Many motor carriers over the past 5 to 10 years have shifted their operations to the brokerage model. Brokers arrange transportation of freight using authorized motor carriers, but do not actually perform transportation. Brokers are generally not responsible for personal injuries and property losses caused by accidents suffered by the motor carriers they select.
However, brokers have on occasion have been held responsible under a “negligent hiring” theory for injuries and damages caused by selected motor carriers where the facts showed that the carrier hired was not a safe or sufficiently experienced carrier. This theory has opened the door to much litigation and uncertainty. How much investigation of selected motor carriers must brokers do to avoid such a claim? Different courts have come to different results. Brokers have been required to purchase insurance to cover potential claims of negligent hiring.
There is a strong argument under federal law that brokers should not be subjected to negligent hiring claims. There is a split of opinion among courts in the United States. Our local Ninth Circuit Court in Miller v. CH Robinson, 976 F. 3d 1016 (2020), held that brokers are subject to negligent hiring claims. However, there is a new case (Ye v. Global Sunrise (2020 U.S. Dist. LEXIS 37142) before the Seventh Circuit Court where the underlying decision held that federal law preempts such claims. This issue may be headed to the United States Supreme Court to avoid the application of different legal principles in different states.
To learn more about the pros and cons of instituting a brokerage model, contact the transportation law attorneys at Chauvel & Glatt.
This material in this article, provided by Chauvel & Glatt, is designed to provide informative and current information as of the date of the post. It should not be considered, nor is it intended to constitute legal advice nor tax advice as we are not tax attorneys or tax advisors. For information on your particular circumstances, please contact Chauvel & Glatt at 650-573-9500 for legal assistance near you. (Photo Credit depositphoto.com.)