Chain Reaction Liability

Q: We’re a small motor carrier broker. Lately a couple of our big customers have been asking us about insurance protection against “vicarious liability.” Frankly, I’m not quite sure what they’re talking about. I’ve spoken to a couple of other brokers about this who have told me it has to do with the possibility of a trucker we hired having an accident.

I don’t see what this has to do with us. How could we be held liable for what the trucker does or what happens to him? And even if we could be found to have some liability, what would we be liable for? The loss of or damage to the cargo?

This is a whole new area for me. I know there have been some changes in the law regarding brokers, especially the increased bond requirement, but I’m not aware of any changes that impact our liability. Can you clarify?

A: This isn’t a change in the law as written, but rather a new interpretation of law regarding who may be held responsible for events that result in compensable injury to some party through the fault of someone else.

The courts have always been pretty open-ended about lawsuits resulting from highway accidents. The idea has been to ensure that innocent victims of such accidents have the maximum recourse against some financially responsible person to pay them for their injuries. Normally, of course, that will be the person who is at fault in the accident, but sometimes that person doesn’t have a lot of financial resources; in such cases, courts have been fairly liberal about letting plaintiffs’ (victims’) lawyers drag in a range of secondary defendants who have deeper pockets.

What your shippers are calling “vicarious liability” is an example of this. A key case revolving around the point is Sperl v. C.H. Robinson, 946 N.E.2d 463, and there’s also Schramm v. Foster, 341 F.Supp.2d 536, a couple of years earlier, both cases coincidentally involving the same broker. In both, the broker was found, in one way or another, “vicariously” liable for the consequences of an accident involving a trucker hired by the broker — specifically, personal injuries (deaths) resulting from the accident.

There are several legal theories underlying this approach. Especially, where the broker plays a strong role in the actual transportation process (as was found to be the case in Sperl) by directing and/or controlling the activities of the driver, the driver may be found to have been acting as de facto agent of the broker, which therefore is liable for its “agent’s” acts and failings.

An extension of this theory is that the broker and the carrier are involved in a joint venture, rendering both of them co-equally liable. This is sometimes supported by the fact that the broker in modern practice arranges with the shipper for the transportation and bills the shipper directly for the service, compensating the carrier out of its own pocket and making it the “point man” in the relationship.

But there’s another aspect; the broker may be found liable on the basis of so-called negligent hiring of a carrier with a poor safety history. Unlike the shipper, the broker as a licensed transportation professional is considered to have a duty to the public that is betrayed by its hiring an unsafe carrier. So that’s another possible basis for finding the broker liable for damages incurred by some third party in a highway accident involving that carrier.

In other words, the broker can be found legally just as liable as an at-fault driver or carrier for what happened in the accident. This is what your shippers are talking about; they want to be protected from winding up in what amounts to a chain-reaction legal accident — where they get dragged in as a defendant because they hired the broker who hired the carrier, and so on, if you get the picture.

All this is a relatively new way of looking at the law. In the past, brokers were at arms’-length distance from the physical transportation process and less involved in its details than today. Past practice also did not entail the broker billing the shipper directly and otherwise interceding so strongly in the shipper-carrier relationship. Nor did brokers play as strong a role in the industry as they do today.

But as your profession has increased in influence and activity, you’re finding that your rise to prominence is not without its downside. The court system is noticing you, too, and this is an example of how that can affect you. 

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 most recent 351-page compiled edition of past Q&A columns, published in 2010.

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