Vicarious Liability in Trucking Changes The Way Shippers Do BusinessDecember 20, 2012
There was a time when liability for CMV-related accidents was limited to the driver and carrier. Shippers, third party logistics companies (3PLCs) and brokers were insulated. No longer. Vicarious liability in trucking is now opening the door to big claims against companies with deep pockets, and it’s changing the relationship between shippers, 3PLCs, brokers and carriers in a big way.
Schramm v. Foster – a landmark vicarious liability in trucking case
In 2002, C.H. Robinson contracted with a carrier to haul a load of soy milk. When that carrier’s driver failed to stop at a stop sign and the resulting accident left two with permanent, incapacitating injuries, the Schramm family brought suit against the driver, the carrier—and C.H. Robinson.
That the company did not perform due diligence in vetting the carrier that left their son in a semi-vegetative state. C.H Robinson settled out of court for $4M.
More recently, in 2011, an Illinois appeals court upheld a $23.8M judgment against C.H. Robinson, after they were found vicariously liable for a fatal accident that was caused by the carrier they’d hired. (An investigation found that the driver responsible was operating on a suspended license and had doctored her driver logs.)
Clearly, the days of liability resting squarely on the shoulders of the carrier are over.
Indemnity provisions and false security
Indemnity provisions in shippers’ contracts may make them feel more secure, but do they really offer protection?
In some cases, no.
Oftentimes, a carrier’s liability insurance will exclude indemnity, where independent claims are made against the shipper. So, if the plaintiff brings a negligent hiring claim against the shipper, guess who’s staring into an empty purse? That’s right, the shipper.
Also, under joint and several liability, each defendant is independently responsible for the entire judgment. So, if a claim is made against the driver, carrier and shipper, and the driver’s and carrier’s assets are exhausted, the shipper is then responsible for the remaining judgment.
Shippers, brokers and 3PLCs must do more.
The burden of proof in vicarious liability in trucking cases
So, what must plaintiffs show in order to win judgments against shippers, 3PLCs and brokers?
It’s a two-pronged standard.
First, they must show that the carrier caused injury to property and/or person through their negligence, recklessness or intentional misconduct.
Second, they must demonstrate that the shipper, 3PLC, or broker did not exercise reasonable care or perform proper due diligence when they vetted the carrier.
Doing their due diligence
Due to court rulings like those against C.H. Robinson, shippers, 3PLCs and brokers are changing the way they do business. Not only are they performing more rigorous due diligence, they’re also changing the way they write their contracts, as well.
Now, thanks to publicly available CSA scores, shippers, 3PLCs and brokers are closely evaluating those scores to eliminate carriers that raise red flags from their pool. They’re also reviewing carrier insurance rates and checking up on their operational statistics, all to gain a deeper understanding of the carrier’s safety record.
And when it comes to writing load agreements, shippers, 3PLCs and brokers are requiring carriers to maintain baseline CSA scores to continue hauling their goods. In fact, some are even requiring their carriers to run on EOBRs to further ensure they’re operating safely and in compliance with FMCSA regulations.
Of course, carriers know this—and they’re doing all they can to ensure their safety scores are stellar.
See, in the race for big contracts, the safest carrier wins.
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