Keep it clean

Q What is a broker’s liability for the negligent acts or omissions of the carrier it retains?

A I have addressed this issue before, but the topic needs to be addressed again in light of two current cases. In my opinion, logistics firms are best served by acting in a simple broker capacity – i.e., arranging for transportation for compensation and steering clear of accepting carrier duties and responsibilities.

The regulations prohibit property brokers from representing themselves as carriers in any way. When a property broker ignores these regulations by placing its name on the bill of lading as a carrier of record, or otherwise undertaking carrier duties, it opens the door to be named in lawsuits for third-party accidents and cargo claims.

Clearly, there are cases that go both ways, and how a logistics company structures its transaction can have huge consequences. For example, in Chubb v. H.A. Trans. Systems, the shipper’s assignee sued a property broker when the carrier it hired failed to have proper cargo insurance.

The Court held that H.A., which operated as a pure property broker, was not liable under federal transportation law for the cargo claim and had no duty to determine that the authorized carrier was fully or properly insured. If the broker had made written warranties in its shipper-broker contract, obviously the case would have gone the other way.

A more frightening recent decision was entered in a wrongful death lawsuit brought against C.H. Robinson in Madison County, Illinois. The plaintiff seized on the fact that Robinson allowed its name to be used on the bill of lading and otherwise represented itself on its website and elsewhere to be in a logistics “partnership” with the carriers it retained.

This blurring of the distinction between the role of the property broker and the role of the underlying carrier was sufficient to tag Robinson with joint and several liability. Robinson reportedly contributed $4.25 million to settle this suit.

Obviously, the case law is not well settled, and no one can predict with accuracy how a court will rule in any specific case. But plaintiffs’ lawyers clearly will attempt to sue every deep pocket involved in the chain of commerce when a horrific accident occurs.

In view of these two cases, an intermediary arranging for transportation for compensation should conduct operations as a property broker and carefully avoid any sales literature, contract language or bill of lading notation that could be used to argue that it was a de facto carrier or was in a joint venture with the carrier it retained.