A court decision occurring last August should remind Third Party Logistics providers (3PL) and freight brokers to consider carefully their contractual and applied promises to customers – as 3PL Providers can be found liable for the promises that they make.
Particularly in high exposure cases when a subcontracted motor carrier has minimum insurance coverage, 3PL providers must avoid the perception that they control driver and motor carrier actions. In this case, McHale v Kiswani Trucking, an Illinois appellate court affirmed an $8 million decision against a logistics supplier, Transfreight, Kiswani Trucking and Russell Kleppe whose semi-truck struck and killed Stacey McHale.
When the incident happened, Transfreight, which provided logistics and transportation services to Toyota Motor Manufacturing, had engaged Kiswani to carry auto parts. According to their contract, Kiswani was solely responsible for complying with Department of Transportation regulations for hiring and training its drivers and for assigning drivers and removing drivers on the Toyota routes. Furthermore, the contract called for Kiswani’s total control over how its employees and subcontractors carry out transportation services and that these employees and subcontractors are to be considered solely Kiswan’s employees and subcontractors.
The liability portion in the trial centered on Transfreight’s liability after the driver’s and motor carrier’s admission of fault. In the proceedings, the plaintiff brought in a transportation expert to testify that the driver was an employee of Transfreight per FMCSA regulations, section 390.5.
In the appeal hearing, Transfreight claimed that the transportation expert provided a legal conclusion on whether the truck driver was Transfreight’s agent. However, the appellate court disagreed saying the expert did not provide an opinion on the fundamental issue, whether the truck driver was Transfreight’s agent. Rather, the expert concluded that according to section 390.5, Transfreight was a motor carrier because it owned the trailer, and therefore was the ultimate employer of the truck driver as perceived by the trucking industry.
The appellate court opinion falls in line with a practice of Illinois decisions assigning liability to logistic providers. In the McHale case, the plaintiff, trial and appellate courts identified certain contract language and activities that showed Transfreight’s control over motor carrier and driver actions. Freight brokers and third party logistics providers should take note.