Case Summary

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CASE SUMMARY
The Distinction Continues
FACTS: M. Fortunoff of Westbury operates a chain of department stores in New York and New Jersey. In
March 1997, the company entered into a contract with Frederick- son Motor Express, whereby the
carrier agreed “as contract
carrier and independent contractor … to transfer shipments … as authorized in Carrier’s contract carrier
permit … issued by the ICC.” The contract further provided: “Although carrier is authorized to operate …
as a common
The Distinction Continues continued
carrier, each and every shipment tendered to carrier by ship- per … shall be deemed to be a tender to
carrier as a motor contract carrier….” Fortunoff’s goods were damaged in tran- sit, prompting it to make
a claim against Frederickson. When the carrier went out of business, Fortunoff asserted the same claim
against the carrier’s insurer, Peerless Insur- ance Co., for $13,249.42 under the BMC-32 indorsement
(the mandatory attachment to all common carrier insurance policies), which was part of Frederickson’s
insurance policy. From a judgment for Fortunoff, on the ground that the ICCTA mandated the extension
of BMC-32 indorsements to all motor carriers, Peerless appealed.
DECISION: Judgment against the shipper, Fortunoff. Histor- ically, many trucking companies obtained
both a common carrier certificate and a contract carrier permit, meaning they were authorized to
operate as either type of carrier. If the carrier agreed to transport a shipper’s goods according to
standard terms and at a fixed rate (i.e., without an individu- ally negotiated contract) on a nonrecurring
basis, the trans- portation was conducted under the carrier’s common carrier certificate. Accordingly,
common carrier rules, including the cargo liability insurance and the BMC-32 indorsement
requirement, applied. If the carrier and the shipper wished to negotiate a bilateral contract for an
ongoing course of shipping services, the carrier was required to operate under its contract carrier
permit, and no cargo insurance was necessary.
Requiring cargo liability insurance for common carriage but not contract carriage is not an arbitrary
distinction. Instead, it makes economic sense because of the different types of services performed and
the customers served by common carriage. Although the ICCTA abolished the licensing distinction
between common and contract carriers, it did so in large part because most carriers had a common
carrier certificate and a contract carrier permit and provided both types of service anyway. But the
functional distinction between the two types of carriage survives and is still highly relevant to deciding
which motor carriers must have cargo liability insurance. The administrative agency’s decision to require
BMC-32 cargo insurance only when performing common carriage service is consistent with the ICCTA.
The district court’s ruling is reversed. [M. Fortunoff of Westbury Corp. v. Peerless Ins. Co., 432 F.3d 127
(2nd Cir. 2005