A federal court in Tennessee granted insurers’ motions to dismiss barring a shipper of goods from bringing direct action claims against the insurers of motor carriers based solely upon their status as liability insurers. Western Express, Inc. d/b/a Western Logistics v. Oscar Villaneuva d/b/a Las Marias Pallets, et al., 2017 WL 4785831 (M.D. Tenn. Oct. 24, 2017).

Insurers issued policies to motor carriers that provided coverage for cargo losses. A shipper entered into a contract with the carriers to deliver goods to a purchaser, but the goods were delivered to the wrong address and never reached the purchaser. The shipper sued the carriers under various contractual and indemnity agreements which it alleged required them to defend and indemnify the plaintiff for the losses related to the misdelivered cargo. It also sued the carriers’ insurers directly. The shipper argued that it could maintain such an action because federal commerce laws, including the Carmack Amendment to the Interstate Commerce Act, 49 U.S.C. §1407, require carriers to file an insurance policy sufficient to cover damages to cargo/property with an attached MCS-90 endorsement which memorializes the insurer’s agreement to pay a final judgment against the insured resulting from negligence. The insurers argued that neither federal statute nor the MCS-90 endorsement authorized a direct action against an insurer unless there was an unsatisfied judgment against the carrier.

The court found that federal statutes do not authorize a direct action by one not covered by a policy against an insurer prior to the adjudication of liability on the part of the insured, nor does the MCS-90 endorsement establish direct liability or authorize suit directly against an insurer by a third party. The court further held that to the extent the shipper’s claim was grounded in state law, Tennessee law does not permit direct actions by third parties against insurers whether under contract or negligence theories of liability.