Ronald H. Usem is a transportation attorney and partner at Minneapolis-based law firm of Huffman, Usem, Saboe, Crawford & Greenberg. Mr. Usem also serves on the Director’s Circle of the Board of Directors of the Transportation Intermediaries Association (TIA), the professional organization of the third-party logistics industry.
Mr. Usem will discuss due diligence in greater detail at a webinar about “Due Diligence and Certificates of Insurance” on Thursday, October 16. He will be joined by transportation insurance expert Mark Yunker. Register for this free webinar, which is sponsored by TransCore.
Why is carrier qualification necessary?
It is good business practice. Recent case law also dictates brokers, shippers and third-party logistics companies must exercise reasonable care and due diligence in selection of a motor carrier, in order to reduce risk of loss for personal injury and death.
Do I need a signed copy of the carrier’s insurance certificate?
I am frequently asked whether a broker must have a “signed” copy of an insurance certificate. The answer is yes. It should be “signed” either electronically or in handwriting. Under the Electronic Signatures Act, 15 USC 7001, the contract may not be denied legal effect solely because it is in electronic form and solely because an electronic signature was used in its formation.
What is the case law that is relevant to the issue of carrier qualification?
There are four cases that have demonstrated a shift in the court’s treatment of brokers and third party logistics providers:
Schramm v. Foster, 2004. A broker was held potentially liable for personal injuries caused by a motor carrier that was hired by the broker to transport freight. The Court indicated that a broker must exercise reasonable care and due diligence in the selection of a motor carrier. The case was settled and did not go to a jury.
Puckrein v. ATI Transport, 2006. A shipper was held liable for negligent hiring of a motor carrier. The shipper knowingly hired a carrier which had a defective brake on one wheel. The truck was involved in an accident where one person was killed and another was seriously injured. The shipper was held liable.
Jones v. DeSouza (C.H. Robinson), 2006. In a case very similar to Schramm, the court found the broker liable for personal injuries for failure to exercise reasonable care in the selection of a motor carrier. In this case, the carrier had a conditional safety rating, even though Robinson’s contract required it to use only carriers that had a satisfactory rating. The Court indicated where the carrier has a conditional safety rating, you must look at the Safestat scores. The Court also indicated Robinson was acting as a third-party logistics company which was subject to the same due diligence obligations as a broker.
Why are these cases important to my company?
While these three cases established law in Maryland, Virginia and New Jersey, other courts in the U.S. are free to follow this precedent and hold a broker, shipper and third-party logistics company to the same reasonable care and due diligence standards imposed by those three states.
What is the best way for a broker or 3PL to be protected against liability claims?
The question for brokers is how much reasonable care, due diligence is enough? The answer is not clear cut. It depends on the facts of the case. The best way to protect your company against liability is to prepare immediately and thoroughly for any future occurrence.
- Write a carrier qualification protocol and follow it, if you haven’t already done so.
- Establish a procedure or checklist, so you can prove that you followed your own protocol.
- If you do not follow the protocol, make a record of each exception and the reasons for the change in procedure.
- Have your Board of Directors adopt the carrier qualification protocol at a Board meeting to demonstrate the importance of safety as company policy.
If there is a serious accident, and the injured party sues the broker, the shipper or third-party logistics company, what other protective actions can be taken?
Ultimately, regardless of carrier qualification procedures used, if the Plaintiff is a driver’s widow, or some other seriously injured party, Plaintiff’s lawyers may seek a “deep pocket.”
In addition to following the carrier qualification protocol referred to, you must have insurance to protect you from this risk. You should also prepare yourself in advance for a catastrophic loss, by developing a checklist of actions you will take in the event the unthinkable occurs. The checklist should include investigating the claim by obtaining copies of all police and media reports, and all facts concerning the accident.
Do I need a lawyer, or can I rely on my insurance agency to defend me?
In case of a serious injury accident, you should contact a qualified personal injury defense attorney immediately to help you with the investigation and monitoring of the claim. Obviously, you must also notify your insurance underwriter. The reason for obtaining the services of a personal injury defense attorney is that the claim might exceed your insurance limits, and therefore you may need to be prepared to defend yourself.