Carriers Told to Ignore Erroneous Letters Warning of Loss of Operating Authority

This story appears in the March 21 print edition of Transport Topics.

The Federal Motor Carrier Safety Administration told carriers last week that letters warning about possible loss of operating authority after notifying the agency of cargo insurance cancellations were sent in error.

FMCSA said carriers receiving the erroneous notices do not need to respond.

“FMCSA will not revoke the operating authority of non-household goods carriers and non-household goods freight forwarders whose cargo insurance expires on or after March 21,” the agency said in a statement released following publication of an article in Transport Topics.

As many as 6,000 carriers may have received the erroneous warning letters, insurance industry officials said.

Most for-hire motor carriers and freight forwarders no longer are obligated to provide minimum levels of cargo insurance after March 21, according to a new rule FMCSA put in place.

“Only household goods carriers and freight forwarders need to have evidence of cargo insurance on file,” FMCSA said.

When carriers and insurance firms moved to cancel the insurance filings, FMCSA said its computer system sent out notices warning that any operations without such insurance were “unlawful” and that the agency would revoke the carrier’s operating authority within 30 days of the service date of the letter.

“FMCSA clarifies that non-HHG [household goods] carriers and non-HHG freight forwarders . . . need not respond to such letters” received after Feb. 19.

The agency said it is “taking corrective measures” to alert carriers of the problem.

Meanwhile, several groups representing shippers and freight brokers last week mounted a last-minute campaign to stop FMCSA from implementing the change in cargo insurance rules.

“We strongly oppose this action and request immediate legislative action to reverse this decision,” said Nancy O’Liddy, director of policy for the Transportation Intermediaries Association in Alexandria, Va.

“Minimum cargo liability insurance for motor carriers is very important to the transportation logistics community. Equally important is the need for an official central resource to verify that carriers are in compliance with the insurance requirements.”

O’Liddy said that shippers, other carriers and freight brokers rely on FMCSA’s website to access information on insurance and licensing.

“The [minimum cargo insurance requirement] not only serves as proof of insurance, it also provides many valuable protections,” O’Liddy said. “Claims submitted to an insurance company must be paid, even if the carrier is in bankruptcy. Also claims are not subject to deductibles, exclusions or limitations that may exist in the policy.”

A spokesman for the Transportation & Logistics Council said his group has started a campaign to “Save the BMC-32,” which is the name given to the 1930s-era cargo liability insurance requirement.

“Although the BMC-32 only provides minimum coverage for loss or damage in transit — $5,000 per shipment and $10,000 per incident — in many situations it has proven over the years to be the only recourse for shippers, both large and small, to recover otherwise uncollectible cargo claims,” said George Pezold, T&LC’s executive director.

Raymond Selvaggio, T&LC general counsel, said letters have been sent to all congressional transportation committee members asking for help to make the cargo insurance rule mandatory.

Sens. Olympia Snowe (R-Maine) and Amy Klobucher (D-Minn.) last year introduced a bill to make the rule mandatory, but the legislation died when the 111th Congress adjourned.

So far, Selvaggio said, “We haven’t had any responses to our request.”