There are many resources online regarding best practices in the transportation industry for freight brokers to ensure that their motor carriers are properly vetted.
Here at PFA Transportation Insurance & Surety Services, our in-house Claims Department has first-hand knowledge of the pitfalls freight brokers face in those cases when motor carriers are hired without appropriate vetting.
- Claims where the freight brokerage tendered a load to a motor carrier that did not have proper carrier authority;
- Claims where the freight broker did not have proper insurance (or the insurance lapsed) after the load was tendered, but prior to completing the contracted services.
These difficult situations could have been avoided had the companies involved done their due diligence prior to tendering the load. Failure to do so can expose the freight brokerage to liability they would not otherwise be subject to under the claim of negligent hiring or entrustment.
One of the most important things freight brokers can do to protect themselves from these liabilities is to develop and maintain a set of procedures for carrier qualification in order to ensure that business is being conducted with reputable and qualified motor carriers. It’s very important in our view to document the processes and procedures, then keep records in order to prove consistency of the qualification processes.
At a minimum, BEFORE tendering any freight to a motor carrier company, we strongly encourage that you:
- Make sure every motor carrier that is used signs and returns the broker/carrier agreement;
- Verify the motor carrier has proper operating authority for the load to be tendered (Obtain a copy of the carrier’s operating authority and check the FMCSA website to ensure their authority is not inactive or pending revocation for any reason);
- Check the safety rating of the carrier on the FMCSA website to ensure they have a satisfactory rating. Continue to monitor the carrier’s safety rating every 3-6 months. You could also consider checking the FMCSA website to see if the carrier also has freight broker authority. If so, make sure the contract with the carrier specifically prohibits double-brokering of any loads tendered;
- Verify and document the motor carrier’s insurance coverage including obtaining a copy of the carrier’s certificate of insurance (COI), preferably directly from the insurance agent. If provided by the motor carrier company, verify the policy information (i.e. effective dates, monetary limits, etc.) directly with the insurance agent and as listed on the FMCSA website. Make sure the expiration date of the policy allows the services to be completed before the policy expires.
NOTE: Be aware that there are fictitious COIs being passed around within the transportation industry. These fake COIs usually contain an altered phone number and/or email address. If the email address for the insurance agency ends with @gmail.com – this should be a red flag. Be sure to Google the insurance agency in order to verify the correct phone and email and speak to the insurance agent directly. Do not rely on information regarding the motor carrier’s insurance that is posted on a load board. This does not relieve the freight brokerage’s obligation to verify all information to ensure it is accurate and up to date (and not fictitious).
Minimum due diligence should include: 1. Verifying the motor carrier’s operating authority; 2. Verifying insurance coverage (obtaining a copy of the insurance certificate).
Checking that the motor carrier does not have an “unsatisfactory” safety rating may not be enough these days given the number of recent court rulings from around the country.
Everyone should consider seeking the advice of a transportation attorney to better protect yourself and your company.
As the saying goes: Better safe than sorry!