Appeals Court Blocks Truckers’ Bid to Recover More Than $10,000 After Brokerage Failure
This story appears in the July 5 print edition of Transport Topics.
A U.S. Appeals Court has rejected an effort by a group of truckers to collect more than $10,000 from an insurance company that posted a surety bond for a broker that went bankrupt.
The ruling by the U.S. Court of Appeals for the District of Columbia Circuit upheld a lower court’s decision that RLI Insurance, Peoria, Ill., owed just the $10,000 from the bond taken out by Sam’s Transportation Services, a broker in Shaw, Miss.
The truckers who weren’t paid by the bankrupt broker were trying to collect as much as $10,000 apiece — a total of $161,823.50.
Arguments by counsel for the truckers, including All-Star Transportation, Pacific, Mo., had no mer-it, the decision said, because the $10,000 total payout was clearly stated in the federal broker form, known as BMC 84.
“A $10,000 bond isn’t adequate in this day and age,” Mick McCoy, a shareholder in All-Star, told Transport Topics. “Carriers need either a secured interest or a guarantee [of payment]. Bonds need to be underwritten based on risk. That’s what we have to do with our insurance and that’s what has to happen with bonds, too.”
Efforts by TT to reach Peter Roncali, listed as the owner of Sam’s, were unsuccessful.
The carriers that filed claims will receive payment from the $10,000 bond in proportion to the amount that they are owed.
Sixty-eight truckers originally sought payment from the insurance company, but only seven carriers filed claims in the case when it was heard by the lower court. Only those claims filed in the lower court will be paid, according to the decision.
The court decision comes as the issue of brokers paying their debts gains attention in Congress. Sens. Olympia Snowe (R-Maine) and Amy Klobuchar (D-Minn.) have introduced a bill that would raise the minimum bond to $100,000 and toughen requirements to become a broker (click here for previous story).
The Owner-Operator Independent Drivers Association and the Transportation Intermediaries Association both support the bill.
Robert Pitcher, a vice president with American Trucking Associations, said ATA endorses a higher limit for the broker bond, but is still reviewing the specifics of the bill before deciding whether to support it.
