As a transportation industry freight broker, it’s crucial to properly vet your motor carriers. At PFA Transportation Insurance & Surety Services, we have a dedicated Claims Department that has firsthand knowledge of the pitfalls associated with hiring motor carriers without appropriate vetting. This includes claims where carrier lacks proper authority or sufficient insurance.
The Importance of Proper Vetting for Freight Brokers
Failing to conduct due diligence before tendering a load can expose your business to liabilities that could have been avoided. Negligent hiring or entrustment claims can hold you responsible for damages caused by a carrier you hired. To mitigate these risks, we recommend that freight brokers develop and maintain carrier qualification procedures and document them thoroughly.
Steps to Take Before Tendering Freight to a Carrier
- Ensure that every motor carrier you use signs and returns the broker/carrier agreement.
- Verify that the motor carrier has proper operating authority for the load by obtaining a copy of their operating authority and checking the FMCSA website to ensure their authority is active and not pending revocation.
- Check the safety rating of the carrier on the FMCSA website to ensure they have a satisfactory rating, and monitor the carrier’s safety rating every 3-6 months.
- Verify and document the motor carrier’s insurance coverage, including obtaining a copy of their certificate of insurance (COI) directly from their insurance agent. Check the policy information (i.e. effective dates, monetary limits, etc.) as listed on the FMCSA website, and make sure the policy expires after the services are completed.
By following these best practices, you can protect your business from costly liabilities and ensure that you are conducting business with reputable and qualified motor carriers.
Beware of Fictitious Certificates of Insurance (COIs)
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:
- Verifying the motor carrier’s operating authority;
- Verifying insurance coverage (obtaining a copy of the insurance certificate).
Seeking Advice from Transportation Experts
However, 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. Therefore, it is highly recommended to seek the advice of a transportation expert to better protect yourself and your company. As the saying goes, “better safe than sorry”!
A white paper jointly published in 2016 by the Transportation Intermediaries Association (the “TIA”) and the Canadian International Freight Forwarders Association (the “CIFFA”), entitled “Doing Business as a Freight Broker in Canada,” lists the following suggestions to vet a carrier:
- Ensure that the carrier being dispatched is licensed to perform the transportation service requested;
- If advised of the value by the consignor or consignee, ensure that the motor carrier has sufficient road hauliers liability insurance to cover the value of the goods being carried.
Considerations When Working with New Motor Carriers
- Call the published phone number for the carrier. Is it different from the number the contact person has provided? If so, ask the carrier to explain the difference.
- Be leery of the “we are moving offices; so we are using personal cell phones for the time being” explanation. Check if the number(s) are landlines or cell phones. Prepaid cell phones can easily be obtained with cash and no credit check.
- Verify DOT and MC numbers for the United States.
- Check the internet and the FMCSA website for a different number/address for the carrier. Use that number to contact the carrier office to ensure that the person you are speaking with represents the carrier.
Suggestions from TIA’s “Carrier Selection Framework”
- For carriers with a “Conditional” Safety Rating, ask for a copy of the carrier’s plan submitted to the FMCSA for improving their rating and ask the carrier if it has filed a formal request for a safety rating upgrade.