With thanks to our surety partner Avalon Risk Management for this one, it highlights the reason that we spend an inordinate amount of time qualifying vendors. Sure we’d like to work with everybody, but if the rigorous minimum standards are not in place to protect not only our customers but ourselves, if something bad happens it usually gets expensive. Quickly.
In a key decision against a transportation broker for negligent selection, an Oregon jury awarded a $5.2 million settlement, including punitive damages, to the family of a man killed in a truck accident.
The case, Linhart v. Heyl Logistics LLC, et al., was brought about after a truck driver fell asleep at the wheel while under the influence of crystal methamphetamine and slammed into another driver. Linhart, also a truck driver, was killed while inspecting his vehicle on the side of the road.
During litigation, the plaintiff’s attorneys argued that Heyl Logistics did not properly investigate the motor carrier and was liable for negligent selection. The carrier, Washington Transportation, did not have insurance and its operating authority was revoked for failure to conduct drug testing on drivers, among other violations. The plaintiffs asserted that Heyl Logistics should have discovered these facts when hiring the carrier.
According to industry attorneys, the case is the first time punitive damages were awarded against the transportation broker for a negligent hiring claim.
Transportation brokers arrange to move surface cargo domestically, but licensed motor carriers physically move the cargo on their vehicles under their bill of lading and have primary liability for bodily injury and third-party property damage as well as for loss of or damage to freight. The current case (as well as several others, seeSperl v. Henry et al.) has developed into a legal trend that third-party logistics providers or even shippers can be held liable for the acts of motor carriers that they hire.
Several types of liability insurance policies are available to protect brokers from claims arising from cargo loss or damage and third-party liability they assume when hiring truckers:
- Non-following Form Contingent Cargo Insurance provides coverage for loss or damage to cargo when the motor carrier’s insurance does not pay a claim and the motor carrier is unable to pay. Coverage is typically triggered only in situations where the motor carrier is negligent.
- Errors & Omissions Insurance protects the transportation broker if an error or oversight in the course of business causes a customer to suffer a financial loss. A transportation broker should ideally obtain a combined policy form with Errors & Omissions Insurance and Contingent Cargo coverage – this is not the same as purchasing separate policies. Doing so can create both gaps as well as overlaps in coverage.
- Contingent Automobile Liability Insurance is also available to protect transportation brokers when they are held liable for death, bodily injury or third party property damage claims as a result of the motor carrier’s negligence, as in the case above. Coverage may be purchased as a separate policy or, as an endorsement (add-on) to an Errors & Omissions insurance policy.
The firm that won the case issued a press release on this. Full text available here.