Freight Broker Risk Management 101

You are a Domestic Freight Broker. You gave up your common carrier authority years ago. Now you enjoy the comfort of limited liability thanks to common law and don’t play by the Carmack Amendment. Right?

Many brokers believe that the separation of authorities will nullify the risk of being seriously affected by a lawsuit as a result of the movement of freight. However, when it comes to transportation logistics risk management, this is merely one step in a series of steps to help prevent being sued as anything other than a freight broker (who enjoys limited liability).

The other day I was reading an insurance policy wording and it was clearly set up to cover damages for the following people; Motor Carrier, Warehouseman, Freight Forwarder, Logistics Service Provider or Other Bailee.

A plaintiff’s attorney would read the policy wording and say “Eureka! We got them now. If they are a freight broker why would they buy coverage for a motor carrier, or freight forwarder? They are clearly holding themselves out to be something other than a freight broker.”

If an auto accident occurs injuring or killing a third party the average settlement is $2.6 Million. The average truck driver only carries $1 Million in liability coverage. What most attorneys do is drag everyone who had anything to do with the shipment into this case including a Freight Broker and those with the deepest pockets.

In recent court cases such as Travelers Insurance a/s/o Vera Bradley Designs v. Panalpina, Inc., 2010 WL 3894105 (N.D. IL. 2010). The courts have upheld the notion that even though you have sole freight broker authority, how you hold yourself out to be (i.e. the way you run your operations, contracts in place, broker/shipper/carrier relationships) plays a big role in how the courts will actually view your authority.

There are many steps you can take when it comes to transportation logistics risk management to protect your assets and not face serious punitive damages as a result of death or injury from the movement of freight. One of the best steps is having someone with years of industry experience to review your current business model & current contracts in place. LOGISTIQ is a leader in transportation logistics risk management education and insurance solutions. With products specifically designed for freight brokers, you will not find yourself in this situation. When it comes to freight brokers, LOGISTIQ should be your first and only call every time especially if you need risk management consulting services.