The Eleventh Circuit Court of Appeals recently ruled on a case that could have far-reaching consequences for both the trucking and insurance industries.
As Insurance Journal noted, the case tested the limits of the Federal Aviation Administration Authorization Act (F4A). It asked whether the federal law shielded a brokerage company from tort claims after its negligence led to the theft of cargo worth half a million dollars. The Court of Appeals argued that the F4A did, in fact, shield the brokerage company.
Aspen American Insurance Company vs. Landstar Ranger, Inc.
The case began when Tesco Technologies Inc., a shipper, hired Landstar Ranger, Inc. to find a carrier for its load of cargo. Landstar typically verifies the company information for each of its shippers, but it failed to follow standard protocol in this case. The result was that Landstar arranged for someone named “James” to ship the cargo. This James turned out to be a thief, and he disappeared with Tesco’s cargo.
Tesco filed a claim against its policy with Aspen American Insurance Company. Aspen reimbursed Tesco and then sued Landstar for negligence. It claimed Landstar had “breached its duty as a transportation broker” to ensure the load went to a reliable carrier.
The district court dismissed Aspen’s claim, saying that the F4A expressly prohibited it. When Aspen argued that its claim fell within the F4A’s “safety exception,” the district court rejected the argument. Aspen appealed.
The Court of Appeals quickly outlined the basics of its review. Landstar was clearly a broker, and its hiring of a carrier was clearly connected to its services. Accordingly, the F4A preemption applied. The only question was whether Aspen could bring its claim under the F4A’s safety exception.
The key legal issue
This is not the first time courts have ruled on F4A preemptions and safety exceptions. However, the Court of Appeals said the case was novel for one reason. Neither the Supreme Court nor the Court of Appeals had previously ruled on one key issue.
Insurance Journal says the issue was whether the F4A safety exception applied to stolen cargo, but that is only partly correct. As the Court of Appeals saw it, the core issue was how judges should interpret one key phrase within the safety exception, “with respect to motor vehicles.”
Here, the safety exception says the F4A “shall not restrict the safety regulatory authority of a State with respect to motor vehicles.” As the Court of Appeals noted, the exception provides two standards for qualifying claims:
- The claim must invoke an “exercise” of the state’s safety regulatory authority
- The claim must invoke that authority “with respect to motor vehicles”
In Aspen’s case, the Court of Appeals said the claim met the first standard but failed to meet the second.
The fact that the Court of Appeals said Aspen’s claim met the first standard is notable. Here, it cited the Supreme Court’s argument that laws fall within the safety regulatory authority of a state if they are “generally responsive to safety concerns.” In other words, it didn’t matter that the case featured only property damage, rather than bodily injury. The principles of negligence claims are the same in either case and “generally responsive” to safety concerns.
Again, this meant that Aspen’s claim hinged on whether it focused on matters “with respect to motor vehicles.” Here, the Court of Appeals noted that because brokers deal with motor carriers and their vehicles, every claim involving a broker would have, at least, an indirect relationship to motor vehicles. Thus, for the phrase to have any meaning, it would need to indicate a direct relationship to motor vehicles.
Indeed, the Court noted three reasons it felt the safety exception demanded a direct relationship:
- The Supreme Court had previously commented on another limiting provision. In the subsection just before the one driving Aspen’s case, a provision limits the statute “with respect to the transportation of property.” The Supreme Court said this “massively limits” the scope of the provision in which it appears, and the Court of Appeals inferred that “with respect to motor vehicles” should similarly limit the safety exception.
- An interpretation of the statute that allowed an indirect relationship to motor vehicles would violate the “basic premise of statutory construction.” Judges should read statutes as though every word serves a purpose. All the laws that might affect motor carriers and brokers will necessarily have, at least, an indirect relationship to motor vehicles. Accordingly, the language “with respect to motor vehicles” would be redundant if it were to indicate only an indirect relationship.
- Finally, the Court of Appeals said that its interpretation leaves room for other provisions to have meaning. If it were to interpret the phrase more broadly, it would render the other provisions redundant and meaningless.
In the end, the Court of Appeals said the safety exception limited the State’s safety authority to matters with a direct relationship to motor vehicles. Aspen’s complaint centered on Landstar’s negligent screening and recruitment. It did not directly target the “ownership, maintenance, or operation” of a motor vehicle.
The F4A remains a key point of contention
This opinion from the Eleventh Circuit Court of Appeals is good for brokers and many others in the transportation industry. However, people in both transportation and insurance will want to make sure they think carefully before they respond to any issues connected to the F4A’s preemptions or safety exceptions. After all, the F4A was at the heart of two of last year’s biggest trucking cases.
If there is anything else to take away from this case, it may be the importance of reading and writing claims against the statutory language. As federal law, the F4A has tremendous reach. Its safety exception does permit negligence claims under state laws, but anyone raising or defending such a claim will need to understand whether it meets the standards.