When a Truck Goes Off a Mountain - w/ Rob Hassman | Ep 56

Justin: 00:00:00

Welcome back to Logistics and Leadership. We have a special guest, first recurring guest that we've ever had, Rob Hasman, our attorney. Some of you have heard him on previous podcasts.

We want to bring him back because we had an issue that Brian and I discussed in episode 41 about a truck that legit drove off a mountain in Northern California. When we had the podcast, when we recorded it, it had happened that day. So I worked with Rob throughout this legal process with the carrier.

And just to recap, we had a situation where we contracted a carrier. They were based in Oregon.

The shipment was going to Oregon, or it may have been Washington, but they were based in the home state where it was delivering. Carrier checked out, they were in transit, picked up, everything was running fine. Find out the next day that it's a full truckload accident.

Driver was okay, went over the side of a mountain, it was a full truckload of beverages. Not good. But my first instinct is, well, this will be on the carrier. We'll get this worked out, take care of the client.

The issue grew and come to find out that this was a carrier that was leased on.

And we found a lot more through communicating with the carrier, the insurance reps, Rob yourself and want to talk through kind of what exactly happened in the aftermath of that issue. So, Rob, this is a carrier that.

Rob: 00:01:36

Had a lease agreement that is accurate. Thanks for having me back. Glad to be here. So let's talk about that to begin with.

So frequently carriers were, say, carrier B is leased on to me, or we have a lease agreement between carrier A and carrier B and they'll provide some document that just says carrier A is the lessor, carrier B is the lessee, and they're leased on.

Well, while that might be, quote, unquote, a lease in the layman's sense of the word, under trucking law, that does not constitute a lease, and that does not make them one in the same.

And what I mean by that is when a carrier leases on to another carrier, they essentially, if you think about it just globally, they again, in layman's terms, they essentially become part of the lessor company. So if carrier A is the lessor and carrier B is the lessee, when carrier B leases onto carrier A, they are just become a part of carrier A.

So carrier A's MC number should be. Is the number they operate under, should be the MC number on the side of the truck. Carrier A's insurance should cover them.

It's essentially as if they are carrier A. In other words, there's no difference to the Outside world.

Justin: 00:02:51

Pause right there. The carrier, let's say we have an owner operator.

Rob: 00:02:54

Correct?

Justin: 00:02:55

They don't have assets or they might be.

Rob: 00:02:57

They just generally have a tractor.

Justin: 00:02:59

Okay, they have a tractor. They're looking for equipment so that they can move shipments. But they are not technically an employee of this company.

Rob: 00:03:07

Correct.

Justin: 00:03:08

Are they carrying their own insurance? Like what exactly happens there?

Rob: 00:03:12

So if they have a true lease, and I'm going to get to that, the owner operator leases on to lessor, let's call it bigger trucking company. And they just become to the outside world a part of big trucking company. They operate under their authority, they operate under their MC number.

They should be insured by them. Big trucking company would pay for all their gas, all that sort of stuff subject to the lease.

They basically just go to work for the other company and in essence the other company gets to use their tractor trailer and them as a driver. It's almost like they're employed, but they do remain an independent contractor. But it's almost as if the truck now belongs to big trucking company.

It's used by them, operated by them through this driver. And they should be completely covered by the other big trucking company just as if any other employee would be.

Now with that said, again, under the eyes of the law, to have a trucking lease, it is extremely dot your I cross your T driven. The regulation is 49 CFR 376.12. Again, 49 CFR 376.12. That defines what needs to go into a trucking lease.

And if anything that's within that regulation is not within the document they give you, it will not be considered a trucking lease under the law and therefore they will not be leased on even though they think they are whatnot. So there's a lot that is in that reg.

You know, it would be too much for me to go into right now, but if you pull it up, you'll see all these various things. I mean it covers everything from deductions for claims, escrow fuel, insurance, but generally all those things need to be in there.

And I've written a few for probably 10 for carriers out there. And you get all these things in there and once they're all in, if it's signed, you have a valid lease.

And when you have a valid lease again, it's as if owner operator is now absorbed into or a part of big trucking company and they just run underneath them.

So when you have that circumstance and owner operator who is leased onto big Trucking company gets in an accident, generally no one's going to know that there even is a lease because big trucking company's insurance should be in play. Big trucking company's operating authority MC should be the one that the load is moved under. It should be the MC number on the side of the truck.

So oftentimes we don't even know. I bet you I can't verify this, but I would say that it could be a good portion of claims that I do. And you know how many I do on a daily basis?

Probably five, literally every day. There could be a vast chunk of those that the driver is actually leased onto the other company. But I don't know because it doesn't matter.

They're essentially part of that company. Same insurance, same MC number, whatnot. To the outside world. No one would ever know.

Now, what happens, quite honestly, frequently in my world is I present the claim. My broker sends me a claim and says it was Big Dan's trucking present the claim for. In your instance, drove off.

Justin: 00:06:25

Why's it gotta be Big Dance?

Rob: 00:06:27

It could be Big Wave.

Justin: 00:06:28

I bet there's a Big Wave. Would be a great truck.

Rob: 00:06:31

It could be Big Wave trucking company and drives off a truck. And I present the claim to Big Waves insurance and the Big Wave. And I get a response from the insurance. And it'll say, and sometimes. Or Big Wave.

And they'll say, don't point the finger at me. Point the figure at Little Wave. Or they move the load, but they're leased on to me. And.

Or the insurance will contact me and say, little Wave move this, not Big Wave. They're not covered by my insurance.

When that happens, I do a little digging and I'll sometimes get sent a document from Big Wave that says, this is our lease. You know, we're covered. Well, it's missing 85% of the stuff that the regulation requires. Therefore, they're not leased.

Justin: 00:07:17

And it's on a napkin.

Rob: 00:07:19

Yeah, sometimes it's on a napkin and. And it's garbage. And therefore they are not the same trucking company. And Little Wave is, in fact, independent trucking company. It would be under.

Even if they have this lease in place, the law doesn't recognize that. The insurance will not recognize that.

And they are operating as two independent entities, in which case you sometimes have to pivot and go after Little Wave directly and Little Waves insurance. I'm not saying that you can't still be successful, especially in something like an accident, if you can find the insurance.

The problem you sometimes do have, though is because there is no lease in place and they're not one in the same anymore. The broker carrier agreement that you had with Big Wave is not binding or applicable to Little Wave.

In which case, you know, if insurance denies or various things happen, we couldn't bring them here in Ohio. We can't seek attorneys fees in a trucking claim. We can only get direct damages. So let's say your customer wants compensation for.

Let's say they were moving a concert stage. They couldn't use that stage for a month. I want $10,000 for the loss of the use.

You know, indirect damages are not recoverable under a general contract or a Carmac claim. So your broker carrier agreement allows those other things. Well, that's out the window.

Justin: 00:08:41

Real quick, can you. I know Carmack's very common in our industry. Can you clarify what exactly that is?

Rob: 00:08:47

CFR: 14706

It's basically a statute or an amendment to a prior statute that governs all aspects of cargo claims. Who's liable, how they're liable, how you prove they're liable. And there's lots of regulations underneath it.

But how you process a claim, what damage you, you can get all that sort of stuff. And Carmack amendment specifically preempts or in other words, wipes away claims against a motor carrier for damages.

Delays losses to shipments under state law. So you can't bring a negligence claim. You can't bring any other claim. You would generally bring if someone's in an accident.

You can only bring a Carmac claim. Okay. If you don't have a contract with them. And again, Carmack amendment damages are just direct damages. Damages to widgets.

But if for instance, someone says, well, I had to send out my field investigator and they stayed a week in this hotel, well, tough. That's an indirect damage. Okay?

But if we have a contract in place, we have written, hopefully, if written correctly, all these other damages you can apply. So while you have the Carmack claim, you also have this contract and broke. There is law out there that broker contract claims are not preempted.

So again, if you have a lease, you're just going after Big Wave because they're one in the same. If you don't have a lease, they're independent. And whereas your contract would have been with Big Wave, it no longer applies to Little Wave.

And you're stuck with just a Carmac claim and just what the insurance would pay.

Justin: 00:10:54

And your only route to take at this point if it is a non binding lease agreement, is to go after in this scenario, Little Wave.

Rob: 00:11:05

That's not correct. What I do when I find that out is generally I will have already sent a cargo claim letter to Big Wave.

And then I find out, well, Little Wave had the movement and here's our lease. Now if it's a real lease, great, we keep going after Big Wave, which we'll get to in a little bit.

If it's a non conforming lease, which is ineffective, what I do then immediately is ask my client to get me MC information on Little Wave and Little Waves Insurance and I will take a and take and present a Carmack cargo claim letter to Little Wave. Have to take out my breach of contract and broker carrier agreement stuff.

That would be in the first letter I sent the Big Wave, but I send that to Little Wave and it's insurance to try to get that going. At the same time I send a secondary letter to Big Wave and I put them on notice that you alleged you had a lease, but you don't.

And because you don't have a lease, generally my clients broker carriers agreements have language that they're prohibited from double brokering, interlining, assigning, contracting, subcontracting loads to third parties. And then there's language that says if you breach the agreement, you have to indemnify us, I. E. Defend us, make us whole for losses.

And because we have losses, I put Big Wave on notice that you assign this to a third party while you allege it was a lease. It is not, therefore it is a different party. A different party has moved this, therefore you have assigned it or double brokered it.

That breaches our agreement because you breached the agreement, you have to indemnify us. And so if Little Wave and its insurance don't pick it up, we're coming after you in court because we have a contract with you.

Justin: 00:12:47

In our actual situation, we did not get to that point.

Rob: 00:12:51

We did not. That's because you have a very, very unique situation which quite honestly I've never seen and I don't know that I'll ever see again.

But we'll get to that, I think.

And then hopefully at the end of the day, Little Wave, especially in an accident or some claim other than temperature, hopefully Little Waves Insurance eventually comes to the table and pays the claim and everyone goes their separate ways. That's what happens most times in a what I will call situation, we find out there's a lease, but there isn't.

And we have a third party carrier in play that we have to go after. Always remember that some cargo insurance policies only cover certain drivers, only cover certain VINs. There's exclusions.

So it is possible that Little Waves insurance still might not pick it up, in which case you can't do anything with respect to Little Wave because you don't own the cargo. Unless you pay your customer and take an assignment, you don't have really any rights to go after Little Wave.

If you pay the claim, you could potentially go after Little Wave, but you might have to go to Oregon in your instance. Right?

So if Little Wave and or its insurance don't pay the claim, a lot of times you're stuck with trying to go after Big Wave under your contract for breach of contract.

Justin: 00:14:10

And how likely is that? Because that would have been our next step.

Rob: 00:14:13

It just depends on the size, viability and solvency of Big Wave. If it's a trucking company with 40 trucks and lots of operations, you might have a good success taking them to court.

If it's two trucks and Little Wave was one of them, you probably don't have a lot of utility in taking Big Wave to court. You know, that's a situation by situation analysis.

But in this instance, Big Waves insurance is never going to kick in because Big Wave was not in possession of the cargo.

If Little Wave was in fact leased on, Big Wave would have been deemed to have been in possession of the cargo, and therefore its insurance covers that. But when you have what we'll call false lease, it is a third party and their insurance will never come into play.

Justin: 00:15:02

So in our situation, we're going to continue on the Wave Wave train here. Little Waves insurance denied it. Big Waves insurance denied it. Correct.

Rob: 00:15:11

Well, your instance was very unique.

Okay, Well, I said I've written leases for people, and therefore I would know that if those parties were out there operating, Little Wave would be part of Big Wave and Big Waves insurance should kick in. But you provided a circumstance for me that I've never seen. When you told me Little Wave was leased on, I said, get the lease agreement.

You provided it, and sure enough, it did include everything the regulation requires, and it was a bona fide valid lease, which I was really, really surprised to hear. So in that instance, Little Wave was essentially Big Wave. Okay? Now, Big Wave dropped the ball, and I guess Little Wave allowed them to drop the ball.

Big Wave failed. It had a scheduled auto policy. Okay?

If it didn't have a scheduled outlet policy, every driver it had would be covered because it had a scheduled auto policy. Only certain VINs and only certain drivers are covered.

Well, I guess in your unique instance, although Little Wave was essentially Big Wave, now because Big Wave had a scheduled auto policy, it either failed to or forgot to, or just didn't add Little Wave as a covered driver.

Justin: 00:16:33

Okay, so is that based on the VIN number?

Rob: 00:16:36

Sometimes it's VIN number, sometimes it's driver, sometimes it's both.

Justin: 00:16:40

I want to pause right here because I think we run this often. Especially, you know, we do produce as well, where a lot of these asset based carriers will contract.

They have friends, cousins, brothers, you name it, where they'll just re broker it out to another carrier. We run into it constantly. What is the best practice when it comes to eliminating that issue?

Rob: 00:17:03

Let's get to that in a second. Let's close the loop on your first circumstance because that's, that's kind of a, a different situation than happened here.

So in our claim, Big Wave was the moving carrier.

So I present the claim to Big Wave and its insurance comes back and says, well, you're not covered because this driver and this VIN number aren't on our policy. So we go back to Big Wave, you and I, and we say, your driver's not covered. Big Wave says, all right, well, here's insurance for Little Wave.

We send the claim to Little Wave's insurance. Little Wave's insurance says, great. Didn't move under our MC number. You have a lease, it's under Big Waves. So even if this driver moved it, great.

But we're not covering Little Wave in this instance. This move was by Big Wave. If Little Wave had moved it, that'd be a different story.

So we were in a very weird situation where we had a leased on driver who was Big Wave, who Big Way failed to put on its policy. And then we had Little Wave that we went to and Little Waves Insurance said, great.

We do cover them, but not in this instance because this is a Big Wave move. So ultimately, that was a strange situation.

At the end of the day, what you and I did was we sued Little Wave and Big Wave and we negotiated a settlement and got a good deal of the money paid through a settlement and resolved it that way because we had leverage. Big Wave was a big trucking company. We had court costs, attorneys fees and other hammers to drop on them.

And they would have had to come here to Cincinnati, Cincinnati, Ohio, to fight it. I think we were fortunate.

But it's a unique situation in that I don't know that you're going to see an actually leased on driver that isn't going to be covered. And I've just not seen that before. Generally if you have a lease, again, we won't even know because it'll just be Big Wave.

So the fact that we found out it was a lease and didn't have insurance coverage coming and going was interesting. But generally, again, what you're normally going to see is here's our lease. No, you're not leased. This is a fake lease.

So double broker letter or claim against Big Wave and cargo claim against Little Wave and its insurance because it is a separate mc. Try to process one of those two things and get it resolved.

Justin: 00:19:24

I think it's great information. It's not common, clearly, because it's the first time you ran into it after practicing transportation law for nearly 20 years.

What we did when we recorded episode 41, it was very fresh. We had alluded to making a client payment for the damages. The full truckload claim. It was roughly $40,000.

We did do that in hopes of recovering and recouping the funds from the carrier. Didn't matter who paid us, but we were going after the carriers. In this situation, you put a lot of pressure on both parties.

Communication was lackluster at best. You encouraged us to submit freight guards and that seemed to really generate more communication from both parties.

And I think that was ultimately the play that helped us reach that settlement. Would you agree with that?

Rob: 00:20:19

I would agree.

I would say that Freight Guard is probably maybe the best, the strongest tool to not only draw a payment, but first and foremost a response from motor carriers. Sometimes I'll present a claim and they never respond. And then their insurance responds and says I can't get them to respond to me.

And as we've talked about in previous episodes, all cargo policies have a duty cooperate. If the motor carrier doesn't cooperate, insurance will deny. So if they're not responding to their insurance, it's going to lead to a denial.

So if and when we get to either no response or if they are responding and we get a denial and we tell them pay and they don't pay. We also use this for after insurance pays and they haven't paid their deductible, I always tell my client to post a freight guard.

And if that motor carrier is operating, oftentimes controls, responses, actions, potentially payments. There is a unique twist that has occurred.

,: 2024

So not only is it something that motor carriers are aware of, which it makes even the urgency to respond greater for them. That can be, you know, they're aware of it.

So if they don't respond within 72 hours, that freight guard is going nowhere, and it could really affect their business.

But I also bring that to your attention as brokers because as many brokers out there, and potentially you, Justin, have seen, sometimes when these freight guards are posted, attorneys for carriers or carriers or collection companies will come and allege defamation and say you're hurting their business and threaten lawsuits against the brokers for posting these things.

So what I tell my clients since this October 1st thing, since we can't take them down after 72 hours, is to be very careful when you post a freight guard. Defamation basically means slander. You know, everybody's heard that term.

Basically means a statement, either verbal or written, published to the world. Published means said or put on a website or put in the newspaper or something in a song that causes damage to a third party.

Well, the first element for a statement to be quote unquote defamatory is that it be false. If it's true, I could call you any name I want and you could lose billions of dollars. Doesn't matter. It's not defamation.

,: 2025

We don't have to get anything specific. Just the mere fact that there's something out there is enough for the outside world to pick up on the freight guard report.

Historically, my clients would put something like trucker broke down on the side of the road, failed to respond to my calls for three days. Failed, vanished. You know, all this information, very emotional. Yes. And, you know, very he said, she said.

And theoretically, some of that could be false, may not be false, I don't know. But if we can nip that in the bud, then these attorneys and these motor carriers are headed off at the pass.

So when you post a freight guard, it's a hugely powerful tool. Carriers will respond. It can draw payments, it can draw responses. But be very careful to just stick to the facts.

Load arrived, claim filed, claim unresolved. Or load was late, claim unresolved. Something like that. Something.

Just write down the brass tax that you're not inserting any ambiguity or language that could Be subject to interpretation, just very factual. Get that in there. Then no one's going to be able to allege to you that you're causing defamation and you're going to not have those issues.

So do it that way. And freight guards will be very powerful going forward.

Justin: 00:24:31

So we are making a change previously and that's extremely valuable because I know it's kind of wild, wild west when it comes to the freight guards. But recently we had to reel it in where all employees had access to carrier411. They could post whatever they wanted.

And then it creates a huge distraction for us when we have carriers. Some have a clean track record. They might have had one bad experience with us, but they have a lot of assets, great reputation.

And then we have an employee that posts something and it's consuming our time because we're going back and forth trying to figure out what's going on as opposed to having a process where there's a filter through. If they're credible and they make sense, then we'll take action on using a freight guard.

Otherwise we're not going to muddy the waters and point fingers or, you know, try to burn bridges just because of one bad experience with an employee.

Rob: 00:25:21

Yeah, that makes sense. I would have a gatekeeper who's the only person at the organization who can post, who knows a good way to post.

An effective non defamatory way to post and only posts when absolutely necessary. Employees on the, on the floor will want to post because they're an hour late or you know what, they can't get there till tomorrow.

Yeah, you use the tool for the reason you need the tool. I have a hammer. I can hit you in the head, but that's not what it's for.

Freight card is to draw an action and to notify the world when real issues exist. I mean, every carrier is going to be late sometimes. That doesn't mean the world needs to know that.

Just post when they haven't responded, they aren't paying, or they're not doing something that you absolutely need them to do. And only after you've given them ample warning and requests of whatever you want them to do. And they still fail to do so.

Justin: 00:26:16

Exactly. Well, in this case it was effective and it got the outcome that we were seeking.

So, extremely grateful for the way this played out and your partnership helping us through not only this issue, but numerous others. If you all have any questions or comments about this episode and some of the advice that, you know, Rob shared today, please feel free to reach out.

Drop us a comment or send us a message. We'd love to connect with you, answer any questions that you have. Rob, if people want to reach out to you directly, where can they find you?

Rob: 00:26:49

-: 0900

Website is Burns hasmanlaw.com with which is B U r n S H a s S M a N L a W dot.