Opinion ID: 1464559
Heading Depth: 1
Heading Rank: 2

Heading: the insurance charge-back issue

Text: Federal law requires that registered carriers, such as United, file with the Secretary of Transportation a bond or PL/PD insurance policy protecting the public from personal injury and property damage caused by the negligent operation, maintenance, or use of motor vehicles. 49 U.S.C. § 13906(a)(1); see generally 49 C.F.R. §§ 387.7, 387.9; H.R.Rep. No. 96-1069 (1980), reprinted in 1980 U.S.C.C.A.N. 2283, 2323-2327. The Secretary's regulations reflect this requirement. For example, the section of the Truth-in-Leasing regulations dealing with motor carrier insurance, 49 C.F.R. § 376.12(j)(1), provides in relevant part: (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 ... regulations [issued] under 49 U.S.C. 13906. The lease shall further specify who is 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. The Owner-Operators asserted in Claim III that this regulation prohibits United from charging back to owner-operator/lessors any part of the cost of the PL/PD insurance that United must maintain. Based on the plain meaning of the phrase any of this insurance in the third sentence of § 376.12(j)(1), the district court dismissed Claim III, concluding that the regulation permits registered motor carriers to charge back the costs of PL/PD insurance. The only other district court to consider this issue reached the same conclusion. See OOIDA v. Mayflower Transit, Inc., 2005 WL 4702006, at -2 (S.D.Ind. Sept.26, 2005). Reviewing this issue of statutory interpretation de novo, we agree. On appeal, the Owner-Operators argue, as they did in the district court, that the phrase any of this insurance in the third sentence of § 376.12(j)(1) refers only to the other insurance referred to the second sentence. On this question, we agree with and adopt the district court's reasoning: The first sentence [of § 376.12(j)(1)] establishes that all carriers must maintain public liability and property damage insurance. The second sentence provides that carriers and drivers may decide who is responsible for maintaining other insurance, such as bobtail insurance. The third sentence permits the carrier to charge back to the driver any of this insurance. The inclusion of the word any and the exclusion of the word other signify that this insurance [in the third sentence] refers to all insurance referenced in the paragraph, not just to the insurance discussed in the previous sentence. The Owner-Operators further argue that the regulation's drafting history reflects the agency's decision that carriers may not transfer their responsibility for PL/PD insurance to owner-operator/lessors. The proposed rule placed the requirement that the lease specify the carrier's obligation to maintain insurance in a separate subparagraph (4). The final rule, in adopting what is now 49 C.F.R. § 376.12(j)(1), moved the substance of subparagraph (4) to the first sentence of the above-quoted subparagraph (1). The agency explained that this change was intended to clarify that a carrier may not delegate its legal responsibilities to carry... property damage and public liability insurance. The final rule and the agency's explanation said nothing about whether the carrier/lessee must pay for PL/PD insurance. See Lease and Interchange of Vehicles, 131 M.C.C. 141, 149-50, 1979 WL 11158 (I.C.C.), at 6-7 (1979). Passing the cost of insurance to the owner-operator/lessor does not delegate the responsibility to maintain that insurance. Finally, the Owner-Operators argue that construing § 376.12(j)(1) in accordance with its plain meaning conflicts with federal motor carrier financial responsibility statutes reflecting Congress's intent to bar insurance charge-backs so as to improve the carriers' level of care. Without question, Congress requires that motor carriers maintain adequate levels of PL/PD insurance to protect the public and to encourage safer motor carrier operations. See 49 C.F.R. § 387.1. But the statutes requiring insurance and minimum levels of financial responsibility49 U.S.C. §§ 13906(a) and 31139do not specify which party to a motor carrier lease must bear the cost of that insurance. Thus, the legislation neither grants nor denies the [Secretary] power to regulate compensation paid under lease arrangements. Central Forwarding, Inc. v. ICC, 698 F.2d 1266, 1283 (5th Cir.1983). The impact on public safety of allowing carriers to transfer the cost of PL/PD insurance to owner-operator/lessors is uncertain. See Transam. Freight Lines, Inc. v. Brada Miller Freight Sys., Inc., 423 U.S. 28, 41-42, 96 S.Ct. 229, 46 L.Ed.2d 169 (1975). In these circumstances, we must apply the plain language of § 376.12(j)(1) reflecting the Secretary's decision not to dictate how these private parties must resolve this aspect of their financial arrangement. [3] The judgment of the district court is reversed insofar as it dismissed Claims I and II asserted by plaintiffs Norman Pelletier and Dennis Lee for the period February 17, 2001, to February 16, 2003. In all other respects, the judgment is affirmed.