It turns out that $1,000,000 isn't enough for some plaintiff's attorneys. That's the amount of auto liability insurance coverage on a typical commercial vehicle and what victims of an accident can get if the truck is found liable. But plaintiffs' attorneys from California to Maryland, in journal articles and blog posts, are coaching their colleagues on how to go after even bigger paydays – by suing freight brokers.
Attorneys and insurance providers tell FreightWaves that these cases are on the rise.
Plaintiffs' attorneys have been suing freight brokers for years over alleged negligent selection and vicarious liability, but over the past six months or so, a new risk has emerged. Shippers are asking freight brokers to sign contracts that indemnify the shipper and hold the shipper harmless, effectively making the freight broker liable for anything the shipper may do wrong, including problems with the load or misdirecting the truck at a facility.
"Shippers, intentionally or not, are having freight brokers assume liability they have no business assuming," said Chad Eichelberger, president of Reliance Partners, a Chattanooga-based insurance agency serving the transportation industry.
Freight brokers get sued for negligent selection or hiring when a plaintiff's attorney makes the argument that the accident would never have happened if the carrier had not been hired in the first place.
"Negligent selection happens when you pick a carrier that didn't meet the qualifications that you've developed," said Cassandra Gaines, an attorney whose practice at Gaines Law Group focuses on representing freight brokerages and transportation providers. Gaines was in-house counsel for Echo Global Logistics and then Schneider National before starting her own practice. She recently posted a YouTube video about a case involving freight brokerage Allen Lund to teach brokers how to avoid negligent hiring claims.
Gaines said that there are a couple of theories as to the best way that brokers can protect themselves from negligent hiring claims. Some brokerages choose not to review carriers' safety information, on the theory that their carrier reps are not safety experts and do not have the knowledge necessary to undertake a statistical analysis of violations data and calculate risk. Instead, those brokerages – and this was Allen Lund's theory – say that if the Federal Motor Carrier Safety Administration has given the carrier authority to haul freight, that's good enough for them.
Other brokerages have compliance staff review carriers' safety records during the onboarding process, sometimes using third-party software like SaferWatch or Carrier411. Those tools can help brokerages make their carrier networks safer and higher quality, but they come with the risk that now the broker is responsible for developing a policy around the data, and more importantly, sticking to it.
It's when a broker with a hot load uses a sketchy carrier or a driver he knows has had a recent accident in violation of normal practice that the broker can be exposed to negligent selection risk. Recent innovations like electronic logging device (ELD) integration into brokers' transportation management systems, so that a broker has more information about a carrier's hours of service and even data on how fast the truck is driving can open up a broker to even more liability.
A rule of thumb is that if a brokerage is collecting data on its carriers – whether that's performance data, safety records, or real-time information based on visibility solutions or ELDs – the broker needs to form a policy about how to use that data and stick to it.
"When you are involved in carrier selection you have to do what's right for your business and what's right in general," Gaines said.
The second major risk is vicarious liability – when the broker appears to be controlling the carrier to the point of supervising its actions and therefore assuming liability for them. Call checks, text messages and emails both to the carrier and to the shipper, can put a broker at risk for vicarious liability. If a broker tells a driver to move a load through inclement weather, or make a delivery even though the driver is tired, or if a broker refers to a carrier in a customer email as "my driver," a plaintiff's attorney will try to allege that the broker is controlling the driver and assuming vicarious liability.
"All these carrier sales reps want to know where the driver is, and they call the driver's cell phone," Gaines said. "It's sort of what an employer would do, and it sounds ‘controlling.' If you have to text a driver, at the very least, tell them not to respond while they're driving."
Finally, Eichelberger said that he has seen a spate of recent cases in which a shipper has required a freight broker to only use carriers that have $5 million or more in insurance coverage. The freight broker may sign the contract knowing that the vast majority of his carriers do not have that much coverage and the shipper may reassure the broker that everyone else is willing to sign the contract.
"We're seeing shippers make demands on higher levels of motor carrier liability insurance that they try to get the broker to agree to," Eichelberger said. "That can put the broker in violation of the contract from day one."
The good news is that there have not been many large judgments or jury awards against freight brokers for these sorts of claims. Most of the time, when confronted with a sophisticated plaintiff's attorney who is digging through ELD data and issuing subpoenas for "Do Not Use" notes buried in a TMS, the freight broker's insurance company will decide to settle the case. Still, a freight brokerage's self-inflicted issues – like giving carrier reps information without firm policies on how to use it – can lead to unexpected attorneys' fees and higher insurance costs.
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