Appendix — Millers National Insurance v. Axel's Express, Inc.

Oo & ae Sty) >} Supreme Court, US,

. : FILED

OCT 26 13988

JOSEPH F. SPANIOL, JR,

CLERK

- eer =

SUPREME COURT OF THE UN

OCTOBER TERM, 1988

NO.

MILLERS NATIONAL INSURANCE COMPANY;

JOHN CAULFIELD, dba CAULFIELD

TRUCKING; DONALD PRESTON THURMAN

Petitioners,

Ve

AXEL'S EXPRESS, INC.

FIREMAN'S FUND INSURANCE COMPANY,

Respondents

APPENDIX TO PETITION

WRIT OF CERTIORARI

CHARLES M. FARANO

FARANO AND KIEVIET

100 S. Anaheim Boulevard

Suite 340

Anaheim, CA 92805

(714) 778-2828

TABLE OF CONTENTS

Opinions and Orders

i U.S. District Court's Order

To Show Cause Re Jurisdiction..

2 U.S. District Court's Order

Of Dismissal (Oct. 7, 1987) ...

3 United States Court of

Appeals Ninth Circuit opinion

July 1, 1988 851 F.2d 267

(OU Gee BOG ip ccsdcceséscses

4. United States Court of

Appeals Denial of Rehearing

July 28, 1988 ..ccsece corks ewes

Relevant Statutes and Regulation

Le 49 USC §10101 .cccccccccsce

Ze 49 USC §10927 .cccccccccce

3 49 USC §11107 wcccccccccece

4. 49 CFR §1043.6 wccccccccce

5. 49 CPR $1057.11 wccccccces

6. 49 CPR §1057.12 wccccccccs

16

14

Ss

20

22

24

27

30

35

UNITED STATES DISTRICT COURT

CENTRAL DISTRICT OF CALIFORNIA

MILLERS NATIONAL

INSURANCE COMPANY,

et al.,

NO. CV 86-6592 AWT

ORDER OF DISMISSAL

Plaintiffs,

vs.

INC., et al.,

Defendants.

AND RELATED

)

)

)

)

)

)

)

AXEL'S EXPRESS, )

)

)

)

)

;

COUNTERCLAIM. )

)

This is an action to obtain a

declaration of rights and liabilities as

between insurers. Jurisdiction is

predicated under 28 U.S.C. §§1331 & 1337.

There is no diversity of citizenship.

Because, at the pretrial conference,

the Court was not satisfied that it had

subject matter jurisdiction, further

briefing was ordered on the issue (twice)

and the matter was argued. The Court has

concluded that it has no jurisdiction.

As between lessor and lessee (the

truckers), the Court may have "arising

under" jurisdiction under 49 U.S.C.

§11107(a) (4) and the regulations

promulgated thereunder, 49 C.F.R. Part

1057. See Rodriguez v. Ager, 705 F.2d

1229 (l1Gtnm Cir. 1983). However, this

would not give the Court jurisdiction of

any dispute between the insurers, because

they would be pendent parties. See,

e.g., C enters So. Cal. Admin. Co Vv.

& L Ca Cons Co., 738 F.2d 999 (9th

Cir. 1984).

Moreover, because the dispute with the

third-party claimant, James Gagner, has

been settled, the truckers no longer have

any interest in this matter -- with

respect to Caulfield, Thurman and Axel's,

the action is now moot. All that remains

is purely a dispute between insurance

carriers as to who is primarily liable

for coverage.

That dispute does not arise under

federal law. See Transamerica Freight

— - i Frei Sys.

Inc., 423 U.S. 28, 39-40 (1975); Grinnell

Mut. reins. Co. v. ire Fi & Ma

Ins. Co., 722 F.2d 1400, 1404 (8th Cir.

1983), cert. denied, 466 U.S. 951 (1984);

Carolina Cas. Ins. Co. v. Underwriters

Inc. ¢Co., S69 F.2€ 304, 313 (Sth Cir.

1978); contra, Argonaut Ins. Co. Vv.

n m. Co., 435 F.2d 718 (10th

Cir. 1971) (predating Brada Miller). As

these cases demonstrate, not every case

which may involve the interpretation of

some federal statute or regulation

“arises under" federal law. See

generally Franchise Tax Bd. v.

Construction Laborers Vacation Trust, 463

U.S. 1 (1983).

IT IS ORDERED that this action is

DISMISSED without prejudice for lack of

subject matter jurisdiction.

Dated: October 7, 1987

A. WALLACE TASHIMA

United States District Judge

|

KOR PUBLICATION

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

Mitiers NATIONAL INSURANCE

Company; JOHN CAULFIELD, dba

Caulfield Trucking; DonaLp

PRESTON THURMAN,

Plaintiffs-Counter-Defendants-

Appellants,

and

No. 87-6606

INTERSTATE TRUCK UNDERWRITERS,

INC., : D.C. No.

Plaintiff-Counter-Defendant, CV-86-6592-AWT

y. OPINION

AXEL’S EXPRESS, INC.,

Defendant-Appellee,

FIREMAN’S FUND INSURANCE

COMPANY,

Defendant-Counter-Claimant-

Appellee.

Appeal from the United States District Court

for the Central District of California

A. Wallace Tashima, District Judge, Presiding

Argued and Submitted

May 4, 1988—Pasadena, California

Filed July 1, 1988

Before: Procter Hug, Jr., Alex Kozinski and

David R. Thompson, Circuit Judges.

Opinion by Judge Hug

8003

8004 Mitcers Nationa ins. Co. v. Axet's Express

SUMMARY

Jurisdiction/insurance/Motor Carriers

The court affirmed the district court’s judgment dismissing

the action for a lack of jurisdiction. The court held that the

district court did not have federal-question jurisdiction.

Appellant Donald Thurman was involved in an accident

while driving a truck owned by appellant Caulfield Trucking

and leased to appellee Axel’s Express. After the personal

injury action was settled, appellant Millers National Insur-

ance Co., Caulfield’s and Thurman's insurer, filed a com-

plaint alleging that Axel’s was exclusively liable for the

damages. The district court dismissed the action, finding

there was no federal subject matter jurisdiction.

[1] Under federal law, Axel’s was required to file an insur-

ance policy or security before operating the truck in interstate

commerce. [2] Though resolution of this action may involve

a determination of federal law, that alone is not sufficient to

invoke federal-question jurisdiction. [3] There is nothing in

the regulations or the federal statute that deals with the ques-

tion of allocating liability between the insurers of an owner

and a carrier. Congress did not intend to provide a federal

private right of action to insurers of carriers for indemnifica-

tion.

COUNSEL

Charles M. Farano and Jeffrey L. Farano, Farano and

Kieviet, Anaheim, California, for the appellants.

Kurt A. Moll, Rigg and Dean, Santa Ana, California, for the

appellees.

Mitiers Nationat Ins. Co. v. AXEL’S EXPRESS

—_—_——— _ ——— oe ee -- -_—_—--—

OPINION

8005

HUG, Circuit Judge:

This is an appeal from a dismissal for lack of jurisdiction.

The sole issue is whether a federal district court has federal-

question jurisdiction over a dispute between two insurance

companies for coverage of an accident involving an interstate

motor carrier regulated under federal law. We affirm.

FACTS

On June 16, 1985, Donald Thurman was driving a truck

owned by Caulfield Trucking (“Caulfield”) and leased to

Axel’s Express, Inc. (“Axel’s”). Axel’s was a common carrier

authorized by the Interstate Commerce Commission (“ICC”)

to engage in interstate commerce. While he was driving,

Thurman fell asleep, and the truck hit a parked vehicle, caus-

ing serious injuries to the occupant, James Gagner. On June

3, 1986, Gagner filed a complaint for damages in state court,

naming Caulfield, Thurman, and Axel’s as defendants.

At the time of the accident, Axel’s was insured by Fire-

man’s Fund Insurance Co. (“Fireman’s”); and Caulfield and

Thurman were both insured by Millers National Insurance

Co. (“Millers”). The lease under which Axel’s was operating

stated, “The Contractor [Caulfield] shall hold Carrier [Axel’s]

harmless from any loss or damage incurred by Carrier as a

result of the negligent operation, maintenance, or best use of

the vehicles .... The Contractor shall maintain continuous

insurance coverage sufficient to hold Carrier harmless.”

A settlement was reached in the Gagner action. Fireman’s

contributed $450,000 towards settlement on behalf of its

insured, Axel’s. Millers contributed $200,000 on behalf of its

insureds, Caulfield and Thurman. The settlement was prem-

ised on the reservation of each party’s rights and obligations

THiHt

8006 Mitiers NaTtionat Ins. Co. v. AXet’s Express

regarding coverage and liability, to be determined at a later

time.

On October 10, 1986, Millers filed a complaint in federal

district court against Axel’s and Fireman's for damages and

a judicial declaration that Axel’s was exclusively liable for the

damages claimed by Gagner and that, as Axel’s insurer, Fire-

man’s was responsible for primary coverage of the Gagner

claim. Fireman's counterclaimed,' requesting a judicial dec-

laration that Caulfield and Thurman were exclusively liable

for the accident and that Millers was responsible for primary

coverage of the loss and Fireman's responsible only for excess

coverage.

The district court dismissed the action for lack of subject

matter jurisdiction. There was no diversity of citizenship

between the parties, and the court did not find the existence

of a federal question sufficient to invoke jurisdiction under 28

U.S.C. § 1331 (1982).? This appeal was taken by Millers. We

have jurisdiction pursuant to 28 U.S.C. § 1291 (1982). The

sole issue On appeal is whether the district court had jurisdic-

tion over the dispute. The existence of subject matter juris-

diction presents a question of law reviewable de novo. Peter

Starr Production Co. v. Twin Continental Films, Inc., 783

F.2d 1440, 1442 (9th Cir. 1986).

DISCUSSION

Millers argues that jurisdiction exists because the determi-

‘Though Fireman's contested federal jurisdiction over the action

brought by Millers, it counterclaimed in the event that the court found

jurisdiction. In its counterclaim, Fireman's stated that it did not concede

the junsdictional issue.

That section states:

The district courts shall have onginal jurisdiction of all civil

actions arising under the Constitution, laws, or treaties of the

United States.

Mitiers Nationa Ins. Co. v. AXEL’S Express 8007

nation of insurance coverage rests on which party 1s primarily

liable for the accident. This underlying liability, Millers con-

tends, is governed by federal law. While Millers acknowledges

existence of the indemnity clause in the lease, whereby Mill-

ers’ insured agreed to hold Axel’s harmless for liability, Mill-

ers disputes the validity of this indemnity clause based on

federal regulations. The argument appears to be that federal

law governs the question of liability for the accident, and any

indemnification agreement which would allocate liability

contrary to federal law is not valid.

{i] The truck involved in this case was a leased vehicle

engaged in interstate commerce, regulated under 49 U.S.C.

§ 10101 et seg. Under 49 U.S.C. § 10927, a motor carrier such

as Axel’s may not operate in interstate commerce unless it

files an insurance policy or other type of security in compli-

ance with applicable regulations. The security must be sufh-

cient to pay “for each final judgment against the carrier for

bodily injury to, or death of, an individual resulting from the

negligent operation, maintenance, or use of motor vehicles”

subject to regulation. 49 U.S.C.A. § 10927(a)(1) (1988). The

purpose of this law is “to assure to members of the public...

that a certificated carrier has independent financial responsi-

bility ... to pay for losses created by its carrier operations.”

Carolina Casualty Ins. Co. v. Underwriters Ins. Co., 569 F.2d

304, 312 (Sth Cir. 1978) (discussing section 215 of the Inter-

state Commerce Act, 49 U.S.C. § 315, which 49 U.S.C.A.

§ 10927(a)(1) supersedes).*? Some courts have held, based on

the federal statute and regulations, that the carrier is liable for

injuries caused by the leased vehicle. See Grinnell Mutual

Reinsurance Co. v. Empire Fire & Marine Ins. Co., 722 F.2d

1400, 1404 (8th Cir. 1983), cert. denied, 466 U.S. 951 (1984)

*To implement this Statutory requirement, the ICC requires the motor

carnier to file proof of adequate insurance. The carrier must attach form

BMC 90 to the carrier’s insurance policy; the form acts as an endorsement,

Stating that the carrier’s policy provides the required coverage. At the time

of the accident in question, Axel’s was properly certified by the ICC.

8008 Miutcers Nationa Ins. Co. v. Axet’s Express

(“{T]}he ICC regulations . . . make a carrier liable to the public

for negligent acts of the vehicle's driver . . . .~). See also Rodri-

guez v Ager, 705 F.2d 1229, 1236 (10th Cir. 1983). Millers

contends that. since Axel’s arguably would be liable for the

accident under federal law.‘ its insurer, Fireman's. is respon-

sible for primary coverage. According to Millers. this case

“arises under” federal law because the determination of

insurance coverage follows directly from the underlying

determination of liability, which itself is governed by federal

law.

[2] In essence, Millers’ claim for indemnity is a state law

claim. Though its resolution may involve a determination of

federal law, that alone is not sufficient to invoke federal-

question jurisdiction. We believe this case falls squarely

within the Supreme Court's holding in Merrell Dow Pharma-

ceuticals, Inc. v. Thompson, 106 S. Ct. 3229 (1986).

In Merrell Dow, the plaintiffs brought an action in state

court against a drug manufacturer, alleging that the drug

caused multiple birth defects in a child. In one of the six

counts, plaintiffs alleged that the drug vas misbranded in vio-

lation of the Federal Food. Drug, and Cosmetic Act,

(“FDCA”) and that such violation constituted a rebuttable

presumption of negligence in the state law action. The case

was removed to district court.

Denying the plaintiffs’ motion to remand. the district court

found that federal-question jurisdiction was invoked by vir-

tue of plaintiffs’ reliance on the defendant's violation of fed-

eral law. The Supreme Court reversed, holding that the case

did not arise under federal law. It began its analysis by noting

that “the vast majority of cases brought under the general

“Millers points out that although Gagner’s claim has been settled. the

issue of liability between Axel's and Caulfield has not been resoived. The

settlement was contingent upon reserving the parties’ rights and obligations

regarding liability and coverage issues.

10

MILLFRS NaTIONAL INS. Co. v. AXEL’S EXPRESS 8009

federal-question jurisdiction of the federal courts are those in

which federal law creates the cause of action.” /d. at 3233.

The court pointed to the “long-settled understanding that the

mere presence of a federal issue in a state cause of action does

not automatically confer federal-question jurisdiction.” /d. at

3235. The Court noted that the federal law in that case (the

FDCA) did not create any of the causes of action asserted by

the piaintiffs, but rather, the case involved “the presence of a

federal issue in a state-created cause of action.” /d. at 3233. It

concluded, “[A] complaint alleging a violation of a federal

Statute as an element of a state cause of action, when Congress

has determined that there should be no private, federal cause

of action for the violation, does not state a claim ‘arising

under the Constitution, laws, or treaties of the United States.’

28 U.S.C. § 1331.” Id. at 3237.

We had occasion to interpret Merrell Dow in Utley vy.

Varian Associates, Inc., 811 F.2d 1279 (9th Cir.), cert. denied,

108 S. Ct. 89 (1987). There we explained, “Under Merrell

Dow, if a federal law does not provide a private right of

action, then a state law action based on its violation perforce

does not raise a ‘substantial’ federal question” sufficient to

confer federal-question jurisdiction. Utley, 811 F.2d at 1283.

We found that federal-question jurisdiction did not exist in

Utley. In that case, Utley brought a state law employment dis-

crimination action against his employer. The case was

removed to federal court. In one claim, Utley alleged that his

employer dismissed him because cf his race. in violation of

the employer’s affirmative action duties as a federal contrac-

tor under a federal Executive Order. He contended that such

violation amounted to an unlawful employment practice

under section 12940 of the California Government Code,

which prohibits employers from discharging employees on

the basis of race. Applying the Merrell Dow analysis, we

examined whether the federal Executive Order upon which

Utley’s state claim was predicated provided a private right of

action. We stated. “Only if the executive order provides Utley

ll

8010 MILLERS NATIONAL INS. CO. v. AXEL’s Express

with a private right of action against [his employer] in federal

court might his complaint raise a ‘substantial’ federal ques-

tion permitting . . . jurisdiction.” /d. at 1284. We found that

no such private right of action existed and, accordingly, held

that the state claims did not raise a substantial question of

federal law sufficient to confer federal jurisdiction under

Merrell Dow. Id. at 1286. -

[3] We approach this case under the same analysis. The

proper inquiry is whether the federal statute involved in Mill-

ers’ state claim provides a private right of action. Millers’

claim is predicated upon federal law governing interstate car-

riers. We have previously noted that “Congress and the ICC,

through authorizing statutes and regulations, intended to

impose financial responsibility requirements upon autho-

rized carriers to protect the public.” Planet Ins. Co. v. Trans-

port Indemnity Co., 823 F.2d 285, 286-87 (9th Cir. 1987). But

though the regulations require the carriers to hold insurance

to assure financial responsibility toward members of the pub-

lic, there is nothing in the regulations or the statute that deals

with the question of allocating liability between the insurers

of an owner and a carrier. See Grinnell, 722 F.2d at 1404. We

are convinced that Congress, in enacting the statute, did not

intend to provide a federal private right of action to insurers

of carriers for indemnification against insurers of equipment

owners. Because Millers possesses no private right of action

under federal law, the fact that federal law might be an ele-

ment in its state law claim is not sufficient to present a federal

question supporting jurisdiction under 28 U.S.C. § 1331.°

5We also reject Millers’ argument that jurisdiction is conferred by 28

U.S.C. § 1352 (1982), which provides: “The district courts shall have origi-

nal jurisdiction, concurrent with State courts, of any action on a bond exe-

cuted under any law of the United States ....” Millers argues that the

insurance required by 49 U.S.C. § 10927 and 49 C.F.R. § 1043 is a type of

security which fatis under 28 U.S.C. § 1352. Insurance, however, is not nor-

mally thought of as a “bond” as that term is commonly used. Moreover,

even if insurance could be thought of as a “bond” as the term is used in sec-

tion 1352, this is not an “action on a bond.” Rather, it is an action for

indemnification brought by one insurer against another. This action fol-

lows the underlying state court action filed by Gagner. That action resem-

bles, far more than this one does, an “action on a bond.”

12

MiLiters NaTIonat Ins. Co. v. AXeL’s Express 8011

The district court's judgment is AFFIRMED.

13

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

MILLERS NATIONAL

INSURANCE COMPANY;

JOHN CAULFIELD,

dba, Caulfield

Trucking; DONALD

PRESTON THURMAN,

Plaintiffs-

Counter-Defendants

Appellants,

and

INTERSTATE TRUCK

UNDERWRITERS, INC.

Plaintiff-

Counter-Defendant,

VS.

AXEL'S EXPRESS,

INC.

Defendant-

Appellee,

FIREMAN'S FUND

INSURANCE COMPANY,

Defendant-

Counter-Claimant-

Appellee.

)

)

)

)

)

)

)

)

-

)

)

)

)

)

)

)

)

)

)

)

)

)

)

)

)

)

)

)

)

)

)

)

)

)

No. 87-6606

D.C. No. CV-

86-6592-AWT

ORDER

FILED JULY 28, 1988

14

Appeal from the United States

District Court for the Central District

of California

Before: HUG, KOZINSKI, and THOMPSON,

Circuit Judges.

The panel, as constituted in the

above-entitled case, has voted to deny

the petition for rehearing.

The petition for rehearing is

denied.

15

UNITED STATES DISTRICT COURT

CENTRAL DISTRICT OF CALIFORNIA

MILLERS NATIONAL

INSURANCE COMPANY,

et al.,

NO. CV 86-6592 AWT

FURTHER ORDER TO

SHOW CAUSE RE

Plaintiffs, JURISDICTION

vs.

INC., et al.,

Defendants.

AND RELATED

)

)

)

)

)

)

AXEL'S EXPRESS, )

)

)

)

)

)

COUNTERCLAIM. )

)

Based upon plaintiffs' memorandun,

filed August 19, 1987 (to which

defendants have not responded), the Court

is satisfied that it has subject matter

jurisdiction, but only with respect to

limited aspects of the controversy.

The dispute as between plaintiffs

Caulfield and his driver Thurman and

16

defendant Axel's Express appears to

“arise under" 49 U.S.C. §11107(a)(4) and

the regulations promulgated thereunder,

49 C.F.R. Part 1057. See Rodriguez v.

Ager, 705 F.2d 1229 (10th Cir. 1983).

However, the rights and obligations of

the various insurance carriers--

Plaintiffs Miller National Insurance

Company and Interstate Truck

Underwriters, Inc., and defendant

Fireman's Fund Insurance Companies--

appear to be governed by the terms of

the respective policies. Any liability

of any insurer is derivative only, based

on the liability of its insured and the

coverage afforded. It does not appear

that insurance carriers are governed by

Title 49 of the U.S. Code or the C.F.R.

In fact, under the McCarran-Ferguson Act,

15 U.S.C. §1011 et seg., regulation of

the business of insurance is left

17

expressly to the States.

There is no complete diversity of

citizenship here so as to give this Court

subject matter jurisdiction under 28

U.S.C. §1332. Therefore, the controversy

with respect to coverage is a pendent

claim -- pendent to the claim between the

regulated truckers. The insurance

carriers are pendent parties. This

circuit does not recognize pendent party

jurisdiction and that rule applies to

pendent party insurers. Carpenters So.

Cc Admi Cc . Vv. D & L Camp Constr.

Co. 738 F.2d 999 (9th Cir. 1984)

(doctrine applied to pendent party claim

against surety).

The Court believes in these

circumstances that, although it can

proceed to adjudicate the dispute between

the truckers, all insurance company

parties must be dismissed.

18

IT IS ORDERED:

i. The parties shall show cause in

writing by September 25, 1987, why all

insurance company parties should not be

dismissed without prejudice for lack of

subject matter jurisdiction.

2. This order to show cause is set for

hearing on October 5, 1987, at 10:00 a.m.

3. Should a partial dismissal be

ordered, the parties should be prepared

to address the issue of whether they

desire the remainder of the controversy

(as between the truckers) to proceed in

this forum.

Dated: September 14, 1987

A. WALLACE TASHIMA

United States District Judge

19

49 USCS §10101. Transportation policy

(a) To ensure the development,

coordination, and preservation of a

Transportation system that meets’ the

transportation needs of the United

states including the United States Postal

Service and national defense, it is the

policy of the United States Government to

provide for the impartial regulation of

the modes of transportation subject to

this subtitle, and in regulating those

modes-

(1) to recognize and preserve the

inherent advantage of each mode of

transportation;

(2) to promote safe, adequate,

economical, and efficient

transportation;

(3) to encourage sound economic

conditions in transportation,

including sound economic conditions

20

among carriers;

(4) to encourage the establishment

and maintenance of reasonable rates

for transportation without

unreasonable discrimination or unfair

or destructive competitive practices;

(5) to cooperate with each State and

the officials of each State on

transportation matters; and

(6) to encourage fair wages’ and

working conditions in the

transportation industry.

(b) This subtitle shall be administered

and enforced to carry our the policy of

this section.

(Oct. 17, 1978, P.L. 95-473, § 1, 92

Stat. 1337)

21

49 USCS §10927. Security of motor

carriers, brokers, and freight forwarders

(a) (1) The Interstate Commerce

Commission may issue a certificate of

permit to a motor carrier under section

10922 or 10923 of this title (49 USCS §

10922 or 10923] only if the carrier files

with the Commission a bond, insurance

policy, or other type of security

approved by the Commission. The

security must be sufficient to pay, not

more than the amount of the security, for

each final judgment against the carrier

for bodily injury to, or death of, an

individual resulting from the negligent

operation, maintenance, or use of motor

vehicles under the certificate of permit,

of for loss or damage to property (except

property referred to in paragraph (3) of

this subsection, or both. A certificate

or permit remains in effect only as long

22

as the carrier satisfies the requirements

of this paragrcph.

23

49 USCS §11107. Leased motor vehicles

(a) Except as provided in section

11101(c) of this title [49 USCS

§11101(c)]}, the Interstate Commerce

Commission may require a motor carrier

providing transportation subject to the

jurisdiction of the Commission under

subchapter II of chapter 105 of this

title (49 USCS §§ 11521 et seq.], that

uses motor vehicles not owned by it to

transport property under an arrangement

with another party to-

(1) make the arrangement in writing

signed by the parties specifying its

duration and the compensation to be

paid by the motor carrier'

(2) carry a copy of the arrangement

in each motor vehicle to which it

applies during the period the

arrangement is in effect;

(3) inspect the motor vehicles and

24

obtain liability and a cargo

insurance on them; and

(4) have control of and be

responsible for operating those motor

vehicles in compliance with

requirements prescribed by the

Secretary of Transportation on safety

of operations and equipment, and with

applicable law as if the motor

vehicles were owned by the motor

carrier.

(b) The Commission shall require, by

regulations, that any arrangement,

between a motor carrier or property

providing transportation subject to the

jurisdiction of the Commission under

subchapter II of the chapter 105 of this

title (49 USCS §§ 11521 et seq.], and any

other person, under which such other

person is to provide any portion of such

transportation by a motor vehicle not

25

owned by the carrier shall specify, in

writing, who is responsible for loading

and unloading the property cnto and from

the motor vehicle.

(As mended July 1, 1980, P.L. 96-296, §

15(d), 94 Stat. 809.)

26

49 CFR § 1043.6 Bonds and certificates of

insurance.

(a) Public liability. Each Form BMC 82

surety bond filed with the Commission

must be for the full limits of liability

required under § 1043.2(b)(1). Form MCS-

82 surety bonds and other forms of

Similar import prescribed by the

Department of Transportation, may be

aggregated to comply with the minimum

security limits required under §

1043.2(b)(1) or §1043.2(b)(2). Each Form

BMC 91 certificate of insurance filed

with the Commission will always represent

the full security minimum limits required

for the particular carrier, which it

remains in force, under § 1043.2(b)(1) or

§ 1043.2(b)(2), whichever is applicable.

Any previously executed form BMC 91 filed

before the current revision which is left

on file with the Commission after the

27

a ld

effective date of this regulation, and

not canceled within 30 days of that date

will be deemed to certify the same

coverage limits as would the filing of a

revised Form BMC 991. Each Form BMC 91X

certificate of insurance filed with the

Commission will represent the full

security limits under § 1043.2(b)(1) or §

1043.2(b)(2) or the specific security

limits of coverage as indicated on the

face of the form. If the filing reflects

aggregation, the certificate must show

clearly whether the insurance is primary

or, if excess coverage, the amount of

underlying coverage as well as amount of

the maximum limits of coverage.* Each

Form BMC 91MX certificate of insurance

filed with the Commission will represent

the security limits of coverage as

indicated on the face of the form. The

Form BMC 91MX must show clearly whether

the insurance is primary or, if excess

coverage, the amount of underlying

coverage as well as amount of the maximum

limits of coverage.

29

49 CFR Subpart B-Leasing Regulations

§ 1057.11 General Leasing requirements.

Other than through the interchange of

equipment as set forth in §1057.31, and

under the exemptions set for the in the

Subpart c of these regulations, the

authorized carrier may perform authorized

transportation in equipment it does not

own only under the following conditions:

(a) Lease-There shall be a written

lease granting the use of the equipment

to be leased and stating the date and

time of day possession is transferred,

shall be given as follows:

(b) Receipts for equipment-Receipts,

specifically identifying the equipment to

be leased and stating the date and time

of day possession is transferred, shall

be given as follows:

(1) When possession of the equipment

is taken by the authorized carrier, it

30

shall given the owner of the equipment a

receipt. The receipt identified in this

section may be transmitted by mail,

telegraphy, or other similar means of

communication.

(2) When possession of the equipment

by the authorized carrier ends, it shall

obtain a receipt from the owner.

(3) Authorized representatives of the

carrier and the owner may take possession

of leased equipment and give and receive

the receipts required under this

subsection.

(c) Identification of equipment-The

authorized carrier acquiring the use of

the equipment under this section shall

identify the equipment as being in its

service as follows:

(1) During the period of the lease,

the carrier shall identify the equipment

in accordance with the Commission's

31

Diieeeennetenennieinennenenete

requirements in Part 1058 of this chapter

(Identification of Vehicles). Upon

termination of the lease, the authorized

carrier shall remove all identification

showing in as the operating carrier

before giving up possession of the

equipment.

(2) Unless a copy of the lease is

carried on the equipment, the authorized

carrier shall keep a statement with the

equipment during the period of the lease

operated by it. The statement shall also

specify the name of the owner, the date

and the of lease, any restrictions in the

lease relative tothe commodities to

on

transported, the address at which the

original lease is kept by the authorized

carrier. This statement shall be

prepared by the authorized carrier or its

authorized representative.

(d) Records of equipment-The authorized

32

carrier using equipment leased under this

section shall keep records of he

equipment as follows:

(1) The authorized carrier. shall

prepare and keep documents covering each

trip for which the equipment is used in

its service. These documents’” shall

contain the name and address of the owner

of the equipment, the point or origin,

the time and date of departure, and the

point of final destination. Also, the

authorized carrier shall carry papers

with the leased equipment during its

operation containing this information and

identifying the lading and clearly

indicating that the transportation is

under its responsibility. These papers

shall be preserved by the authorized

carrier as part of its transportation

records. Leases which contain the

information required by the provisions in

33

a

this paragraph may be used and retained

instead of such documents or papers. As

to lease agreements negotiated under a

master lease, this provision is complied

with by having a copy of a master lease

in the unit of equipment in question and

where the balance of documentation called

for by this paragraph is included in the

freight documents prepared for the

specific movement.

(2) [Reserved]

[44 FR 4681, Jan. 23, 1979, as amended at

49 FR 47259, Dec. 3 1984; 49 FR 4785,

Dec. 7, 1984; 50 FR 24549, June 12, 1985]

34

49 CFR § 1057.12 Written lease

requirements.

Except as provided in the exemptions set

forth in Subpart c of this part, the

written lease sousiven under § 1057.11(a)

shall contain the following provisions.

The required lease provisions shall be

adhered to and performed by the

authorized carrier.

(a) Parties-The lease shall be made

between the authorized carrier and the

owner of the equipment. The lease shall

be signed by these parties or by their

authorized representatives.

(b) Duration to be specific-The lease

shall specify the time and date of the

circumstances on which the lease begins

and ends. These times or circumstances

shall coincide with the times for the

giving of receipts required by §

1057.11(b).

35

(c) Exclusive possession and

responsibilities-(1) The lease shall

provide that the authorized carrier

lessee shall have exclusive possession,

control, and use of the equipment for the

duration of the lease. The lease shall

further provide that the authorized

carrier lessees shall assume complete

responsibility for the operation of the

equipment for the duration of the lease.

(2) Provision may be made in the lease

for considering the authorized carrier

lessee as the owner of the equipment for

the purposes of subleasing it under these

regulations to other authorized carriers

during the lease.

(3) When an authorized carrier of

household goods leases equipment for the

transportation of household goods, as

defined by the Commission, the parties

may provide in the lease that’ the

36

a

—

provisions required by paragraph (c) (1)

of this section apply only during the

time the equipment is operated by or for

the authorized carrier lessee.

(d) Compensation to be specified-The

amount to be paid by the authorized

Carrier for equipment and driver's

services shall be clearly stated on the

face of the lease or in an addendum which

is attached to the lease. Such lease or

addendum shall be delivered to the lessor

prior to the commencement of any trip in

the service of the authorized carrier.

An authorized representative or the

lessor may accept these documents. the

amount to be paid may be expressed as a

percentage of gross revenue, a flat rate

“per mile, a variable rate depending on

the direction traveled or the type of

commodity transported, or by any other

method of compensation mutually agreed

37

itiaticeeeaeeniaiacaiiaiameiiiiniaiieaieiaain

upon by the parties to the lease. the

compensation stated on the lease orig the

attached addendum may apply to equipment

and driver's services either separately

or as a combined amount.

(e) Items specified in lease. The

lease shall clearly specify the

responsibility of each party with respect

to the costs of fuel, fuel taxes, empty

mileage, permits of all types, tolls,

ferries, detention and accessorial

services, base plates and licenses, and

unused portions of such items. The lease

shall clearly specify who is responsible

for loading and unloading the property

onto and from the motor vehicle, and the

compensation, if any, to be paid for this

service. Except when the violation

results from the acts or omissions of the

lessor, the authorized carrier lessee

shall assume the risk and costs of fines

38

ee

for overweight and oversize trailers when

the trailers are reloaded, sealed, or the

load is containerized, or when the

trailer o® lading is otherwise outside of

the lessor's control, and for improperly

permitted over dimension and overweight

loads and shall reimburse the lessor for

any fines paid by the lessor. If the

authorized carrier is authorized to

receive a refund or a credit for base

plates purchased by the lessor from, and

issued in the name of, the authorized

carrier to another lessor the authorized

carrier shall refund to the initial

lessor on whose behalf the base plate was

first obtained a prorated share of the

amount received.

(f) Payment period. The lease shall

specify that payment to the lessor shall

be made within 15 days after submission

of the necessary delivery documents and

39

BEREREBEEESEEEBEEEBERBHS FF

other paperwork concerning a trip in the

service of the authorized carrier. the

paperwork required before the lessor can

received payment is limited to log books

required by the Department of

Transportation and those documents

necessary for the authorized carrier to

secure payment form the shipper. The

authorized carrier may require the

submission of additional documents by the

lessor but not as a prerequisite to

payment. Payment to the lessor shall not

be made contingent upon submission of a

bill of lading to which no exceptions

have been taken. The authorized carrier

shall not set time limits for the

submission by the lessor of required

delivery documents and other paperwork.

(g) Copies of freight bill-Subject to

the right of the authorized carrier to

delete the names of shippers’ and

40

BERERREEEEEBEEEE EBS Sf =

consignees shown on the freight bill, the

lease shall specify that the authorized

carrier shall give a copy of the rated

freight bill before or at the time of

settlement to those lessors whose revenue

is based on a percentage of the gross

revenue for a shipment. The lease shall

clearly specify the right of the lessor,

regardless of method of compensation, to

examine copies of the carrier's tariff.

(h) Charge-back items. The lease

shall clearly specify all items that may

be initially paid for by the authorized

carrier, but ultimately deducted from the

lessor's compensation at the time of

payment or settlement, together with a

recitation as to how the amount of each

item is to be computed. The lessor shall

be afforded copies of those documents

which are necessary to determine the

validity of the charge.

41

(i) Products, equipment, or services

from authorized carrier-The lease shall

specify that the lessor is not required

to purchase or rent any products,

equipment, or services from the

authorized carrier as a condition of

entering into the lease arrangement. The

lease shall specify the terms of any

agreement in which the lessor is a party

to an equipment purchase or rental

contract waton gives the authorized

carrier the right to make deductions from

the lessor's compensation form purchase

or rental payments.

(j) Insurance-(1) The lease shall

Clearly specify the legal obligation of

the authorized carrier to maintain

insurance coverage for the protection of

the public pursuant to Commission

regulations under 49 U.S.C. 10927. The

lease shall further specify who is

42

responsible for providing any other

insurance coverage for the operation of

the leased equipment, such as bobtail

insurance. If the authorized carrier

will make a charge back to the lessor for

any of this insurance, the lease: shall

specify the amount which will be charged-

back to the lessor.

(2) If the lessor purchases any

insurance coverage for the operation of

the leased equipment from or through the

authorized carrier, the lease shall

specify the lessor with a copy of each

policy upon the request of the lessor.

Also, where the lessor purchases such

insurance in the manner, the lease shall

specify that the authorized cagier will

provide the lessor with a certificate of

insurance for each such policy. Each

certificate of insurance shall include

the name and of the insurer the policy

43

number, the effective dates of the

policy, the amounts and types of

coverage, the cost to the lessor for each

type of coverage, and the deductible

amount for each type of coverage for

which the lessor may be liable.

(3) The lease shall clearly specify

the conditions under- which deductions for

cargo or property damage may ge made from

the lessor's settlements. The lease

shall further specify that the authorized

carrier must provide the lessor with a

written explanation and itemization of

any deductions for cargo or property

damage made from any compensation of many

owed to the lessor. the written

explanation and itemization must be

delivered to the lessor before any

deductions are made.

(k) Escrow funds-If escrow funds are

required, the lease hall specify:

a4

(1) The amount of any escrow fund or

performance bond required to e paid by

the lessor to the authorized carrier or

to a third party.

(2) The specific items to which the

escrow fund can be applied.

(3) That while the escrow fund is

under the control of the authorized

carrier, the authorized carrier shall

provide an accounting to the lessor of

any transactions involving such fund.

The carrier shall perform the accounting

in one of the following ways:

(i) By clearly indicating in

individual settlement sheets the amount

and description of any deduction or

addition made to the escrow fund; or

(ii) By providing a separate accounting

to the lessor of any transactions

involving the escrow fund. This separate

accounting shall be done on a monthly

45

Se

basis.

(4) The right of the lessor to demand

to have an accounting for transactions

involving the escrow fund at any time.

(5) That while the escrow fund is

under the control of the carrier, the

carrier shall pay interest on the escrow

fund on at least a quarterly basis. For

purposes of calculating the balance of

the escrow fund on which interest must be

paid, the carrier may deduct a sum equal

to the average advance made to the

individual lessor during the period of

time for which interest is paid. The

interest rate shall be established on the

date the interest period begins and shall

be at least equal to the average yield or

equivalent coupon issue yield on 9l-day,

13-week Treasury bills as established in

the weekly auction by the Department of

Treasury.

46

(6) The conditions the lessor must

fulfill in order to have the escrow fund

returned. At the time of the return of

the escrow fund, the authorized carrier

may deduct monies for those obligations

incurred by the lessor which have been

previously specified in he lease, and

shall provide a final accounting to the

lessor or all such final deductions made

to the escrow fund. The lease shall

further specify that in no event shall

the escrow fund be returned later than 45

days from the date of termination.

(1) Copies of the lease--An original

and two copies of each lease shall be

signed by the parties. The authorized

carrier shall keep the original and shall

place a copy of the lease on the

equipment during the period of the lease

unless a statement as provided for in

§1057.l1(c)(2) is carried on the

47

equipment shall keep the other copy of

the lease.

(m) This paragraph applies to owners

who are not agents but whose equipment is

used by an agent of an authorized carrier

in providing transportation on behalf of

that authorized carrier. In this

situation, the authorized carrier is

obligated to ensure that these owners

receive all the rights and benefits due

an owner under the leasing regulations,

especially those set forth in paragraphs

(d)-(k) of this section. This is true

regardless of whether the lease for the

equipment is directly between the

authorized carrier and its agent rather

than directly between the authorized

carrier and each of these owners. The

lease between an authorized carrier and

its agent shall specify this obligation.

(49 U.S.C. 10321, and 11107; 5 U.S.C.

48

553)

(44 FR 4681, Jan. 23, 1979, as amended at

45 FR 13092, Feb 28, 1980; 47 FR 28398,

June 30, 1982; 47 FR 51140, Nov. 12,

1982; 47 FR 54083, Dec. 11,1982; 49 FR

47851, Dec. 7, 1984}

49