South Carolina Court Defines State’s Motor Carrier Limits

June 15, 2009

The South Carolina Supreme Court has ruled that a trucker paid to haul cut trees is a commercial motor carrier required to carry liability insurance limits of at least $750,000 and does not qualify either as a private carrier or a lumber hauler to carry lower limits of $40,000.

The state’s high court, in a 4-1 vote, reversed a Richland County circuit court ruling and ordered the insurer to reform the $40,000 policy to comply with the $750,000 limits.

The trucker, Roy R. Greene, who operated Rusty Greene Tree Service, was hauling cut trees in 2004 when he was involved in a crash on Interstate-26 in which the wife of the plaintiff, Raymond Bovain Jr., was killed.

State regulations require that trucks with a total weight of 10,000 pounds or more and carrying nonhazardous loads have at least $750,000 in liability insurance coverage per incident.

Canal Insurance, which insured Greene’s truck with a $40,000 liability limit, argued that even though Greene’s truck was a 10-wheeler weighing approximately 26,000 pounds, he was not a motor carrier but a “private” carrier transporting his own property without compensation for doing so and under state regulations he was allowed to carry lower liability limits. Private carriers are governed by the state’s Financial Responsibility Act, which requires a minimum of $40,000.

Canal Insurance further argued that, even if Greene was a motor carrier, he was not required to carry the $750,000 because “lumber haulers engaged in transporting lumber and logs from the forest to the shipping points in this state” are exempt.

But the high court ruled that in this case the insurer was wrong in not classifying Greene as a motor carrier and wrong in in trying to use the lumber hauler exemption.

In addition to its Regulation 38-414 providing for insurance requirements of $750,000 for certain motor carriers for hire, South Carolina has a statute (Section 58-23-20) that provides that any corporation or person that operates a motor vehicle for the transportation of persons or property “for compensation” in the state must comply with all applicable laws and regulations.

The circuit court had found “Greene is not a motor carrier for hire because he does not transport the property of others for compensation.” The circuit court stated: “Greene cuts trees, picks up trees that have been cut and abandoned to him by other tree services, and hauls and sells those trees to pulpwood and paper companies. When he sells the trees, he receives their market value, not a fee for handling them as cargo. Greene is transporting and selling his own property and is not subject to regulation as a motor carrier for hire.”

At the time of the accident, Greene was picking up logs from a worksite beside Interstate 26 and planned to take them to a paper mill in Eastover.

Canal Insurance maintained that Greene was not compensated for transporting the wood; rather, he owned the trees and would take them to the mills of his choice.

However, the Supreme Court noted, that facts showed otherwise. Greene has worked with a timber broker named John Frazier for 10 years and been paid by him for hauling logs to various mills and pulpwood producers selecetd by Frazier. Greene would pick up wood at various locations and then sell it through Frazier, as was the plan for the day the accident occurred.

Frazier would talk with the mill and tell Greene where to take the cut trees; Greene would not talk directly with the mills. Frazier would then pay Greene based on what the mills buy.

The court also noted that Greene is covered under Frazier’s workers’ compensation policy and that Frazier loaned him money to purchase his logging truck.

The high court found that under these circumstances, Frazier is the true seller, and Greene is merely transporting the logs for the convenience of Frazier.

“The fact that Greene temporarily held title to the logs does not preclude the finding that he was being paid to transport materials. Since Greene knew when he was picking up the logs that he would promptly sell them in the name of John Frazier, Greene was merely holding title temporarily until he took the logs to the mill. Thus, we conclude Greene was transporting the wood for Frazier and hold that he qualifies as a motor carrier under South Carolina law,” Justice Donald Beatty wrote for the majority.

The court also ruled that the insurer did not prove that Greene qualifies for the state exemption for “[l]umber haulers engaged in transporting lumber and logs from the forest to the shipping points in this state.”

The plaintiff asserted that Greene was not a hauler engaged in transporting logs “from the forest” and carriers such as Greene who regularly utilize the state’s highways to carry on their business are not entitled to the protection of the “farm-to-market” exemption, which was intended to exempt the infrequent transportation of agricultural products to the market, not the almost daily transportation of items for profit as done by Greene.

The Supreme Court agreed and said that because it is meant to be a farm-to-market exception, it should apply to areas of usual harvesting, not just small areas where trees can be cut.

Having found Greene qualified as a motor carrier, and that he did not meet the requirements for exemption as a lumber hauler, the court found that the policy issued by Canal Insurance should be reformed to conform to the legal requirements for coverage.

Canal Insurance argued that reformation is appropriate only for automobile insurance policies issued under the Financial Responsibility Act, but the court said there was “no reason to impose this arbitrary distinction.”

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