Double Brokering, Vicarious Liability, Oh My

Your brokerage firm has contracted a load out to a carrier, but that carrier has passed on the shipment to another trucking company. Then that third-party is involved in a fatal accident, opening your firm to a myriad of legal ramifications, which could even ratchet up to include your shipper.

When unauthorized double brokering occurs, your third-party logistics companies loses control of the shipment and can find your load hauled by a trucking company lacking cargo insurance, accident liability insurance or both. You can help prevent the situation by vetting the carriers your firm contracts with, attorneys and logistics executives told attendees of the annual Transportation Intermediaries Association conference in San Antonio, Texas.

Once you find out that unknown carrier has your load, try to get as much information on the carrier and its driver, including the truck’s vehicle information number, so you can determine how risky the move is, said Doug Clark, president of Douglas Clark Transportation.

“If you do due diligence on the front end, you can avoid future trouble,” said Alec Gizzi, president of JBS Logistics.

He recommended trying to get the carrier under contract if it turns out they have the needed insurance. Gizzi said if the carrier says they are using a team driver, make sure to verify that because it might just be one driver breaking the hours-of-service rule.

When you lose control of your load to an unknown carrier, there is also risk that the carrier will hold it “hostage” until it receives payment. In some cases, it’s best just to pay the “ransom” because the goods need to be delivered.

Other times the carrier will try to get paid from you and the second-party, and this can land you in front of a circuit court judge. Strangely, the defense that payment has been made twice doesn’t always hold up in court.

One district court accepts this defense, five don’t, and five others have gone both ways, said Ronald Usem, transportation attorney with Huffman, Usem, Saboe, Crawford & Greensberg. Most carriers only seek about $3,000 to $5,000, and they usually settle for about half their requested sum.

The other major threat is that a court will find that you are vicariously liable if the truck driver gets into a serious or fatal accident. The courts tend to measure how vicarious the relationship is by determining how many measures of control your brokerage has placed on the driver.

This requires a balancing act, where you keep in contact with the carrier but keep your distance from the driver, said Justin Olsen, attorney with Olsen Skoubye & Nielsen. He said vicarious liability cases are rare, but can result in costly settlements, whereas cases involving double brokering are more frequent but have smaller stakes.

Brokers should have a contingency plan ready in case a carrier gets involved in serious or fatal accident, and in some cases, an investigator will need to be sent out, because insurance agents can be slow in reacting, Usem said.

Contact Mark Szakonyi at mszakonyi@joc.com. Follow him on Twitter @Szakonyi_JOC.
 

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