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How Transportation Brokers Can Avoid Liability For Personal Injury Claims

Recent cases demonstrate that aggressive personal injury attorneys will seek to establish broker liability for injuries where the damages exceed the trucker’s available insurance.  Brokers need to be aware of this trend and take the defensive measures set forth below to avoid such claims and the adverse impact the claims have on the cost and availability of liability insurance.                                              

The following checklist is drawn from recent cases and intended to assist transportation brokers, their insurers and attorneys in establishing policies for the selection of a motor carrier. The goal of the selection policy is (1) to avoid being named in personal injury lawsuits and (2) if sued, to have a defense to a claim of negligent hiring that allows the broker to obtain summary judgment.

The general rule of law is that a broker has a duty to use reasonable care in selecting truckers whom it maintains in its stable of carriers. Schramm v. Foster, 341 F.Supp.2d 536 (D.Md.2004). The broker should consider whether the selection of the carrier will look reasonable when challenged by innocent victims of catastrophic personal injuries or death.    

The broker must determine that the carrier has valid federal carrier’s authority. GCU Int’l Insurance, PLC v. Keystone Lines Corp., 2004 WL 1047932 (N.D.Cal. 2004). Check the trucker’s licenses and confirm that all licenses are in good standing.

The broker should determine that the carrier has cargo and liability insurance. GCU Int’l Insurance, PLC v. Keystone Lines Corp., 2004 WL 1047932 (N.D.Cal. 2004) Obtain a written certificate of insurance and confirm coverage with the trucker’s insurance broker, preferably a written faxed confirmation from the insurance broker. The more liability insurance covering the carrier, the less likely a personal injury plaintiff will pursue a case against the broker.

The broker has a duty to check safety statistics of carriers.  The broker should “maintain internal records of the persons with whom it does business to assure that they are not manipulating their business practices in order to avoid unsatisfactory SafeStat ratings.” Schramm v. Foster, 341 F.Supp.2d at 551 (D.Md.2004) In Schramm, the broker was denied summary judgment because the court decided that the broker should have known that the involved carrier was formed as a result of a safety performance problem with its predecessor.

The broker must  avoid carriers that violate federal violations. (Schramm v. Foster, 341 F.Supp.2d at 551.) Knowledge of facts suggesting the carrier may violate federal regulations such as failing to maintain brakes and tires in proper condition, violating weight, or hours of service restrictions, could support liability claims for negligent selection of the carrier or “aiding and abetting” the violation of federal regulation. 

The broker’s contract should mandate carrier compliance with federal regulations.

The broker must not become the “employer”of the driver. The broker’s contract  should specify that: (1) the carrier is an independent contractor, (2) the driver is the employee of the carrier, (3) the carrier employs and pays its driver and not the broker, and (4) the carrier is solely responsible for the operation of the transportation equipment. Schramm v. Foster, 341 F.Supp.2d. 536 (D. Md. 2004). 

The broker should avoid supplying the means of transport (trucks) to the carrier. Also, owners/operators  are more likely to be found to be employees of the broker particularly, if the broker supplies all or the majority of their jobs. The more the broker controls the manner in which the trucker and driver perform their job, the more likely the broker may be found to have a master/servant relationship such that the broker will have liability for the negligence of the trucker and truck driver.  

A broker’s contract should not provide for indemnification, insurance, or for an additional insured endorsement benefitting the carrier. A broker may be liable as a result of indemnification provisions in its contract with the carrier. Byrton Dairy Products, Inc. v. Harborside Refrigerated Services, Inc., 191 F.Supp. 977 (N.D.Ill. 1997).

Most brokers know that a transportation broker, not itself negligent, “is generally not liable for the value of the goods lost in interstate commerce.” Travelers Ind. Co. v. Alliance Shippers, Inc., 642 F.Supp. 840, 842 (N.D. Cal. 1986). Cargo attorneys know that the Carmack Amendment does not apply to brokers. However, recent lawsuits have shown that brokers will be sued in catastrophic personal injury cases,  particularly if: (1) the trucker has insufficient insurance, (2) the trucker cannot be found, or, (3) a legal link cannot be made between a negligent owner/operator and a certified and insured motor carrier.

The inevitable result of increased exposure to personal injury claims is an increase in the cost and a reduction in the availability of liability insurance. Unless the brokers respond to the increase in personal injury claims, the entire industry will suffer significant increases in the cost of doing business. Adoption of the polices set forth above is one relatively easy way to reduce broker liability for personal injury claims resulting from the transportation of cargo.

Because of the fluidity of the law concerning broker liability and the creativity of plaintiff’s personal injury lawyers, the policies of transportation brokers in selecting and retaining motor carriers to handle customer loads should be regularly reviewed with the assistance of an expert in the area of transportation broker liability.

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