What Shippers and Brokers Need to Know to Manage Their Liability Exposure and The Effects of CSA 2010

I watched a fantastic webinar put on by American Shipper in November that pointed to ( although they did not specifically mention) two presently underinsured or uninsured exposures- broker liability and contingent auto liability and why coverage is needed today. ( As in right now!)

Both coverages are not understood and frankly not part of the mainstream trucking insurance marketplace. With the current economy, many truck sales professionals are setting up brokerage authority or expanding brokerage sales-as trucking capacity is still tight in many areas. Even today's truckers, who are at an all-time high with respect to operating efficiencies, have found they do not either have the equipment or drivers to keep up with their shippers' needs or demands- and that is poor business. So they are setting up and expanding their brokerage operations both within and autonomous to their existing operating authority.

CSA 2010 will make capacity even tighter as crappy trucking operations and crappy drivers will not have long to fix it. And that spells bad news to the brokerage community- who even with best practices will find their operations exposed.

Some information I learned from the webinar corroborates the need for coverage. The Transportation Intermediaries Association understands that brokers need and will be required to have broker liability ( primary coverage) or contingent auto coverage ( secondary coverage). Why?

Truckers who continue to hire or retain unfit drivers will face litigation for negligent hiring and retention. Note a now famous court decision against the nation's largest brokerage operation C. H. Robinson further necessitates the need for coverage ( the Schramm decision).

Attorney Clay Porter, a true pro in the truck broker/ insurance arena has described the truck liability "vortex" well where there is a constant duty to supervise and retain records amongst other things from a best practices context.

Broker/ Shipper Liability can today be summarized by 6 exposures

* Respondeat Superior- the employer ( the truck broker) is responsible for the employee( the carrier). Even though the broker in all cases acts as an independent contractor, the courts are becoming sensitive to this bringing vicarious liability whereby one party is responsible for the actions of others
* Negligent Entrustment- causing injury due to instrumentality( a poor driver operating a extra heavy tractor)
* Claims under the Motor Carrier Act
* Claims that a Broker acted as a Motor Carrier
* Aiding and Abetting
* Negligent Hiring

While I want to emphasize I am no lawyer, it is pretty clear to me the biggest exposure to a broker is negligent hiring- and that a best practices approach needs to be delivered to the truck brokerage community- along with appropriate insurance ( yes we provide same so this may seem a tad self-serving which is not my intention).

Federal laws also necessitate coverage. Which ones?

+49 USC 14704- Rights and Remedies of Persons injured by carriers or brokers- Both the carrier or broker is liable for damages sustained by a person as an act or omission of that carrier or broker in violation of this part


+49 CFR 387.307- Broker surety bond or trust fund- the broker is liable to payments to shippers or motor carriers if the broker fails to carry out its contracts or agreements for supplying of transportation by authorized motor carriers.

Shippers are going to make their brokers have insurance. Attorney Porter says that the indemnity agreements that brokers and truckers are being forced to sign do not hold up in 23 states, meaning shippers will require insurance, waivers of subrogation, and additional insured requirements across the board.

One of the failures of the industry is that there is a fine line between liability exposure either on a primary or contingent basis versus a professional liability exposure ( yes we insure that too). Clearly its early days from a professional liability perspective and few shippers are requiring same of their brokers and virtually none of their truckers. You will see those products as well.


While I have not commented much about CSA 2010, suffice it to say that these factors in a large loss or claim will have impact on the broker that hired them:

^Unsafe Driving
^Fatigued Driving
^Poor Driver Fitness
^Drug and Alcohol Use
^Poor Vehicle Maintenance
^Cargo Securement
^Higher than Average Crash Indicator

These are primarilly no brainers for a plaintiff's attorney to go to war against a trucker or broker but the crash indicator of a trucker is not something available to the broker or general public as I understand it at this stage in time.

You can bet the truck insurance agents will be hit with insurance requests, waiver of subrogation requests, hold harmless contracts, and additional insured requests. And today, no one knows what to do with the exposure when there is more than one broker involved in the transaction.

Keep in touch on this and Happy Holidays.

Ben

Latest Trends in Trucking Loss Control Recommendations

The one consistency in trucking insurance is that change is an integral part of the game. If you cannot change or do not want to change, you will find that the status quo is the same as a trucker putting on the brakes. You have to be moving - and stay current to what is going on in the industry. Otherwise you become irrelevant and most importantly fail to add the value that differentiates you from the masses.

I thought it made sense to address very briefly what we are seeing from insurance companies writing trucking insurance from a loss control perspective. Here is what we see:

• Acknowledgement by trucking management that CSA 2010 has been reviewed and understood
• Within CSA 2010, insurance companies want to make sure CSA 2010 has been presented to drivers and that everyone understands the implications of a drivers safety record within the driver safety measurement system
• No texting policy and the acknowledgement that it is a disqualifying expense. They will want to see this put in the drivers manual
• Defensive driver training and programs must be implemented

While there are other trends in loss control, these are what we see in most loss control reports.

If you are not familiar with what these issues are about, it makes sense to get familiar with them.