No one is talking about this ?!?!?!?!

Michael Ludwig

Michael Ludwig

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Jul 6, 2009
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I can't believe there isn't a thread (or maybe I missed it?) on the SCOTUS 9-0 ruling that load brokers can be sued for the accidents caused by the trucks they hire.
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Thread 'US Supreme Court rules brokers can be held liable in accidents'

The U.S. Supreme Court on May 14 ruled that freight brokers can be held liable for negligence under state laws for highway accidents. The court’s unanimous decision in Montgomery v. […]

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Thoughts? Comments?
 
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This incident has been in the news a number of times as it wound its way through the US judicial system. The comment that I found most interesting was that from the president of TIA. He compared this situation to that of travel agents booking tickets on airlines. If the Federal government regulates airlines and deems an airline fit to fly, how can you penalize the travel agent in the event the airline suffers a crash?If FMCSA decides that a carrier is fit to operate on the highway, why should you ask a freight broker to perform that same evaluation? It really comes down to a question of jurisdiction. Federal versus state. Although some might look on this as a blow against the “evil empire” of freight brokering, the long term outcome is yet to be seen and I am certain there will be more local court challenges and interpretations. I suppose one result will be brokers asking even more questions and requiring even more documentation from carriers before a load confirmation can be issued.
 
I was blown away by the unanimous decision. What I interpret from the little that I read is that the broker can be implicated and is not immune from exposure by default or by law. How you prove that an entity should be deemed negligent is going to be the factor and will be a high bar to reach. A broker who uses a carrier that has a horrible SMS score should be implicated but to what effect? Every broker has a 'hold harmless' clause in their contracts (if someone even reads it and understands what that mean). I believe that this judgement is going to be used to circumvent that part of the contract.

We need to get back to a time where brokers and insurance companies are the gatekeepers of the industry. They should be the ones forcing carriers to keep their safety scores at the best possible score or risk not being chosen for a load or not insured. Maybe (hopefully) this ruling will tweak the memories of brokers in this regard. Next would be a ruling against insurance companies knowingly writing paper for a carrier known to skirt laws and run illegally but relying on their contract to deny coverage should it happen. That paper is the go/no-go just like the FMCSA SAFER website showing carriers as authorized that the brokers were relying on.
 
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While I don't disagree with what the TIA president and yourself are saying, it's really a moot point. SCOTUS has ruled and it is now the law of the land. The 9-0 decision leaves to wiggle room to further define the decision. The one and only option to undo, or change, the ruling is to change the law through the senate and congress, and in the current political climate, that is highly unlikely.
In my opinion I can see two immediate outcomes of this decision.
1) Carriers are going to seriously tighten their safety belts. TBH, that was tops on our agenda today. Make safety safer. Prepare to be audited by both governments and individuals/3rd parties.
2) Brokers are going to require enhanced safety metrics from their carriers. Brokers' lawyers are going over their indemnity clauses with a fine toothed comb, and tightening them up significantly.

Inevitably this decision will extend to shippers that hire their carriers directly. A carrier's safety package is going to become the prime selling tool. Shippers will also have to look carefully at a load brokers safety vetting practices.

On the economic front, from a North American perspective, fly-by-night carriers that depend on LoadLink and DAT are going to disappear. They simply don't have the time or the money to comply before the rent cheques come due. Rates will increase.
From a Canada-only perspective, rates are going to drop like a stone. All those "shifty" carriers that were running into the U.S. won't be going there anymore, so their numbers will pile up here in Canada. There will be a plethora of available trucks in the cross-Canada market.
Lots and lots of basement dwelling load brokers are going to disappear from the marketplace. They can't afford appropriate insurance, nor do they have knowledge, skills, or legal acumen to keep themselves out of trouble.

As I mentioned, I can see the next evolution being that shippers can be held liable for their hiring practices as well. That means they'll be vetting carriers and load brokers safety practices. I'm not certain if this is going to be good or bad for load brokers. I think it could go either way at the moment. Regardless, the biggest winners out of this ruling are the C.H. Robinson's of this world. Even though they lost the case, and are going to be sued, and are going to have to pay, they are also well positioned to capitalize on the vacuum left by the small/smaller brokers exiting the market.
 
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The types of results you are predicting, could be months, or more likely years into the future, if indeed they ever do take place. Keep in mind, this decision simply allows the injured party to include the freight broker in his suits to receive compensation. Those efforts may, or may not be successful, the courts have yet to determine that. Freight brokering liability insurance has increased steadily over the years, but is still not a meaningful barrier for any well funded, properly managed freight brokerage firm. Will the “basement brokers” be forced out of the industry…perhaps. I wholeheartedly agree that shippers should be required to take a more active role in properly vetting the suppliers they choose, carriers and brokers alike. In my humble opinion, while this one ruling will most likely cause Canadian insurance companies to review their freight broker exposure, I really don’t see it creating any sort of seismic shift in our industry for the near future.
 
loaders said:
Keep in mind, this decision simply allows the injured party to include the freight broker in his suits to receive compensation.
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Keep in mind, in the tort-rich environment in the U.S., where everyone gets wrapped up in the suit, this is going to happen sooner rather than later, and in staggering numbers. When have you ever seen a U.S. lawsuit that didn't include everyone that could even remotely be responsible?

I would expect we will see the first one well before the summer solstice. I would also expect that we will see new load broker contracts, with enhanced indemnity clauses, within the next 7 to 14 days.
The decision is on the books now. There's no "reflection" time. There's no appeal process. It's the law of the land. It won't take long to be used. It will take even less time for potentially affected parties to begin to proactively defend themselves.

And, remember, it costs money, and lots of it, to defend yourself, whether you are guilty, or not. That alone is going to have an economic effect.
 
and the flooring manufacturer
and the contractor who installed the flooring
and the transporter who delivered the flooring
and the subfloor manufacturer
and the floor truss manufacturer
and - sue yourself for buying the house - you have insurance too!
the list is endless!

Happy Friday,
Mike
 
I think where the line gets drawn will be the biggest key here.

I believe how this plays out is that if a broker can show beyond a reasonable doubt they vetted the carrier and driver, they will be off the hook. Highway/Genlogs/Safer scores, all of this will be invaluable to proving a vetting process.

The big boys already use these in some capacity. Their use will only increase from here and there will be strict rules requiring their use. If people remember, awhile back Arrive banned all their employees from Gchat/Telegram/WhatsApp on their work computers.

This was because people were booking trucks and by passing vetting tools, likely sending it to an "approved" MC in the system and then willingly having it double brokered to a different driver.

As Jim said, brokers used to be the gatekeepers, I believe they will go back to being that gatekeeper.
 
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MikeJr said:
and the flooring manufacturer
and the contractor who installed the flooring
and the transporter who delivered the flooring
and the subfloor manufacturer
and the floor truss manufacturer
and - sue yourself for buying the house - you have insurance too!
the list is endless!

Happy Friday,
Mike
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All kidding aside, yes, that’s how it’s always been in the US. This ruling simply reaffirms what already exists… I don’t see what all the fuss is about. Let’s say it’s 2004.. you’re a freight broker and you hire a carrier to haul a load.. you’re in a bit of a hurry, and the carrier you hire is a level B carrier. The worst happens and he rear-ends a school bus on the GW Bridge. There are multiple injuries and fatalities, not to mention damage to the bridge. In 2004 would the broker have been exempt from legal action? Of course not.. he/she would have been in the thick of it right along with the carrier and likely the shipper as well as others. This ruling from a practical standpoint really changes nothing.. you could be sued then, and you could certainly be sued now. Freight brokerage is an extremely high risk business, and that risk has been the big elephant in the room no one talks about… until yesterday. Materially nothing has changed.. all that's changed is the awareness and perception. The risk of getting involved in a cataclysmic event hasn’t changed since yesterday. It’s like a doctor telling you that the extra 20 pounds around your waist increases your risk of getting cancer by 75%. You knew being overweight was bad before, but now with heightened awareness you might change some habits. Same idea with this verdict..
 
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My experience with legal action taken by a large US based global corporation was that it would have to be adjudicated in Canada, subject to Canadian law, because I am based in Canada. I hire Canadian carriers, almost exclusively, to run cross border. The case wouldn't fly without extraordinary circumstances and a Canadian court ruling to accept the case. We would need to investigate Canadians' liability more in depth as per this US ruling outcome.
Also, if USMCA Saferweb is the carrier's responsibility to update, and there is no decent regulatory oversight, how is a broker supposed to be able to vet a carrier properly? Displayed data can be 10 years old at times. It takes such an amount of research, to uncover disreputable carrier behaviours, that time constraints in booking a load render such detective work almost impossible. We are left with a limited field of 'good' carriers, having limited availability, and customers who nickel and dime us all the way. The landscape of brokering has become a stressfest. Brokers, whether inhouse or not, almost need to have their own separate department to deal with pre-vetting of carriers. COIs don't always tell an accurate story either.
 
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COIs don't tell the story at all. I learned that a few years ago on a large claim I had. When vetting carriers it is important to get the policy exclusions. And most of us seem to live in a fantasy land where all underwriters have billions in assets with at least one tower in Dubai. That just ain't the case.. Many contracts are poorly written, so poorly, in fact that the reader wonders if they were written by someone under the influence or perhaps by a ten year old (maybe also under the influence).
 
Burned said:
My experience with legal action taken by a large US based global corporation was that it would have to be adjudicated in Canada, subject to Canadian law, because I am based in Canada. I hire Canadian carriers, almost exclusively, to run cross border. The case wouldn't fly without extraordinary circumstances and a Canadian court ruling to accept the case. We would need to investigate Canadians' liability more in depth as per this US ruling outcome.
Also, if USMCA Saferweb is the carrier's responsibility to update, and there is no decent regulatory oversight, how is a broker supposed to be able to vet a carrier properly? Displayed data can be 10 years old at times. It takes such an amount of research, to uncover disreputable carrier behaviours, that time constraints in booking a load render such detective work almost impossible. We are left with a limited field of 'good' carriers, having limited availability, and customers who nickel and dime us all the way. The landscape of brokering has become a stressfest. Brokers, whether inhouse or not, almost need to have their own separate department to deal with pre-vetting of carriers. COIs don't always tell an accurate story either.
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If the accident took place in the US, the legal proceedings would be heard in the US. The fact that you, either as a broker, or as a carrier are Canadian based and involve Canadian citizens, would have no bearing whatsoever. If you are registered with FMCSA, again, either as a freight broker or a carrier, your office address in inconsequential. In their sandbox, their rules apply. I agree with your assessment of the usefulness of Safer information., marginal at best.
 
Burned said:
My experience with legal action taken by a large US based global corporation was that it would have to be adjudicated in Canada, subject to Canadian law, because I am based in Canada. I hire Canadian carriers, almost exclusively, to run cross border. The case wouldn't fly without extraordinary circumstances and a Canadian court ruling to accept the case. We would need to investigate Canadians' liability more in depth as per this US ruling outcome.
Also, if USMCA Saferweb is the carrier's responsibility to update, and there is no decent regulatory oversight, how is a broker supposed to be able to vet a carrier properly? Displayed data can be 10 years old at times. It takes such an amount of research, to uncover disreputable carrier behaviours, that time constraints in booking a load render such detective work almost impossible. We are left with a limited field of 'good' carriers, having limited availability, and customers who nickel and dime us all the way. The landscape of brokering has become a stressfest. Brokers, whether inhouse or not, almost need to have their own separate department to deal with pre-vetting of carriers. COIs don't always tell an accurate story either.
Click to expand...
Welcome to operating in the US. If you are a FMCSA approved broker, you have to expect to abide by the US laws. What you have to remember is that if legal action is taken, it usually takes place in the location where the action took place. In other words, if the carrier you hired has an accident in Cincinnati, the action will be in Cincinnati and if you're pulled into the lawsuit, you will be required to be represented there. I do anticipate that in time, in the absence of a FMCSA approved broker, the beneficial freight owner (BFO) will also be pulled into the lawsuit. Lawyers are constantly trying to peel back the onion to find another layer that may have some skin in the game.
Once in a lawsuit, you'll learn very quickly about what is expected. You will receive a statement of claim that will have 30 pages of all the items you should have reviewed before sending this carrier down the road. Yes, it's a boilerplate but if one or more of those items apply, and were overlooked, it will determine the amount of risk you may be facing. They don't care how hard it is to vet the carrier, it's your job to do so with the exact measure that will limit, diminish or extinguish your liability.
Carriers and their insurance companies deal with this all the time. That driver who just got in an accident better be squeaky clean with hundreds of thousands of proven miles driven and no accidents, incidents or tickets. That one overweight fine from 4 years ago will somehow show up and be used against the carrier to show how this driver is inattentive to his job, has a no-care attitude, and is likely the ultimate reason for this accident. It's the same reason why insurance companies are quick to sign off on any claim.
Like I said earlier, it is a very high bar to reach showing that the broker is negligent to a degree that will amount to much. I expect a couple high prolific cases to come forward very quickly that, when complete, will set the basis for case law. The hope is that brokers remain cognizant of who they are hiring and not just anybody and this new ruling will help that.
 
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Personally I've always operated my business on the premise that I would be invited to any litigation-fest involving any shipment I am or have been involved in. This ruling really changes nothing. Then and now, the focus needs to be on minimising exposure to risk.. in this biz that means lowering it from "extreme" to just "high". There's no such animal as "low risk" in the freight world. I find it funny that some brokers are surprised to learn that they may be exposed to litigation involving the carriers that they hire. Is this really news?
 
If anyone is interested, there is a webinar tomorrow put on by Carrier Assure

Scroll down and click on Sign Up: https://www.carrierassure.com/webinars

The Broker Standard of Care After Montgomery: What Every Broker, Shipper, and Insurer Must Understand Now

The Supreme Court’s decision in Montgomery v. Caribe Transport has intensified industry scrutiny around broker liability, negligent selection, and carrier vetting standards.

In this webinar, transportation attorney, Expert Witness (on broker liability), and Carrier Assure founder Cassandra Gaines will explain what the decision means for brokers, shippers, insurers, and transportation professionals and how courts are likely to evaluate broker conduct moving forward.

Topics include:
• The evolving broker standard of care
• Carrier vetting expectations after Montgomery
• Double brokering and carrier identity risks
• Authority history, inspections, insurance, and SMS data
• What a defensible vetting program should look like today

This session is designed for freight brokers, shippers, insurers, risk managers, and transportation attorneys seeking practical guidance on reducing exposure and strengthening carrier oversight in a rapidly changing legal environment.
 
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