Brokers, Shippers and Carrier Liability

Q: In a recent speech to a group of 3PLs, a shipper representative spoke of liabilities shippers may face when they use 3PLs or brokers.

He said sometimes motor carriers hired by brokers will seek damages from the shipper who hired the broker. And in other cases, he said, lawyers for someone injured in an accident with the trucker may also look back to the broker and also to the broker’s shipper/customer.

His point was that third parties need to straighten out “gray areas” in their liability, which he says leave shippers too easily exposed to risk.

Can you clarify this? In particular, am I exposing my company to potential additional liability by using 3PLs and brokers?

A: I read the reports about this speech, and if you want my opinion, this shipper was mostly just whining.

When it comes to brokers and 3PLs (which may be brokers who offer value-added services), the liability situation is pretty clear and has been for decades: They aren’t liable for the failings of the carriers they hire. Neither are their shippers.

To be sure, this is only the general rule, to which there are admitted exceptions. The most significant of these occurs when the third party or the shipper that hired that company can be shown to have been negligent.

It’s in hope of finding such negligence that plaintiffs’ lawyers draw brokers and their shipper-employers into litigation. The carrier who is the primary defendant may have little money, so even a successful lawsuit will net only a small payout. But the broker may have some money, and the shipper may have a lot of it. The most lucrative judgment will be against the “deep pocket,” which is what the lawyer seeks.

Lawyers also can get very creative about asserting negligence. Did the carrier have a second-rate safety rating? If so, wasn’t hiring the carrier negligence on the broker’s part? And wasn’t the shipper also negligent in hiring such a broker?

It goes on from there . . . and on, and on. The slightest hint of irregularity anywhere can be used to pass the buck up the food chain in search of the deepest pocket, and it’s often up to a lay jury or a judge uneducated in the nuts and bolts of transportation to decide what is and what isn’t negligence.

I can understand this shipper speaker’s frustration with a judicial process that focuses heavily on securing compensation for victims and is a lot less interested in the source of that compensation and whether that source was primarily or only peripherally at fault.

But the main reason I called this shipper’s comments “whining” is that it has precious little to do with brokers or other third parties. He’s just looking for his third parties to set up a stronger barrier against his company being dragged into the litigatory morass.

Consider what happens in the absence of an intermediary that is, the shipper has selected and dealt directly with the carrier. Does this thwart an injured party’s lawyer in seeking to involve that shipper in the lawsuit?

Of course not. It just means there’s one less layer to penetrate. If the carrier had a track record of safety violations, now the claim is that the shipper was itself negligent for engaging the company. It goes on from there; if anything, the absence of the broker intermediary means the shipper may be more exposed, not less, to litigatory attack.

So the existence of an intermediary may offer at least some protection. The broker can be found negligent for hiring the carrier, but perhaps the shipper won’t be found negligent for engaging the broker. It’s not a lot of insulation, but it’s something.

This speaker, however, seems to be complaining that the insulation isn’t perfect. He wants the third- party industry to somehow find a way of telling the law, in essence, that “the buck stops here” (i.e., with the third party) in the event of a lawsuit.

Well, I’m sorry to say that can’t be done. Some shippers have ‘hold harmless’ clauses in their agreements with third parties, but even that won’t bar anybody from including them as litigatory defendants; in our court system, you can sue anybody you choose. And when offered by a non-asset-based provider, a ‘hold harmless’ clause has limited utility even if it can be enforced. Therefore, no, in this regard you aren’t assuming extra risk by using brokers.

Consultant, author and educator Colin Barrett is president of Barrett Transportation Consultants. Send your questions to him at 5201 Whippoorwill Lane, Johns Island, S.C. 29455; phone, 843-559-1277; e-mail, BarrettTrn@aol.com. Contact him to order the 536-page compiled edition of past Q&A columns, published in 2001, at $80 plus shipping. 

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