There has seen an increase in governmental oversight of the manufacturing, handling and storage of food. The Food Safety Modernization Act (FSMA) was passed to prevent practices that could potentially create food safety hazards. The Food and Drug Administration (FDA), in turn, released rules for the safe transport of food. They are known as rules for "Sanitary Transportation of Human and Animal Food", and they are affecting the inland marine market.
Under the FDA rules, adulteration of a food shipments of may result, not only when the shipment has been damaged, but also when the motor carrier fails to:
- Properly maintain clean equipment;
- Maintain temperature requirements;
- Maintain required records; or
- Implement conditions, practices, and training for the sanitary transportation of food.
Food is adulterated when it has been prepared, packed, or held under insanitary conditions where it may become contaminated or create a serious health crisis that could affect many consumers.
The FDA rules will increase the obligations on motor carriers to secure the integrity of the food chain. This means a cargo load of food can be condemned because of adulteration, and therefore considered a total loss if the cargo is not shipped in accordance with rules set out by the FDA.
Inland Marine forms provide coverage for direct physical loss or damage caused by a covered peril to covered property. Under AAIS’s motor truck cargo (MTC) forms, if cargo is damaged as a result of a direct physical loss (e.g., collision) and a food shipment is deemed adulterated, the MTC form should provide coverage (all else being equal). However, if a food shipment is deemed adulterated, but there has been no direct physical loss or event, there would be no coverage under a MTC form.
AAIS remains vigilant regarding trends that affect its members, making changes to programs as necessary to provide the best available solutions. We are in the process of amending the MTC forms that are part of the Inland Marine Guide, AAIS’s program for the traditional nonfiled inland marine classes. Revised MTC forms will specifically exclude loss caused by, or resulting from, failure to comply with regulations or shipping terms not related to food safety, and food safety regulations, when there is no direct physical loss or damage to cargo.
An optional endorsement will be added to the MTC forms as well, providing coverage for loss caused by the condemnation of a food shipment as a result of the failure of the motor carrier to follow the rules set out by the FDA under the Food Safety Modernization Act. Meanwhile, motor carriers should be cognizant of the emergence of new risks due to these evolving regulations.
NOTABLE CASES
Recent courts cases have ruled that motor carriers are liable for a loss if the carrier failed to comply with requirements under the Carmack Amendment, adopted in 1935.
Trucker’s Exch v. Border City Foods
The court rejected carrier’s defense regarding liability because shipment
was delivered without seal.
Oshkosh Storage v. Kraze Trucking
The court found carrier’s premature removal of seal on Kosher food caused "actual loss, injury or damage" to cargo.
