For more than three decades, the freight brokerage industry operated under a powerful legal assumption: if a motor carrier you hired was involved in a catastrophic highway accident, federal law shielded your brokerage from being sued for negligent selection. 

Under the Federal Aviation Administration Authorization Act of 1994 (FAAAA or F4A), state-level laws “related to a price, route, or service” of a broker were preempted. For years, brokers successfully used this defense to dismiss personal injury lawsuits at the earliest stages of litigation.

That shield is officially gone.

On May 14, 2026, the Supreme Court of the United States issued a unanimous 9-0 decision in Montgomery v. Caribe Transport II, LLC. 

Written by Justice Amy Coney Barrett, the landmark ruling established that state-law negligent hiring claims against freight brokers are not preempted by the F4A. The Court concluded that negligent selection claims fall squarely within the F4A’s “safety exception,” which preserves state authority to regulate motor vehicle safety.

A 9-0 SCOTUS ruling means there is no more debate. Federal preemption will no longer rescue brokers from negligent hiring lawsuits. Your liability is now governed by state tort law, exposing your business to jury trials and devastating verdicts.

Inside the Case: From a Highway Shoulder to the Supreme Court

The dispute in the Montgomery case began with a catastrophic accident on an Illinois highway shoulder. 

Shawn Montgomery, a motorist operating a tractor-trailer, had pulled over when his stopped vehicle was struck by a truck driven by Yosniel Varela-Mojena. The crash resulted in severe, life-altering injuries for Montgomery, ultimately leading to the amputation of his leg.

Varela-Mojena was driving for Caribe Transport II, LLC. However, the shipment itself had been arranged by C.H. Robinson Worldwide, Inc., one of the nation’s largest freight brokers.

Montgomery sued the driver, the motor carrier, and C.H. Robinson. 

The allegation against the broker was clear: negligent selection. Montgomery’s legal team argued that C.H. Robinson knew, or should have known, that Caribe Transport posed an unreasonable safety risk. They pointed to Caribe’s poor safety history, conditional safety ratings, and documented driver-qualification deficiencies as evidence that the broker failed to exercise reasonable care.

For years, brokers relied on the F4A’s preemption clause to get these cases dismissed before they ever reached a jury. 

While the Federal District Court and the Seventh Circuit initially sided with C.H. Robinson, the Supreme Court took up the case to resolve a split among federal circuits. The High Court’s ruling sent a shockwave through the logistics sector: a jury, not a federal loophole, will now decide whether a broker did their homework.

How the Ruling Redefines “Ordinary Care” and State-Level Tort Exposure

Now that federal preemption is off the table, how are brokers judged? The standard is ordinary care, but “ordinary care” does not have a single, clean federal definition. Because these cases will now play out under the tort laws of all 50 states, a broker’s liability will be defined by local judges, state statutes, and county juries.

This creates a highly unpredictable patchwork of legal exposure. What a jury in Cook County, Illinois, considers “ordinary care” may be vastly more demanding than what a jury in rural Texas expects.

In a state-level personal injury trial, plaintiffs’ attorneys will focus heavily on foreseeability:

• Did the broker have access to safety data indicating the carrier had high out-of-service rates?
• Did the carrier have conditional safety ratings or active violations?
• Did the broker document why they bypassed their own safety standards to assign the load?

If the answer to these questions is “yes,” and you cannot prove a rigorous, consistent vetting process, a jury can easily find your brokerage negligent. 

The financial consequences of these state-court battles can reach the tens of millions of dollars, which can instantly bankrupt a small-to-midsize brokerage.

The $52.1 Million Warning Shot: Perrigo v. Rodriguez

To understand how rapidly state-level courts are expanding vicarious liability down the subcontracting chain, just look at what happened in the recent Perrigo v. Rodriguez ruling, where a Los Angeles Superior Court jury handed down a massive $52.1 million verdict in June 2026. 

The chain of liability in this case illustrates the exact multi-tier threat intermediaries face when a contract is passed down the line:

1. The Prime Contract: The U.S. Postal Service (USPS) contracted with Thunder Ridge Transport to haul mail.
2. The First Subcontract: Thunder Ridge Transport subcontracted 100% of the contract to Fames Transport.
3. The Second Subcontract: Fames Transport subsequently subcontracted a portion of that mail route to Montecristo Trucking (an independent contractor).
4. The Crash: Jorge Castaneda Rodriguez, the sole owner and driver for Montecristo, struck a motorcyclist head-on at 50 mph while actively operating in violation of federal Hours of Service (HOS) safety rules.

During the trial, the jury looked past the independent contractor labels on paper. Under California’s common-law nondelegable duty doctrine, the court held all three trucking companies in the subcontracting chain jointly liable for the severe injuries resulting from the crash.

While no traditional freight broker was named in the Perrigo suit, the legal mechanism is identical to the post-Caribe landscape. 

If your business passes freight to an entity that fails to operate safely, state courts will actively look to hold the hiring party financially responsible. Without robust, specialized transportation insurance, a single subcontracting decision can lead to total financial ruin.

The Insurance Fallout: How Post-Caribe Liability Impacts Underwriting for Freight Brokers

The Montgomery v. Caribe decision fundamentally alters how insurance underwriters assess and price risk for the transportation intermediaries they cover. For years, the F4A preemption acted as a risk ceiling. Now that the ceiling is gone, the commercial transportation insurance market is adjusting to a new reality of unlimited state-level tort exposure.

For freight brokers navigating this transition, three key areas of the insurance landscape are shifting:

1. The Underwriting Shift: From Paper Compliance to Operational Audits

Historically, securing Contingent Auto Liability or Freight Broker Liability was largely a matter of revenue volume and historical claims. Today, underwriters are taking a microscopic look at a brokerage’s actual day-to-day operations.

Insurance companies are beginning to treat carrier vetting procedures as a primary rating factor. 

Underwriters want to see formalized, written standard operating procedures (SOPs) for carrier selection. A broker who cannot prove they have a systemized vetting process may face significantly higher premiums, restrictive exclusions, or find themselves deemed uninsurable in some cases. This also plays a direct role in your ability to secure your BMC-84 surety bond.

2. The Rising Cost of Defense Limits

In a negligent selection lawsuit, the cost of legal defense can easily exceed the eventual settlement. In state courts, where cases are far less likely to be dismissed early on, brokers face prolonged discovery and trial preparation.

As a result, the market is seeing a push toward policies that offer defense outside the limits. This means legal fees do not eat into the actual coverage pool needed to pay a judgment. Brokers are also re-evaluating their limits, as standard $1 million policies are increasingly viewed as insufficient against modern “nuclear verdicts,” driving a surge in demand for excess liability lines.

3. The Changing Role of Contingent Cargo and E&O

While Caribe was a bodily injury case, the ripple effects are touching other lines of coverage.

• Errors and Omissions (E&O): E&O underwriters are tightening guidelines because incorrect carrier selection or administrative slip-ups in vetting can now be catalysts for catastrophic liability claims.
• Contingent Cargo: Similarly, as primary carriers face increased financial strain from their own rising insurance costs, cargo claim denials are rising. Brokers are having to rely more heavily on robust Contingent Cargo policies to protect shipper relationships when a primary carrier’s coverage fails.

Mitigating Your Legal Risk: The Bridge to Compliant Carrier Vetting

With the threat of litigation at an all-time high, running a brokerage on gut feelings or selecting the cheapest carrier on a load board without verification is a recipe for disaster. To protect your business in a post-Caribe environment, you must transition from passive carrier screening to an active, documented compliance workflow.

Ordinary care requires operational discipline. Brokers must proactively audit their internal workflows to ensure they are:

• Evaluating Authorities & Operational Details via MOTUS: Utilizing the FMCSA’s MOTUS platform to confirm active carrier and broker operating authorities, check verified company information, and cross-reference key operational details (such as legal entity names, principal addresses, and USDOT registration status) to prevent double-brokering and identity fraud.
• Evaluating Safety Scores: Consistently monitoring FMCSA safety data via the Safety Measurement System (SMS) rather than relying on outdated “Satisfactory” safety ratings.
• Verifying Insurance Chains: Confirming that the carrier’s insurance is active, meets your minimum threshold, and is verified directly with the provider, not just from a forwarded PDF.
• Documenting Decision Logs: Keeping a permanent, litigation-ready digital paper trail of why every carrier was chosen and how exceptions were handled.

To learn more about how to protect your brokerage and to make your compliance strategy airtight, check out our motor carrier vetting guide for freight brokers.

Protecting Your Brokerage in a New Era of Litigation

The Supreme Court’s unanimous ruling in Montgomery v. Caribe Transport II, LLC marks a permanent shift in how the transportation industry manages risk. By stripping away the F4A preemption defense, the Court has placed the burden of carrier safety squarely on the shoulders of the broker.

However, this does not mean the end of profitable freight brokerage. Instead, it rewards responsible brokers who prioritize compliance and ordinary care. By aligning your operations with strict vetting standards and maintaining your required BMC-84 surety or BMC-85 trust agreement protections alongside robust liability coverage, you can turn a challenging legal environment into a powerful commercial advantage.

Don’t wait for a subpoena to pressure-test your risk management. 

Contact PFA today and have our surety and transportation insurance specialists evaluate your current coverage and ensure your business is fully protected.