Motor Carriers' Liability for Acts of Independent Operators

Federal Statutes and Regulations

Under traditional principles of tort law, an employer of an independent contractor is not liable for physical harm and damage caused to another by an act or omission of the independent contractor or his servants. Restatement (Second) of Torts § 409. By the early 1950's, many motor carriers used this tort principle to legally immunize themselves from liability for the negligence of drivers who operated their vehicles as independent contractors under some type of lease arrangement. As a result, in 1956 Congress adopted amendments to the Interstate Motor Carrier Act to insure, among other things, that the general driving public was protected from the negligent conduct of frequently insolvent owner-operator independent contractors. The amendments authorized the Interstate Commerce Commission to promulgate regulations concerning leased motor vehicles being operated in interstate commerce, including regulations concerning the exclusive control and responsibility of leased vehicles. See 49 U.S.C. § 304(e)(2).¹ For a discussion of the conditions existing in the trucking industry that ultimately brought about regulations concerning leasing arrangements, see American Trucking Associations, Inc. v. United States, 344 U.S. 298, 73 S. Ct. 307, 97 L. Ed. 337 (1953) and TransAmerican Freight Lines, Inc. v. Brada Miller Freight Systems, Inc., 423 U.S. 28, 96 S. Ct. 229, 46 L. Ed. 2d 169 (1975).

The current statute governing leased motor vehicles is 49 U.S.C. § 14102, which allows the Secretary of Transportation to require a motor carrier using non-owned vehicles to transport property under an arrangement with another party to:

(4) have control of and be responsible for operating those motor vehicles in compliance with requirements prescribed by the Secretary on safety of operations and equipment, and with other applicable law as if the motor vehicles were owned by the motor carrier.

49 U.S.C. § 14102(a) (4).

The current regulation specifically putting such written lease requirements into place is 49 C.F.R. § 376.12. This regulation provides as follows with respect to the exclusive control and responsibility for leased vehicles:

(c) Exclusive possession and responsibilities.

(1) The lease shall provide that the authorized carrier lessee shall have exclusive possession, control, and use of the equipment for the duration of the lease. The lease shall further provide that the authorized carrier lessee shall assume complete responsibility for the operation of the equipment for the duration of the lease.

49 C.F.R. § 376.12(c) (1), formerly 49 C.F.R. § 1057.12(c)(1).

Under this regulation, the motor carrier now has both a legal right and duty to exercise control of vehicles operated for its benefit under a lease agreement. The employees of the lessor operating such equipment are deemed "statutory employees" of the motor carrier/lessee for purposes of protecting the public safety. Simmons v. King, 478 F.2d 857, 867 (5th Cir. 1973); White v. Excalibur Insurance Co., 599 F.2d 50, 52 (5th Cir. 1979).

Who is the General Public?

Motor carriers frequently face claims from passengers and co-drivers of the carrier's lease drivers who are injured as a result of the negligence of the lease drivers. These claimants seek the protection of the regulations set forth above regarding the motor carrier's exclusive control and responsibility of leased vehicles. Some federal circuits have now addressed the issue of whether claimants of this nature should be afforded the protection of the regulations.

The circuit courts vary in their definitions of who is included in the general public. In the Third Circuit, for example, the court determined that the plaintiff was part of the traveling public for which the regulations were designed to protect, even though he was a lumper paid by the defendant lease driver to ride and assist in unloading the truck. Smith v. Johnson, 862 F. Supp. 1287, 1292 (M.D. Pa. 1994). The court noted that at the time of the accident, the plaintiff was riding in the sleeper bunk and was not in the course of his employment as a lumper. Id. Similarly, in the Fourth Circuit, the court rejected the defendant's argument that its responsibility under federal regulations did not extend to an employee of defendant's lessor who was injured in an accident while riding with the lessor. In reaching its conclusion, the court noted that there was no contractual relationship between the motor carrier and the plaintiff and thus "[the plaintiff] was as much a stranger to [the defendant carrier] as a shipper or a member of the traveling public." Proctor v. Colonial Refrigerated Transportation, Inc., 494 F.2d 89, 92 (4th Cir. 1974). After evaluating several circuits' rationales, the Sixth Circuit chose to follow the Fourth Circuit in Proctor and concluded that the surviving parent of a lease driver killed in an accident could maintain an action against the motor carrier for failing to comply with the federal safety regulations because the lease driver was an intended beneficiary of the federal regulatory scheme. Johnson v. S.O.S. Transport, Inc., 926 F.2d 516, 524 (6th Cir. 1991). If the leased driver was an intended beneficiary of the federal leasing laws and regulations, then the Sixth Circuit would almost certainly classify a passenger or co-driver as an intended beneficiary.

The Fifth Circuit, however, differs in its interpretation of the "general public". In White v. Excalibur Ins. Co., 599 F.2d 50 (5th Cir. 1979), the court determined that a co-driver employed by the lessor was also a "statutory employee" of the licensed motor carrier under the federal leasing regulations and thus not a member of the "public" designed to be protected under the statute. Id at 55. In a subsequent case, the court distinguished its holding when the plaintiff passenger was a waitress picked up by and riding with the lease driver because the waitress passenger was not engaged in furthering the economic interests of the carrier. Price v. Westmoreland, 727 F.2d 494, 496 (5th Cir. 1994). See also Riddle v. Trans-Cold Express, Inc., 530 F.Supp. 186 (S.D. Ill. 1982) (co-driver and co-owner of independent contractor/lessor was not a member of the general public because he had contractual relations with defendant [carrier/lessee] unlike members of the traveling public who are not involved in the parties' economic enterprise).

Does the Lease Driver (Statutory Employee) Have to Be in the Course and Scope of the Lease Agreement?

The federal circuits are split into a majority and minority view on the issue of whether a lease driver must be acting within the scope of the lease agreement for the motor carrier/lessee to be liable for the driver's negligent actions. The majority approach, found in the Third, Fifth, Eighth, Ninth, and Tenth Circuits, generally holds the motor carrier/lessee strictly liable for the acts of a lease driver regardless of whether the driver is acting within the course and scope of the lease agreement. If the "logo" of the motor carrier/lessee is on the truck at the time of the accident, then the motor carrier is responsible for the negligence of the lease driver, even if he is not acting in furtherance of the motor carrier/lessee's business at the time of the accident. See Planet Ins. Co. v. Transport Indemn. Co., 823 F.2d 285, 288 (9th Cir. 1997) ("the federal scheme [does] not require that covered losses occur while the driver is in the scope of employment or acting under common-law principles of vicarious liability"); Price v. Westmoreland, 727 F.2d 494, 496 (5th Cir. 1994) ("[carrier/lessee] vicariously liable as a matter of law for [owner/operator's] negligence and the traditional common law doctrine of master servant relationships and respondeat superior does not apply".); Rodriguez v. Ager, 705 F.2d 1229, 1236 (10th Cir. 1983) (reversing the trial court's finding that the carrier/lessee was not liable, even though the lease driver was not on a mission for the carrier/lessee and the carrier/lessee was unaware that the vehicle was being used in that manner at the time of the accident); Wellman v. Liberty Mut. Ins. Co., 496 F.2d 131, 136 (8th Cir. 1974) (carrier/lessee may be held liable for the negligence of the lease driver even if the carrier/lessee did not specifically authorize the trip); Mellon National Bank & Trust Co. v. Sophie Lines, Inc., 289 F.2d 473, 477-78 (3rd Cir. 1961) (carrier/lessee strictly liable for the acts of the lease driver even though the lease driver undertook transportation for a third party); Carolina Casualty Insurance Co. v. Insurance Co. of North America, 595 F.2d 128, 137, f/n 29 (3rd Cir. 1979) ("federal law in effect creates an irrebuttable presumption of an employment relationship between the driver and the lessee whose placards identify the vehicle.")

Under the minority approach, found in the Sixth and Seventh Circuits, the motor carrier/lessee is responsible only if the lease driver is acting in the course and scope of the lease agreement at the time of the accident. See Wilcox v. TransAmerican Freight Lines, Inc., 371 F.2d 403, 404 (6th Cir. 1967) (carrier/lessee not liable when lease driver was neither engaged in the carrier/lessee's business nor doing anything to benefit the carrier/lessee at the time of the accident); Gudgel v. Southern Shippers, Inc., 387 F.2d 723, 725 (7th Cir. 1967) ("[a] common carrier operating under an Interstate Commerce Commission certification is liable for the negligence of an independent contractor operating equipment leased to the carrier, if the contractor is operating by authority of the carrier's I.C.C. certificate and is carrying out the carrier's undertaking.").

Interestingly, when the Interstate Commerce Commission amended the regulations regarding written lease requirements in 1986, it published comments in the ICC Reporter recognizing some concern by the Commission with the majority view. See Lease and Interchange of Vehicles (Identification Devices), 3 I.C.C.  2d 92 (1986). In 1992, the Interstate Commerce Commission further revised the lease regulations in what again appeared to be a response to the majority view. The amended regulation provided in pertinent part as follows:

(4) Nothing in the provisions required by paragraph (c)(1) of this section is intended to affect whether the lessor or driver provided by the lessor is an independent contractor or an employee of the authorized carrier lessee. An independent contractor relationship may exist when a carrier lessee complies with 49 U.S.C. 11107 and attendant administrative requirements.

49 C.F.R. § 1057.12(c)(4), now set forth in 49 C.F.R. § 376.12(c)(4).

It appears that the Commission was expressing its desire that courts adopt the minority view. For a good analysis of how the amendments to the I.C.C. regulations and several I.C.C. decisions interpreting those regulations support the minority view, see Penn v. Virginia International Terminals, Inc., 819 F.Supp. 514 (E.D. Vir. 1993) (employee/employer relationship not mandated between lessee and lessor under 49 C.F.R. § 1057.12(c)(1) given the 1992 amendments) and Parker v. Erixon, 473 S.E.2d 421 (N.C. App. 1996) (rebuttable, rather than irrebuttable, presumption of agency between common carrier/lessee and independent contractor/lessor; common carrier liable only if negligent conduct occurred while driver was in course and scope of his services).

Conclusion

From just this brief look at the federal circuits addressing two issues arising under the federal leasing laws and regulations, it is clear that the courts' interpretation and application of these laws and regulations vary significantly from circuit to circuit. A similar variance would be expected from state to state. The lesson is a simple one for the motor carrier and its defense counsel. Before formulating a defense and particularly before settling with a claimant injured as a result of the negligent acts of an independent contractor/owner-operator operating under a lease arrangement with the motor carrier, the motor carrier and its counsel must do their homework and have a thorough understanding of the applicable law in a jurisdiction. As more courts continue to address such issues in light of the former I.C.C.'s 1992 amendments to the regulations, motor carriers and their counsel will want to stay abreast of these developments as they may find the playing field for motor carriers continuing to level out.
  

1. 49 U.S.C. § 304(e)(2) was revised as 49 U.S.C. § 11107(a)(4) as part of the Motor Carrier Act of 1980 to reflect the transfer of functions from the Interstate Commerce Commission to the Secretary of Transportation. 49 U.S.C. § 11107(a)(4) was later amended at 49 U.S.C. § 14102(a)(4) as part of the ICC Termination Act of 1995.

     
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