Litigation filed against a freight brokerage operation probably represents their biggest financial exposures because:
- The litigation environment has heated up where plaintiffs are regularly naming freight brokers, shippers and consignee in litigation when bodily injury arises or fatalities. CH Robinson 24 million judgement really put the litigation environment against Freight Broker in motion.
Sperl v. CHR case No. 3–09—0830 Sperl v. C.H. Robinson, Ill. App. 3d 2011
- No tort reform laws have been passed limiting judgement against a motor carrier, so we have seen award as high as 165 million in just one accident.
- Most motor carrier only have 1 million in place however the average settlement in the U.S. over past 10 years when motor carrier is found responsible for the accident is 2.6 million.
- This motivates plaintiff’s council to name everyone involved in the shipment so shippers, consignees are named and if a freight broker is involved in the shipment they are being named.
- The volume of incident must be considered; on average past 10 year 4000 fatalities take place each year on U.S. highways involving a heavy truck or 8 a day. 120,000 accidents arise where bodily injury arises or 328 every day.
- Plaintiffs approach in litigation focuses on two major allegations either:
- Allegation of negligent hire or allegations a freight broker assume vicarious liability of a motor carrier.
- Very basically the allegation of negligent hire tries to suggest the freight broker did not enough in the vetting of a motor carrier to ensure they would ‘safety’ transport a shipment. If the vetting process is strong where the freight broker has confirmed the motor carrier has valid motor carrier authority in place, valid insurance coverage in place and is not operating with an unsatisfactory safety rating it should prove difficult for a plaintiff to successfully prove the allegation of negligent hire. This is especially true if the defense of litigation has successfully move the venue of litigation from the State court system to Federal court system which can in fact be accomplished since freight broker authority is recognized as subject to the federal court system.
- Allegation of vicarious liability suggests the freight broker “did too much” in the control of the motor carrier or “held themselves out to the public as a motor carrier” If successfully proven as it was in one of the CH Robinson case it can open a freight broker to the unlimited liability assumed under motor carrier authority Vs the limited liability normally enjoyed under freight broker authority. Freight Broker authority enjoys Federal preemption and it’s recognized in most litigation freight broker exempt from cargo claims and more importantly bodily injury/fatality claims. The allegation of vicarious liability was present in the Sperl v. CHR case 3–09—0830 Sperl v. C.H. Robinson, Ill. App. 3d 2011 CH Robinson case for a number of reasons including how their web-site and advertising material reads “we are one stop center for all transportation needs suggesting they offered direct motor carrier service. In addition, they exercised too much control over the third party driver who was operating under a third party motor carrier but was directly controlled by CH Robinson in the case where penalties were assessed if they didn’t deliver cargo on certain schedule time frame they has established. Considering the judgement levied against them as result of their actions $23,000,000 any logistic operation would be wise to learn from the mistakes present in the CH Robinson case.
- Vicarious liability should be avoided at all cost because of the unlimited liability motor carrier face.
- Other actions by freight broker can create the environment where a plaintiff can successfully pursue the Vicarious liability of a motor carrier involve “how they hold themselves” out to the public. How their web-site appear and what is reflect should be closely reviewed. They should also avoid signing any contract that suggest they are motor carrier or assume the liability of a motor carrier contractually.
- They should also make certain if they assume more than one authority such as motor carrier authority, freight forwarding authority and freight broker authority that make certain freight broker authority is in separate corporate entity from any other authority in place. This is required to comply with the federal definition of freight broker and enjoy the limited liability assumed under freight broker authority. If a company has their freight broker authority in the same entity as their motor carrier authority plaintiff’s will sue them as a motor carrier because the fact no tort reform laws limiting judgement has been passed.
- It should be noted a company with motor carrier authority may not have coverage under their motor carrier operations if the freight is moved under their freight broker authority with a 3rd party motor carrier. This would be true if their motor carrier coverage was based on a scheduled auto policy basis.
- If they happen to have contingent auto or freight broker auto liability they could see coverage under this policy compromised if they were to sign a contract claiming they were a motor carrier or contractually agreed to assume the liability of a motor carrier.