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 bad trucking operations and 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 (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 and broker are 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 we are in the 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
