Failure to Comply Carries Serious Risks
written by Christy Han

Carriers transporting household goods within California are subject to numerous regulations promulgated by the California Public Utilities Commission (“PUC”), including obtaining a proper permit to operate their business and maintaining adequate insurance (public liability/property damage, cargo, and worker’s compensation). (1) There is a lot at stake for carriers that do not comply with PUC regulations. Failure to comply may result in monetary and criminal sanctions, such as a $500 fine for each offense, (2) and in the case of a continuing violation, each day’s continuance is considered a separate and distinct offense subject to accruing fines. (3) Willful violations result in a misdemeanor, punishable by a maximum fine of ten thousand dollars ($10,000) or by a maximum imprisonment sentence of one year in county jail, or both. (4) The PUC has the power to investigate claims, conduct administrative hearings, refer cases to the district attorney for prosecution, and file injunctions against offending carriers to cease operation. (5) Carriers should be prudent and proactive by implementing business procedures to ensure compliance, rather than risk these sanctions. We therefore offer the following reminders for best practices to ensure compliance with PUC regulations.

1. Obtain a permit to operate business.

If a carrier transports used furniture and personal effects to or from a residence, between points in California, it must obtain a household goods carrier permit. (6) The process is relatively easy and requires completion of an application and a $500 filing fee. To obtain an application and specific requirements, contact the CA PUC License Section at (800) 877-8867 or licensing@cpuc.ca.gov.

2. Comply with insurance requirements.

Carriers of household goods must maintain adequate insurance so long as they are engaged in the business of transporting such goods. It is wise to comply with these insurance requirements, as failure to do so can result in a PUC order to cease operation and carriers will be liable for injuries and damages resulting operation of business.
The PUC requires minimum liability protection of $250,000 for bodily injury to or death of one person as the result of a single accident; $500,000 for bodily injury to or death of more than one person as the result of a single accident; and $100,000 damage to or destruction of property other than the property being transported as a result of a single accident; or a combined single limit in the amount of not less than $600,000. *7* The minimum cargo insurance coverage is $20,000 per shipment. (8) Carriers that hire employees must also maintain on deposit with the PUC evidence of workers’ compensation insurance covering all of its employees. (9)

3. Provide Customers with the Important Information For Persons Moving Household Goods (within California) Booklet.

This booklet was prepared by the PUC to offer guidelines and recommendations to customers for moving, and to explain the obligations of moving companies to their customers. The PUC requires that carriers of household goods provide the booklet without charge to persons planning to move between points in California. Carriers can comply with this PUC requirement by either (1) providing the booklet to the customer at the first in-person contact; (2) mailing the booklet to the customer (time allowing) if the move was arranged and confirmed by mail or telephone and no in-person contact is made prior to the day of the move; or (3) obtaining the customer’s assurance that he received it from some other source. (10) Regardless, the customer must initial a statement, on the Consumer Protections or Waivers section of the Agreement for Moving Services Form, indicating that the customer has received the booklet either from the carrier or some other source. (11) If the carrier does not ensure that the customer has the booklet, he is eligible for a $100 refund from the carrier.

As a rule-of-thumb, a carrier should always provide the booklet to the customer and obtain an acknowledgement of receipt. These are small measures that can significantly reduce future litigation, as the customer is more likely to read the booklet if it is given to him, purchase additional insurance, and follow proper procedures for filing claims and declaring items of exceptional value. The customer cannot plead ignorance because the information is clearly articulated in the booklet and he has signed an acknowledgment of receipt for the booklet.

4. Advise customers to purchase additional insurance and to declare exceptional items.

Carrier rates include only basic protection against possible loss or damage at 60 cents per pound per article. For example, if a laptop computer weighing 10 pounds is lost or damaged, the customer can only recover $6.00 for the computer (60 cents x 10 pounds), (12) which, to the customer, can hardly feel like sufficient compensation for a computer that probably cost more than $600.00. Despite not purchasing additional insurance, the customer can still seek restitution by filing a negligence claim against the carrier in civil court. To prevent this type of litigation, it would be prudent to recommend the purchase of additional insurance, such as:

• Actual cash value protection, which covers the depreciated value of the customers’ goods and is determined by the cost of the item new, its age, its condition when received by the carrier, and the value declared;

or

• Full value protection, which covers the full replacement costs of any lost or damaged item.

It is important to note that if the customer does not declare items of extraordinary value (such as antiques, art objects, and gold or silver articles) and the items are damaged, he is not protected for the full value regardless of the level of insurance purchased. In that instance, the customer will likely sue the carrier for the full value of those items in civil court under a theory of negligence. The liability exposure may be high; a houseful of antiques can add up to tens of thousands of dollars or more. To prevent any problems with claims for losses and to prevent future litigation, advise the customer to purchase additional insurance, declare exceptional items, and sign an acknowledgment of information, regardless of whether additional insurance is purchased.

5. Follow proper procedures for claims filing and maintain accurate records.

In the course of normal business operations, it is inevitable that items will become lost or damaged during transit. A customer filing a claim for loss or damages must continue to pay the carrier for transportation charges, as the handling and settlement of a claim is distinct from the performance of and payment for the transportation service itself. (13) If a customer does not pay the transportation charges, the carrier is not required to honor the claim.
To file a claim against a carrier, the customer must:

• List separately the lost or damaged items.
• Note the exact amount claimed for each lost or damaged item.
• Provide the date of move, the origin and destination, and the carrier’s order number.

The claim must be filed by the customer, in writing, within nine months after delivery of the goods or within nine months after a reasonable time for delivery has elapsed. (14)

Upon receipt of the claim, the carrier must acknowledge the claim in writing within 30 days and must either pay, decline to pay, or make a firm compromise settlement within 60 days of receipt of the claim. (15) If the carrier delays action for a longer time, it must notify the customer in writing within 60 days of receipt of the claim as to its status, the reason for delay (with a copy to the PUC), and do so again every 30 days thereafter until final action is taken. (16) If the carrier fails to respond to the claim within the time limits and manner described above, the consumer may seek recourse through the PUC, at which time the PUC may file an injunction against the company to cease operation of its business. The inability to operate one’s business results not only in lost revenue, but also the inability to complete contractual shipping obligations with other customers, thus leaving the company exposed to future litigation.

Since the PUC has no authority to compel carriers to settle claims for loss or damage and will not undertake to determine whether the basis for or the amount of such claims is proper, nor will it attempt to determine the carrier’s liability for such loss or damage, most customers will file grievances in civil court. Therefore, a carrier must protect its interest by maintaining all correspondence and claims documentation mentioned above, in case of future civil lawsuits or PUC investigations.

1. Ca. Pub.Util. Code § 5101 et seq.
2. Ca. Pub. Util. § 5313.
3. Ca. Pub. Util. § 5315.
4. Ca. Pub. Util. §5311.
5. Ca. Pub. Util. §§ 5251 and 5259. See also I.04-08-022, Ca. Pub. Util. Com. Slip Copy, August 19, 2004 (2004 WL 1987618).
6. Ca. Pub. Util. Code §5133(a) and (c).
7. See Cal. Pub. Util. General Order 100-M(1) (Adopted December 17, 1993, effective January 1, 1994)
8. See Cal. Pub. Util. General Order 136-C 91) (Adopted July 1, 1992, effective November 1, 1992)
9. Cal. Pub. Utili. Code Section 5135.5
10. Maximum Rate Tariff 4, Item 470.
11. Id.
12. Id.
13. Id.
14. Maximum Rate Tariff 4, Item 92(14). It is important to note that in a civil action, plaintiffs are not strictly held to PUC rules regarding claims filing, such as those articulated above. Rather, the court merely provides deference to this agency’s rules. Therefore, a customer may fail to adhere to any of the PUC rules but still be able to seek recourse for losses in civil court based on theories of negligence, breach of contract, fraud, etc.
15. Maximum Rate Tariff 4, Item 92(15).
16. Id.