Equipment Owner, and/or Facility Operator. The Equipment Owner may
be a chassis leasing company, or a steamship company or railroad that has
“beneficial title,” such as under a long-term lease. Note, however, that a chassis
lessor that is not a Party to the UIIA, is given indemnity rights, nonetheless, as well
as protection by the Motor Carrier’s insurance coverage, as a third-party
beneficiary of the UIIA.
The Indemnity provision found at Subsection F.4. is broad. It requires the
Motor Carrier to –
(without regard to whether the Indemnitees’ liability is vicarious,
implied in law, or as a result of the fault or negligence of the
indemnitees), against any and all claims, suits, loss, damage or
liability, for bodily injury, death, and/or property damage,
including reasonable attorneys fees and costs incurred in the
defense against a claim or suit, or in enforcing subsection F.4 . .
. caused by or resulting from the Motor Carrier’s: use or
maintenance of the Equipment during an Interchange Period;
and/or presence on the Facility Operator’s premises.
That says a lot. The Motor Carrier must defend and indemnify the Provider,
Equipment Owner, and/or Facility Operator against any claim that arises out of the
Motor Carrier’s use or maintenance of a chassis because of an occurrence during
21
the time the chassis is under an Interchange to the Motor Carrier. The Indemnitee
is entitled to that protection even if it is at fault or negligent in causing the
occurrence.
Closely tied to the Indemnity provision are the Insurance requirements of
Subsection F.6. The motor carrier must maintain commercial auto insurance
coverage of not less than $1,000,000, Combined Single Limit, and shall name the
Provider as an additional insured. The extent of the Provider’s coverage is limited
to the amount of the Indemnity provision, Subsection F.4.
In addition, the Motor Carrier must have attached to its insurance policy a
Trucker’s Uniform Intermodal Interchange Endorsement, the UIIE-1, which
confirms that the insurer will cover the Motor Carrier for the UIIA obligations,
including the Indemnity provision, irrespective of the remaining provisions of the
policy. This means that every Indemnitee, including an Equipment Owner-third-
party-beneficiary, can rely on that coverage.
Finally, the UIIA states that it shall be governed and interpreted by the laws
of the State of Maryland. The intention is that for the sake of uniformity and
predictability, a dispute being litigated in any State should be decided on the basis
of Maryland law. We will first look at the holdings of Maryland law, and then
look to decisions of other States to see how they treat the UIIA.
22
Maryland Courts’ Treatment of Indemnity
The most-often cited case from Maryland is Mass Transit Administration v.
CSX Transportation, Inc., 708 A.2d 298 (Md. 1998). This case does not involve
the UIIA, but does involve an indemnity agreement which the Maryland Court of
Appeals deemed to be broad enough to require the MTA to indemnify CSXT for
CSXT’s own negligence. The indemnity provision there required MTA to
indemnify CSXT for any and all casualty claims, losses, suits, damages or liability
of any kind, arising out of the “Contract Service under this Agreement.” It did not
expressly call for indemnifying CSXT for its own negligence (which negligence
was clear in this case). Notwithstanding, the Maryland Court of Appeals found
that the “arising out of” language of the Indemnity provision was sufficiently broad
to encompass an event that only indirectly involved the Contract Service.
More importantly, the Court found that contracts made by non-insurers to
indemnify for “any and all casualty losses . . .” are intended to include indemnity
of CSXT for its own negligence in causing the casualty. The Court noted that
contractual language purporting to indemnify a party for claims “arising out of”
certain activity, is to be “interpreted and applied in the same manner as contracts
made by commercial insurers.”
23
As the Court states, “we have demonstrated that the promise to indemnify
includes liability for the sole negligence of CSXT . . . it matters not that MTA is
without fault.”
But the Court went further than that. It noted that the contractual indemnity
provision was backed by an obligation that MTA maintain $150,000,000 of
liability insurance, $5,000,000 of which was self-insured. “Inasmuch as the
indemnification was intended, at a minimum, to serve as liability insurance for
CSXT . . ., it is appropriate to interpret and apply the indemnification in the same
manner as liability insurance policies are interpreted and applied.”
The existence of contracted-for insurance that backs up the indemnity
provision was crucial to this decision and distinguished the case from the general
rule in Maryland that an agreement to indemnify a party for its own negligence
must be clear and unequivocal. That is not unlike the UIIA’s mixture, in close
association to one another, of the Indemnity provision of Subsection F.4, and the
Insurance requirement of Subsection F.6. The modern indemnity provision of the
UIIA expresses the intent to indemnify an “Indemnitee” even for its own
negligence.
24
Legal Decisions after Mass Transit
Six months after the decision in Mass Transit, the federal court in
Massachusetts dealt directly with the UIIA, in Mack v. Consolidated Rail Corp., 24
F.Supp.2d 126 (D. Mass. 1998). Mack worked for R.M. Sullivan Transportation,
Inc., a trucking company hauling containers in and out of Conrail’s intermodal
facility in West Springfield. Mack was working for his employer, Sullivan, when
he allegedly hurt his back when he stepped in a hole inside a container while
loading the container at a customer’s facility. Sullivan had obtained the container
from the Conrail facility. Mack sued Conrail under the mistaken assumption that
Conrail owned the chassis.
Conrail impleaded Sullivan Transportation for Indemnity under the UIIA, to
which both subscribed. Conrail’s impleader of Sullivan would be barred by the
Massachusetts worker’s compensation law unless the court found that the UIIA’s
Indemnity provision constituted an express agreement by Sullivan to indemnify
Conrail. The Mack court so held, stating that “Sullivan has expressly contracted to
indemnify Conrail against Sullivan’s negligence.” The case, which upheld the
application of the UIIA Indemnity provision, relied upon Massachusetts law alone,
making no mention of the Agreement’s mandate to apply Maryland law.
25
Lopez v. Louro, was decided by District Judge Martin of the Southern
District of New York, on January 23, 2002. In Lopez, Judge Martin extended the
Mass Transit Indemnity-Insurance combination to the UIIA. Oddly, the court
never identifies the contract as the UIIA, but the context makes it clear that the
UIIA was before the court, especially the exact quotation of the UIIA’s provision
for indemnity “during an interchange period.” Salvador Lopez was injured when
his car was struck by a tractor-trailer consisting of a tractor owned by Ravan
Transport, Inc., and a container/chassis combination owned by American President
Lines. Lopez sued Ravan and APL.
APL moved to compel Ravan to indemnify it under the Agreement. Ravan
opposed, arguing that the accident may have been contributed to by some (as yet
unknown) negligence on the part of APL. Judge Martin held that under Mass
Transit, the [UIIA’s] indemnity provision is sufficiently broad to encompass
indemnity even for any APL negligence. The court specifically noted the presence
of the Insurance requirement in the Agreement between APL and Ravan Transport.
Also, Judge Martin noted that the result would be no different under New
York law, citing Levine v. Shell Oil Co., 321 N.Y.S.2d 81 (N.Y. 1971) (construing
a contract between a service station owner and an oil company to require
indemnity to the oil company, for its own negligence).
26
Thus, the provisions of the UIIA have found favor in Massachusetts and
New York, and should be acceptable to the courts in Maryland.
Tennessee joined the group of States agreeing to enforce the UIIA, in Yang
Ming Transp. Corp. v. Intermodal Cartage Co., 685 F.Supp.2d 771 (W.D. Tenn.
2010). Yang Ming sought indemnity under the UIIA from Intermodal Cartage, for
Yang Ming’s own negligence. The Tennessee federal court followed the lead of
Maryland and other States in granting that relief to Yang Ming. It first had some
hurdles to overcome.
First, the District Court noted that prior to passage of Tennessee’s anti-
indemnity-in transportation-contracts statute, the State’s common law favored
contractual indemnity for one’s own negligence. In 2008, the Tennessee General
Assembly passed § 65-15-108. Subsection (a) of this Section applies to motor
carriers and states that a contract purporting to have a motor carrier indemnify
another party for that party’s own negligence, is void and unenforceable.
However, Subsection (b) states that the Section “shall not apply to the [UIIA].”
Thus, whether under earlier Tennessee common law or under the statute, the UIIA
may be enforced to require indemnity to an Indemnitee for its own negligence.
Issues such as the duration of the Interchange Period, and the breadth of the
Indemnity provision, were also decided in Yang Ming’s favor.
27
Finally, the Yang Ming court determined, in keeping with Mass Transit and
other decisions, that the UIIA is more akin to an insurance contract. The court
found that the parties intended Intermodal Cartage to defend and indemnify Yang
Ming for Yang Ming’s own negligence, and to pay its attorney fees in defending
the underlying lawsuit as well as bringing the action to enforce the indemnity
agreement.
New Jersey joined in support of the UIIA, in Santana v. Inter-America
Insurance Agency, an unreported decision of the Appellate Division in 2012. The
court relied upon the UIIE-1 to require the trucker’s insurer to cover indemnity
obligations not otherwise covered by the trucker’s policy – in this case, uninsured
motorist’s coverage. The New Jersey court specifically avers that the Agreement
holds that the laws of Maryland shall govern the enforcement and interpretation of
the UIIA, “without regard to conflicts of law principles.”
And, in 2017, the federal district court in South Carolina ordered indemnity
for the equipment provider, relying upon both the UIIA and the applicable user
agreement, in Flexi-Van Leasing, Inc. v. US Services, LLC. South Carolina allows
indemnity for a third-party beneficiary not in privity of contract, only when the
contract is made for the direct benefit of that third party. To get around that
possible issue, the provider, Hamburg, assigned to Flexi-Van its right of indemnity
28
under the contract carrier’s trucking contract. The court upheld both the
assignment and Flexi-Van’s right to sue US Services as Hamburg’s assignee, for
indemnity.
BUT, not every State is kind to the UIIA. The Court of Appeals of Texas
ruled on virtually every issue, against the provider, in CGM-CMA (America), Inc.
v. Empire Truck Lines, Inc., 416 S.W.2d 498 (Tx. App. 2013). This case had a
prior history of appeals and remands. At issue at this stage was the UIIA’s current
indemnity provision requiring the trucker to indemnify CGM-CMA for its own
negligence. The court refused to apply Maryland law, but instead applied a Texas
statute that bars indemnification of a party for its own negligence. The court also
disapproved of the opinions of courts in other States treating the UIIA indemnity
provisions as insurance.
The Take-Away
Issues abound as to whether Maryland law should apply to the UIIA,
whether indemnity provisions should be treated as insurance, and whether the
UIIA indemnity provision may be used to the benefit of third-party beneficiaries
such as equipment owners. Nevertheless, it is clear that in the newest business
models, the UIIA continues to have vitality. It will continue to be used to enforce
the rights of Providers, Equipment Owners, and Facility Operators.
29
An Introduction to Motor Carrier Regulation – Then and Now
John C. Lane
I. Introduction
The modern motor carrier industry has, like all businesses, gone through
major changes in its history, operationally, technologically, and by way of
regulation. Its modern-day appearance cannot be fully understood without looking
at the history of its regulation by Congress. We start with the Interstate Commerce
Commission.
II. The Interstate Commerce Commission
The trucking industry came under the regulatory control of the Interstate
Commerce Commission with the passage of the Motor Carrier Act of 1935, Pub. L.
255, August 9, 1935. The ICC had been regulating the railroad industry since its
creation under the Act to Regulate Commerce of 1887. The modern day Interstate
Commerce Act, vastly changed from 1935, divides railroad and motor carrier
regulation into Parts A and B, respectively, of Title 49 United States Code. Part A,
applying to railroads, commences at 49 U.S.C. § 10101; Part B, the motor carrier
part, commences at 49 U.S.C. § 10301.
30
Under the ICC, which was an independent agency created by Congress, a
trucker needed to obtain a certificate of “public convenience and necessity” from the
ICC in order to engage in interstate trucking. The requisite process often involved
long and expensive administrative proceedings, leading to receipt of rights to operate
on specific routes and to carry specific commodities. The Motor Carrier Act of 1980
ended that regulatory barrier, allowing any entrant to pay an application fee and
provide proof of required insurance, to obtain a certificate of common carrier, or
contract carrier, authority. No longer would trucking companies be limited to the
routes given them by the ICC in the past. Moreover, many new truckers, some of
which grew very large, were able to enter the interstate motor carrier business. Many
small existing companies grew into giant motor carrier and logistics business.
J.B.Hunt Transport, for example, formed in 1961, grew into the 80th largest trucking
firm in the U.S., by 1983, according to Wikipedia. The rest, as they say, is history.
III. The Interstate Commerce Commission Termination Act
The ICC’s role in safety regulation continued until January 1, 1996, when the
venerable agency was legislated out of existence by the Interstate Commerce
Commission Termination Act (ICCTA). ICCTA ended the existence of the 100
year-old ICC and its regulatory controls over motor carriers. It also eliminated the
requirement for truckers to file tariffs with government, allowing them instead to be
provided to shippers on request. Safety features were transferred to the Department
31
of Transportation, which had been created by Congress in 1966 and commenced
operation on April 1, 1967. The DOT enabling act combined many disparate federal
operations, including among them, the FAA (formerly an independent agency) the
U.S. Coast Guard (which had operated in the Treasury Department since its founding
on August 4, 1790, eight years before the formal founding of the U.S. Navy), and
the newly-created National Transportation Safety Board to investigate catastrophic
transportation accidents and events, and to make recommendations for future
improvements.
IV. The Rise of the Federal Motor Carrier Safety Administration
Ultimately, regulation of the trucking industry has for the most part been
vested in the Federal Motor Carrier Safety Administration, within the Department
of Transportation.
Vested with those powers the FMCSA inherited the ICC’s authority over
motor carriers, and added other responsibilities to its roles. It regulates in the areas
of compatibility of state laws affecting interstate motor carrier operation (49 CFR
Part 355); insurance requirements (Part387); commercial driver licensing (Part 383);
and leasing and interchange of vehicles (Part376). Its authority also includes driver
Hours of Service rules (Part 395); inspection, repair, and maintenance of commercial
32
vehicles (Part 396); and rules of general applicability of the Federal Motor Carrier
Safety Regulations (Part 390).
Many motor carriers utilize leased vehicles, including tractors, trailers, and
intermodal chassis. The regulations in Part 376 make it clear that a leased
commercial vehicle becomes the full operational responsibility of the lessee motor
carrier, whether the driver is an employee of the motor carrier or an independent
contractor, just as if the vehicle were owned by the carrier. See, esp., 49 CFR §
376.12(c). The motor carrier’s required liability insurance must apply to its
operation of leased vehicles. 49 CFR § 376.12(j). By incorporation from 49 CFR
390.21 (marking of commercial motor vehicles), a leased tractor must be visibly
marked as operated by the motor carrier, and including DOT and MC numbers.
V. The Advent of Intermodal Carriage
At least half a century ago, ocean carriers began to imagine a link between
steamships and trucks, allowing a boxed cargo to be offloaded from a ship and placed
on a truck, to be carried inland. Many different physical arrays were tried, leading
to the modern, and predominantly uniform design of ocean and railroad containers,
and intermodal chassis to carry them. Containers are taken off ships, and off
railroads, and placed upon intermodal chassis specifically designed to carry them.
33
Truckers then gain access to containers mounted upon chassis, accept “interchange”
of the containers and chassis, and drive them to their destinations.
Chassis leasing companies have arisen over the years. Originally they would
lease large fleets of chassis to steamship companies on long-term leases. More
recently the steamship companies have eschewed the longstanding program of
maintaining their fleet of leased chassis. In its place, the leasing companies have
created chassis terminals and pools, many of them “cooperative” pools involving
chassis owned by several companies. A new business model emerged in which
many of the chassis are leased by motor carriers specializing in intermodal carriage.
A series of private equipment interchange agreements now exist between lessors and
truckers. And the Uniform Intermodal Interchange and Facilities Access Agreement
must be subscribed to by every trucker desiring to enter the intermodal business. On
another side of the business, agreements have also come about between lessors and
railroads.
It became clear to FMCSA that intermodal chassis are in fact and law
commercial motor vehicles, which ought to be regulated from a safety standpoint.
Thus, the Administration now includes intermodal chassis in many of their
regulatory functions, alongside truck tractors and trailers.
34
Intermodal equipment (containers and chassis) and intermodal equipment
providers (IEPs) are now regulated under various Parts, intermingled with motor
carriers. These include requirements of inspection and the obligation to provide
intermodal equipment that is in safe operating condition (49 CFR §390.41); and the
responsibilities of drivers and motor carriers operating intermodal equipment (§
390.42). These regulations are said to preempt state and local laws regulating
inspection, repair, and maintenance of intermodal equipment (§ 390.46).
Significantly important is 49 CFR Part 393, which governs parts and accessories for
safe operation. This Part, applicable to tractors, trailers, and intermodal chassis per
49 CFR § 393.1, addresses many aspects of the vehicles themselves, including
lamps, reflective devices, electrical wiring, brakes, glazing and window
construction, fuel systems, and coupling devices and towing methods (Sections
393.9 through 393.71, inclusive, forming Subparts B, C, D, E, and respectively).
The remaining subparts address miscellaneous parts and accessories, detailed down
to tires, sleeper berths, mirrors, horns, and even noise levels inside power units
(Subpart G). Requirements for emergency equipment are found in Subpart H.
Subpart I calls for protection against shifting and falling cargo, with specific
requirements according to commodities. Subpart J governs cab and body
components, wheels, and suspension systems.
VI. Insurance and Hours of Service Regulatory Requirements
35
Part 387 of Title 49 CFR prescribes minimum levels of financial
responsibility, either through liability insurance or surety bonds, to be filed with the
FMCSA. A motor carrier may not operate in interstate transportation without
meeting these requirements. 49 CFR § 387.7. The current levels are set out in 49
CFR § 387.9. Currently the minimum level of insurance coverage required for a for-
hire motor carrier of non-hazardous substances (most dry-van carriers) is $750,000.
That minimum increases to $5,000,000 for carriers of hazardous substances
transported in cargo tanks, portable tanks, or hopper-type vehicles. In your writer’s
experience it is not uncommon for even a small motor carrier to have insurance limits
of $1,000,000. Large carriers commonly have more coverage, often subject to
significant self-insured retentions.
Insurance policies must also contain a form MCS-90 Endorsement, the
wording of which is prescribed in 49 CFR § 387.15. This form confirms the required
coverage, but goes further. The Endorsement amends the policy such that the insurer
“agrees to pay, within the limits of the [policy], any final judgment recovered against
the insured for public liability resulting from negligence in the operation,
maintenance or use of motor vehicles [subject to the Motor Carrier Act of 1980]
regardless of whether or not each motor vehicle is specifically described in the policy
and whether or not such negligence occurs on any route or in any territory authorized
to be served by the insured or elsewhere.” [Emphasis added].
36
The MCS-90 Endorsement assures the public that a judgment will be paid, to
the limit of the policy, even if coverage is technically non-existent because a certain
vehicle is not listed on the policy, or an accident occurs outside an authorized route.
But there is a catch: “The insured agrees to reimburse the company for any payment
made by the company on account of any accident, claim, or suit involving a breach
of the terms of the policy, and for any payment the company would not have been
obligated to make under the provisions of the policy except for the agreement
contained in this endorsement.”
In other words, the insurance company may have to pay a judgment that is
actually not covered under the policy, but the insured must pay the amount back to
the insurer. That is good news for an injured plaintiff, but may not be good for the
insurer, especially when the insured motor carrier does not have the financial ability
to make reimbursement. Also, note that the obligation of the insurance company
arises upon the rendition of a judgment. There is no stated obligation to defend the
insured in a lawsuit, or to settle the claim out of court.
Drivers’ Hours of Service requirements, codified at 49 CFR § 395.3, have
continually been a troubling aspect of FMCSA’s regulatory regime. Motor carriers
and drivers have found them to be unnecessarily confounding and inconsistent with
safety. The FMCSA has labored to listen to the industry at the same time it seeks
37
safety on the highways. The complications continue, however, and the motor
carriers are charged with compliance.
On June 1, 2020, the FMCSA revised drivers’ Hours of Service regulations
“to provide greater flexibility for drivers without adversely affecting safety.” The
new HOS regulations are set to go into effect on September 29, 2020. Under the
new regulations a driver may not drive after a period of 14 consecutive hours after
coming on-duty following 10 consecutive hours off-duty. Of that 14 hours on-duty
time, a driver may drive a total of 11 hours. But driving is not permitted if more
than 8 hours of driving time have passed without at least a consecutive 30-minute
interruption in driving status. That interruption may be satisfied either by off-duty,
sleeper berth, or on-duty not driving time, or a combination of them. It remains to
be seen whether he goals are met and all parties are satisfied.
VII. 49 U.S.C. § 14704 – a Private Right of Action?
But does any of these regulations confer a private cause of action upon a
plaintiff injured as a result of a trucking accident? The majority of the courts
considering the issue have ruled that they do not. Plaintiffs have relied upon a
provision from ICCTA, codified as 49 U.S.C. § 14704(a) to argue in favor of
Congressional intent to create a private cause of action. For an excellent discussion
of the issue, including Supreme Court precedent, see the opinion of the district court
38
in Elia Leon v. FedEx Ground Package System, Inc., 2016 U.S. Dist. LEXIS 30281,
313 F.R.D. 615 (D.N.M. 2016). The district court concluded that 49 U.S.C. §
14704(a)(2) does not create a private cause of action for personal injury plaintiffs
for three “primary reasons.” First, the language does not clearly include “rights-
creating language” that “explicitly confer[s] a right directly on a class of persons that
include[s] the plaintiff.” Second, there are “indications of legislative intent to deny
a personal injury remedy for violations of the FMCSR.” See Cort v. Ash, 422 U.S.
66, 78 (applying four-factor test to conclude there is no private cause of action by
corporate stockholders against directors was authorized under the criminal statute
barring corporate expenditures in connection with presidential elections). Section
14704 was enacted as part of ICCTA to transfer to the courts commercial disputes
that had historically been handled in administrative proceedings before the Interstate
Commerce Commission. Crosby v. Landstar, 2005 U.S. Dist. LEXIS 12008, 2005
WL 1459484 (D. Del. 2005). And in Stewart v. Mitchell Transp., 241 F.Supp.2d
1216, 1220 (D. Ks. 2002), the district court held that “Congress did intend to create
private rights of actin in Section 14704(a)(2), but not a right of action for personal
injury.”
Third, the court held, a private right of action in personal injury cases would
be inconsistent with the underlying purpose of the Motor Carrier Act. The section
at issue was part of ICCTA, to deregulate the trucking industry and “shift
39
commercial dispute resolution from the 108-year-old Interstate Commerce
Commission to courts.” Mitchell Transport, supra, 241 F. Supp.2d at 1220.
Finally, the FedEx court ruled that plaintiff did not have a New Mexico state
cause of action for violation of a federal regulation. “There is no state cause of action
allowing a personal injury or wrongful death plaintiff to redress FMCSR violations.”
Leon v. FedEx Ground, supra, 2016 U.S. Dist. LEXIS 30281, at *38. Other states
may differ. New York, for example, has adopted the FMCSRs but does not favor a
cause of action based upon violation of a regulation as opposed to a statute. The
violation, however, may serve as evidence of negligence, or at least a duty. Elliott
v. City of New York, 95 N.Y.2d 730, 734, 724 N.Y.S.2d 397, 399 (N.Y. 2001).
VIII. Conclusion
We have taken a view of motor carrier regulation, past and present, from
30,000 feet in the air. There is much detail we have not covered but which the
Transportation lawyer will likely need to study and master in the practice of law in