Facts.

Nestle Waters North America, the shipper, had a Shipper-Broker Contract with Heyl Logistics.  (NOTE: All references to “Heyl” are to Heyl Logistics, not Heyl Trucking.)  Heyl had a Broker-Carrier Contract with Eric Rangeloff, dba Washington Transportation. Nestle tendered a shipment to Heyl, Heyl tendered it to Washington Trucking, and Washington Trucking tendered the shipment to Forrest Rangeloff, Eric Rangeloff’s twin brother. After picking up the load from Nestle in southern California and transporting it to the yard, Washington Trucking gave the shipment to Dan Clarey, its driver, to deliver to Portland.

While crossing the Siskiyou Summit, Clarey started to fall asleep at the wheel, clipped the mirror of another truck, jolted awake, and pulled hard to the right and hit the rear of a trailer being pulled by Kelly Linhart, another truck driver who had stopped on the shoulder, causing the trailer to hit Mr. Linhart, killing him instantly.

Clarey admitted, and tests confirmed, that he had methamphetamine in his system. Clarey subsequently pled guilty to criminally negligent homicide and driving under the influence and was sentenced to several years in prison.

It is important to point out that Ron Brown, dba I & J Transportation was named as a defendant because it previously leased equipment from  Forest Rangeloff, dba Range Transportation and provided service under I & J’s FMCSA authority and USDOT numbers. However, Ron Brown had terminated the equipment lease and sent a fax to Forest Rangeloff declaring the termination. In addition, Ron Brown reported Forrest Rangeloff’s theft of his FMCSA and USDOT registrations to both the Lake Havasu and Los Angeles police and to Internet TruckStop. Nevertheless, at the time of the collision, the equipment Clarey was driving was identified with I & J’s MC and USDOT numbers.

The Linhart Estate sued Nestle, Ron Brown, dba I & J Transportation, Eric Rangeloff, Heyl Truck Lines, Heyl Logistics and Clarey. At the time the case went to trial, the defendants remaining were Heyl Logistics and Clarey. Ron Brown, dba I & J Transportation settled before trial, but its name remained on the verdict form for purposes of allocating fault. Although we do not believe he settled, Clarey did not actively defend himself and we presume that his name was on the verdict form for purposes of allocating fault.

The Verdict.

The jury found Clarey 80% at fault, Heyl Logsistics 20% at fault, and Ron Brown (I & J) 0% at fault. No economic damages were awarded, but $50,000 in non-economic damages were awarded, meaning (under Oregon law) that Clarey was liable for $40,000 and Heyl was liable for $10,000).  In addition, the jury imposed $1,678,000 in punitive damages against Heyl and $3,471,000 in punitive damages against Clarey.

Why Heyl was at Fault

1)  Heyl’s Shipper-Broker Contract with Nestle required Heyl to obtain written consent from Nestle before using any carriers, but Heyl never obtained written consent from Nestle before using any carriers.

Comment:  This is an unusual requirement and one that we do not put in our Shipper-Broker Contracts or agree to have in the contract.  It makes sense to put in the contract the minimum qualifications carriers must possess, which both the shipper and broker agree to, but to require express consent from the shipper for each carrier before used is asking for trouble simply because it is a requirement brokers can easily ignore or overlook.

2)  In addition, the Shipper-Broker Contract provided that Heyl agreed to “be solely responsible to ensure that all carriers” hired by Heyl were in compliance with “all applicable federal, state and local laws, rules and regulations.”

Comment:  A broker should require in its Broker-Carrier Contract that the carrier comply with all applicable laws, rules and regulations, including but not limited to the FMCSR. Although a broker can require the carrier to comply in the contract, there is no way the broker can “ensure” that the carrier does, in fact, comply. If a broker agrees to “ensure” compliance by the carrier, it must maintain contingent auto liability insurance coverage.

3)  Heyl did not at any time obtain a certificate evidencing Washington Transportation’s insurance coverage. Further, it does not appear that Heyl’s Broker-Carrier Contract required the carrier to provide a certificate of insurance to Heyl. As should be expected, Washington Transportation did not have valid insurance on the date of the collision.  Moreover, it appears that Washington trucking did not hold valid authority at that time and, further, had a history of noncompliance with the FMCSR drug and alcohol regulations.

Comment:   A broker must have a program to routinely check on a carrier’s insurance filings and to obtain copies of certificates. This can take the form of simply checking the FMCSA website for insurance compliance immediately prior to using a carrier and printing out confirmation that the insurance is on file and valid. A better procedure would be to use a competent and experienced third party provider to confirm insurance, authority and compliance matters on a routine and regular basis. In addition, CSA scores must be routinely checked in regard to compliance and violations. Obviously, not all violations mean that a broker or shipper should stop using a carrier, but some may require that action or heightened monitoring.

4)      Heyl evidently did not require in its Broker-Carrier Contract that the equipment provided by Washington Trucking be identified as being operated under Washington Trucking’s own name and USDOT number.

Comment: The Broker-Carrier Contract must require the carrier to provide service with equipment licensed, identified and insured under the carrier’s own name and insurance policy.

Why Brown, dba I & J Transportation was Not at Fault.

5)      There once was “logo liability,” which made a carrier liable if its name and/or MC or USDOT number appeared on the equipment or, in some extreme cases, anywhere in the equipment, even though the equipment was not owned, leased or being used by the carrier.   Logo liability generally is no longer a basis for imposing liability, although it still pops up in cases now and then.

Comment:  Although Brown, dba I & J Transportation settled with the plaintiff prior to trial, its name still appeared on the verdict form.  That Brown, dba I & J Transportation was not a fault, in our opinion, turned on his aggressive proactive approach in faxing a notice of termination to Washington Trucking,  notifying law enforcement officials in two different cities (Lake Havasu and Los Angeles) that its authority had been stolen, and in providing notice to one of the internet load boards, Internet TruckStop.  Brown did not assume everything would be fine, and he did not ignore the problem, but rather he took immediate verifiable action to protect himself and his business.

In this regard, I also want to point out that the FMCSA leasing regulations provide some protection. 49 CFR 376.12(f) allows an equipment lease to provide that “upon termination of the lease agreement, as a condition precedent to payment, the lessor [contractor] shall remove all identification devises of the authorized carrier and … return them to the carrier.” Other provisions apply to painted on identification and other documents items the carrier wants returned.

This case should serve as an awakening because it hits close to home, having been rendered by a jury in Medford. Obviously the driver was the overwhelming cause of the accident, for which he served time. However, it is an example of how plaintiff’s will seek out the deep pockets, especially where the primary at-fault defendants, Washington Trucking and Clarey, the driver, are undoubtedly judgment proof. In this case, those deep pockets included Nestle, the shipper, Heyl Trucking (presumably the uninvolved affiliate of Heyl Logistics), Brown, dba I & J Transportation (essentially an uninvolved broker) and Heyl Logistics, the broker. Although Nestle, Brown dba I & J,  and Heyl Trucking were dismissed from the case, we do not know what, if anything, they had to do to obtain their dismissals.

Epilogue.

About 12 days following the jury’s return of the verdict, but before it was entered, plaintiff and Heyl Logistics settled under terms which were made confidential. Presumably this was the result of issues including, but not limited to, the amount of punitive damages (a very high and possibly impermissible “multiple” of the $50,000 non-economic award) and to avoid the State of Oregon’s claim to a substantial portion of the punitive damage award under Oregon law, which claim vests once the verdict is entered.  However, we do not know for sure and are left to wonder.

1. Fireman’s Fund v Reckart Logistics dealt with identity theft. In that case Alliant (the shipper) sued Reckart (the broker), S&G (the carrier whose identity was stolen), Mr. Bult’s (the real carrier) and Fore (the cross-docker).  Alliant hired Reckart to broker the shipment. Reckart posted the shipment on a load board and was contacted by “S&G” and, at the same time, “Sam” contacted Mr. Bult and hired it to transport the shipment. When Mr. Bult arrived at the origin the driver was told to take the shipment to Chicago rather than St. Louis. Mr. Bult delivered the shipment of Fore Transportation who cross-docked it and turned it over to another carrier.  The shipment was never seen again.

Fireman’s Fund insured Alliant, paid the claim and then sued Reckart, S&G and Mr. Bult for negligence, breach of bailment and Carmack liability.  Reckart Settled. S&G argued that it was the victim of identity theft. And Mr. Bult argued that it was not liable under Carmack because the theft constituted an “act of the public enemy” and, further, that it was entitled to contribution from Fore.at the origin the driver was told to take the shipment to Chicago rather than St. Louis. Mr. Bult delivered the shipment of Fore Transportation who cross-docked it and turned it over to another carrier.  The shipment was never seen again.

The court was sympathetic to S&G and dismissed the claim against S&G because of its identity theft. [Query:  Does this mean that a motor carrier has no obligation to protect its identity? I suspect that this defense will not always work and, accordingly, carriers need to take steps to protect their identity.]

The court held that Carmack applied and that theft did not constitute an “act of the public enemy.” Thus, since Mr. Bult failed to prove that it was free from negligence it was liable.  Further, Mr. Bult had no claim against Fore since Fore was not a carrier with respect to the shipment.

2.  When does “delivery” occur was the issue in Merchants Terminal Corp. v L&O Transport where a shipment of wild salmon was stolen.   L&O picked up a loaded container  and transported it to Merchants’ facility in Delaware where it was unloaded. The next day L&O picked up the empty container and used it to transport the shipment of salmon to Merchants’ facility in Maryland. L&O delivered the loaded container to Merchants’ Maryland facility before it was open. L&O’s driver placed an L&O kingpin lock on the container and left, intending to return when the facility was open. Upon returning it was discovered that the container had been stolen.

The court denied L&O’s Motion for Summary Judgment (essentially meaning that the case had to go to trial). L&O argued that it was not liable because it had delivered the container containing the shipment of salmon. The court disagreed, stating that by placing L&O’s own kingpin lock on the container L&O retained exclusive control over the shipment and, as such, delivery had not been made. The court also ruled that Merchants had the right to bring the claim even though it was not named on the bill of lading as either the shipper or owner of the salmon. Unfortunately for L&O, there was a question of fact whether the person who had signed the equipment lease with the driver had the authority to do so.

3.  The nine month claim filing requirement and the 2 years and one 1 day lawsuit filing requirement were dealt with in 5K Logistics, Inc. v Dailey Express, Inc.  The key holdings in that case were that (a) the nine month minimum claim filing requirement and the 2 years and 1 day lawsuit filing requirement are minimums that must be elected by a carrier to apply and the only way they can be elected is to incorporate them into your bill of lading and/or (preferably both) your rules tariff (aka pricing guide or whatever you chose to call it) and (b) the specific time limitations can be negotiated and agreed upon in a transportation contract.  If these minimum time periods are not made a part of the applicable bill of lading, rules tariff or pricing agreement, then the applicable limitation period under state law applies. In Oregon, that means that a six year statute of limitation would apply.

4.  The importance of clear and comprehensible language in a carrier’s documents, in this case the carrier’s Rules Tariff, was highlighted in Dan Zabel Trading Co. v Saia Motor Freight Line.  As discussed in prior articles, in order to limit its liability a carrier must meet the 4-part “Hughes test” that requires the carrier to (a) maintain a tariff in compliance with the requirement of the ICC [obviously, this requirement no long exists] (b) offer the shipper a reasonable opportunity to choose between two or more levels of liability, (c)  obtain the shipper’s agreement as to its choice of carrier liability limit and (d) issue a bill of lading prior to moving the shipment that reflects any such agreement.

The court found that Saia met the requirements except for the third, stating that Saia did not effectively communicate to Zabel that its liability was limited to $1 per pound. The court looked a Saia’s tariff item in this regard and found it “incomprehensible, internally inconsistent and incoherent.”  This emphasizes the importance for carriers to have multiple parties in their organization, their tariff advisors or their legal counsel, review these critically important documents before publishing them.

5.  The scope of federal preemption under 49 USC 14501 continues to expand. As you know, the Port of LA case found many provisions sought to be imposed against drayage carriers were federally preempted. On the heels of that case the U.S. District Court for the Southern District of California held that California’s state “meal and rest break” law related to carriers’ services and therefore was preempted by 49 USC 14501.  That statute preempts any state or local law that affects a carrier’s rates, routes or services.

1. The addition of five texting and cell phone use violations in the Unsafe Driving Behavior Analysis and Safety Improvement Category (BASIC) as outlined below. The violations reflect FMCSA’s decision on January 3, 2012 to ban commercial drivers from using mobile telephones while driving, which includes a ban on texting. Motor carriers should discuss the new violations with their drivers to ensure that they are aware of these requirements.
   

   Added Carrier SMS Unsafe Driving BASIC Violations
   Section	Violation Description Shown on Driver/Vehicle Examination Report Given to Commercial Motor Vehicle (CMV) Driver after Roadside Inspection	Violation Group Description	Violation Severity Weight
   177.804(b)	Failure to comply with 49 CFR 392.80 – Texting while Oper a CMV – Placardable HM	Texting	10
   177.804(c)	Fail to comply with 392.82 – Using Mobile Phone while Oper a CMV – HM	Phone Call	10
   392.80(a)	Driving a commercial motor vehicle while texting	Texting	10
   392.82(a)(1)	Using a hand-held mobile telephone while operating a CMV	Phone Call	10
   392.82(a)(2)	Allowing or requiring driver to use a hand-held mobile tel while operating a CMV	Phone Call	10

2. A breakout of six current Vehicle Maintenance violations into 22 that provide more descriptive and detailed information about compliance with existing brake, wheel, and coupling regulations. This change will ensure that SMS remains aligned with improvements recently made to roadside data collection systems. Those improvements are the results of a joint FMCSA and Commercial Vehicle Safety Alliance effort to increase data uniformity through improved processes and tools. This change will help to clarify who the responsible party is for the violations, either the motor carrier or the Intermodal Equipment Provider.

FMCSA is revising Appendix A of the SMS Methodology document to take these changes into account. The agency will re-post the document to the Compliance, Safety, Accountability (CSA) Website at the same time the January SMS snapshot is released. Stay tuned by subscribing to the CSA Outreach Website at http://csa.fmcsa.dot.gov/stay_connected.aspx.

1.  Secretary of State Registrations.  Check the status of your business on the Secretaries of State websites in those states where your business is incorporated, organized or  formed, in which it is registered as a foreign corporation authorized to do business, or where you have trade name(s) registered. You need to confirm that all of the information listed is current and correct and, most importantly, that your business is in good standing. If it is not, you need to update the information.

Particular care needs to be taken in naming your registered agent. A registered agent is the person you have designated to receive legal notices on behalf of the business. Whoever is named as registered agent needs to understand the importance of the role and that adverse legal consequences likely will result if  an appropriate response is not made in a timely manner. That person should be an officer, director, member or owner of the company. Oftentimes the business’s lawyer will be the registered agent. (See below regarding the FMCSA’s BOC-3 process agent requirement.)

2.  FMCSA.  Check the FMCSA Registration and Insurance website to confirm that the information listed is current and correct and, most importantly, that all of the authority you thought you had remains active.  We recently were contacted by a carrier located in the Midwest who was totally unaware that its authority had been revoked because a cargo insurance certificate was not on file (HHG carriers must still file proof of cargo insurance).

The FMCSA requires carriers and brokers to designate agents by filing a form BOC-3. Carriers must designate agents in each state they are authorized to operate in or though, which means every state since there is no geographical limitation. Brokers are required to designate agents in any state where they have an office or write a contract, which is not necessarily every state. Nevertheless, most carriers and brokers use companies to  make “blanket filings” on their behalf, which means the company designates an agent for the carrier or broker in every state.

Who you use to make a blanket BOC-3 process agent filing can have serious consequences.  You need to know how and how quickly you will be informed of anything served on the BOC-3 process agent. You should not simply hire the lowest cost blanket company since you may pay dearly for saving a buck now.

The carrier mentioned above also ran into problems when it received a copy of a notice of a lawsuit on December 28 even though the documents were served on the carrier’s BOC-3 process agent on December 7.  The carrier stated that it had no recollection of ever hiring the blanket company.  I suspect they hired the blanket company because they received a fax solicitation from it and the price was cheap.  However, the consequences will be expensive.  The problem now is that the lawsuit was filed in small claims court where the carrier’s response was due within 14 days after the December 7 service date. Thus, the 14 day deadline had expired a week before the carrier even found about the lawsuit.  It is very likely that a default judgment for thousands of dollars will be entered against the carrier even though it may have had valid defenses to the claim.

3.  SMS &  MCS-150.  Check the SMS website and determine your safety scores in each of the basics and figure out what violations you might be able to challenge through DataQs.  If you haven’t already, spend some time looking at your scores and the information provided and learn about the new system. Of course, if any of the basic information concerning your company is incorrect, correct it.  You also need to update your carrier profile by filing an updated MCS-150 form at lease once every two years. Failure to update that information can adversely affect your CSA Basic scores.

Question:  Can the broker collect its freight charges from the consignees even though they have already paid the charges to the bankrupt shipper?

Answer:   Probably, but you need to proceed with caution.

“Automatic Stay.”  The bankruptcy code provides for an automatic stay immediately upon the filing of a bankruptcy petition by a debtor. No legal proceeding may be commenced or allowed to continue once the petition in bankruptcy is filed. This also would extend to claims against assets of the bankrupt debtor. The automatic stay prohibits you from taking any action against the bankrupt debtor or the bankrupt debtor’s assets. Everything immediately becomes subject to the exclusive jurisdiction of the bankruptcy court.

However, in this case the consignees have already paid the bankrupt debtor. As a result, the action is not seeking to recover “assets of the estate” or filing any sort of claim against the bankrupt debtor. Thus, the automatic stay should not apply in the action against the consignee.

“Prepaid” vs. “Collect.”  If the bill of lading was marked prepaid, then the shipper/consignor is/was liable for the payment of freight charges. If the bill of lading was marked collect and/or the “Section 7″ box was signed or other non-recourse language was indicated, then the consignee is liable for the payment of freight charges.  If the bill of lading was not marked as either prepaid or collect and there was no Section 7 or non-recourse language signed, then the default rules apply. (For more information see our previous article discussing the Oak Harbor Freight Lines v Sears Roebuck Co. case.)

“Estoppel Defense.”  Even if the bill of lading indicates that the consignee is liable for the payment of the freight charges, the consignee likely will argue that the broker/carrier is prohibited from collecting the freight charges from the consignee since the consignee should not be made to pay twice. This defense is sometimes upheld, especially when the carrier has done something that misled the consignee, such as not saying anything about payment of freight charges upon delivery or sending the bill to the shipper and not the consignee. The terms of the applicable contract, if there is one, and the normal course of dealing also will apply.

However, the estoppel defense is not always upheld, and there are an equal number of cases that have held that the carrier can collect the freight charges from the consignee even though it means the consignee will have to pay twice. The Oak Harbor v Sears case is an example–Sears was required to pay over $200,000 in freight charges twice.

Recommendation:

Care must be taken before going after a consignee after a shipper has filed bankruptcy. Legal counsel should be obtained to confirm that the automatic stay does not prohibit action, the bills of lading and transportation contracts should be reviewed for payment arrangements, and  a carefully worded demand letter should be prepared to make sure the proper analysis for liability is made and the estoppel defense thwarted at the outset.  You also need to determine what level of effort the claim amount justifies. You may find that smaller claims can be recovered, at least in part, by minimal effort with a demand letter from a lawyer and without the need for a lawsuit. On the other hand, large claims may justify further legal effort and possibly litigation.

Question:  Is it ever okay for a carrier to hold a shipment hostage under these circumstances?

Answer:   A carrier has a possessory lien for the agreed upon freight charges for the shipment it is transporting and has the right to be paid those freight charges before making delivery.  Since this is a possessory lien, the carrier loses it once it makes delivery.

In this case, the load confirmation set out the details of the shipment and was binding until the service requirements changed. Once the service requirements changed, the load confirmation became void as to the affected legs of the shipment. Although a new rate for the remaining legs was discussed, and maybe even agreed to verbally, it does not appear that a new load confirmation or any sort of written memo was prepared or signed confirming the new agreement.  As a result, the situation was a “broker says, carrier says” situation that the carrier took advantage of. This does not mean that the carrier was justified in doing what he did, but it highlights the need to document your agreements, which is what the carrier did when it sent an email stating that he needed an additional $800. That email appears to be the only writing regarding the subsequent agreement.

I do not believe it is ethical or moral for the carrier to do what he did, but I also do not believe you can prove that he acted illegally, that is, I do not believe he violated any law since he did not delay delivery.

Recommendations:

Again, this problem could have been avoided with a comprehensive contract. The contract could have addressed this problem and provided that in no event will the carrier refuse to deliver any shipment because of a rate dispute or other disagreement. The contract could contain a provision that imposed liability on the carrier for interest, attorney fees and possibly forfeiture of any other freight charges owed.

If you find yourself in this sort of position, you also could pay the demanded amount “under protest,” which would have to be noted in writing via fax, email or some other means. If you delivered payment to the carrier by check, the check should state “paid under protest” on the memo line. This preserves your right to file a civil lawsuit against the carrier, probably in small claims court, although you could also make a claim for “conversion,” which essentially is the civil counterpart to criminal theft.

Question:   Is offsetting legal or illegal?  Is the load board right or wrong in upholding the carrier’s complaint and reducing the broker’s rating?

Answer:   Offsetting is legal, but the load board likely was correct and justified in upholding the carrier’s complaint and reducing the broker’s rating.

First, a little history. Prior to enactment of the Transportation Industry Regulatory Reform Act (“TIRRA”) in 1994, all regulated motor carriers were bound by the “filed rate doctrine.”  That doctrine required carriers to publish and file their tariffs with the Interstate Commerce Commission (“ICC”) and to strictly apply and enforce the provisions of the tariff. The primary purpose of the filed rate doctrine was to prevent and prohibit discrimination between similarly situated shippers. Thus, small shippers were entitled to receive the same rates as large shippers in the same industry.

Offsetting was a means for carriers to rebate and discriminate between shippers, so in 1937 the ICC adopted Administrative Ruling 65 which required a shipper to pay freight charges in full before filing a loss or damage claim. The ICC affirmed Administrative Ruling 65 in 1978 in Administrative Ruling 128. (It should be noted that although offsetting was prohibited between carriers and shippers informally, if and when  a case was in court in formal litigation, claims for offset were allowed to be made since the court was not bound by the ICC’s Administrative Rulings. Rather, the law and rules applicable to the court proceeding governed.)

As a result of TIRRA, the filed rate doctrine no longer applies to motor carriers (except household goods carriers). This means that offsetting is legal but, as discussed below, should be used in a reasonable manner with discretion.

However, even though offsetting is legal, the load board may be justified in upholding the carrier’s complaint and reducing the broker’s rating.  The broker does not state what justification the load board gave for its decision, but I suspect it had nothing to do with the legality or illegality of offsets in transportation. Rather, I suspect that the justification is found in the load board’s contract terms and conditions it requires all participants to agree to before being allowed to join. These terms and conditions are set forth on a screen when you go to join, and you must check the “I ACCEPT” box before being allowed to participate. So, the question is, what did the load board’s terms and conditions provide? More specifically, what did the broker agree to?

The load board used by this broker contains broad terms and conditions. However, because I am not a member and do not qualify to become a member, I was unable to search all areas of the website and the various programs, including those for complaints by carriers against brokers and vice-versa. However, I was able to find specific terms and conditions  on other load board websites that specifically state that “offsetting is not allowed.”  Thus, I believe that the broker got caught up in the load board’s contract terms and conditions and it rules and policies applicable to particular issues, including offsets.

Recommendations:

It is critical for brokers to have  comprehensive Broker-Carrier Contracts executed by each carrier used. Similarly, it is critical for shippers to have comprehensive Shipper-Transportation Provider Contracts with each carrier, broker and freight forwarder used.   If the broker or shipper, as the case may be,  plans on applying offsets, the contract should have specific provisions allowing offsets and further setting forth a reasonable procedure to be followed. The provision should allow the affected party a reasonable amount of time to investigate, adjust and process a claim before applying the offset. A broker or shipper runs the risk of paying tariff penalties, interest and attorney fees to the carrier if it improperly applies an offset. An offset is valid only if the carrier is liable under the Carmack Amendment or the provisions of the contract. Shippers and brokers are not allowed to unilaterally declare a loss and offset for some arbitrary amount without first giving the carrier and, in some cases, the broker, its “day in court.”

If there is a valid contract that authorizes offsets between the parties, then that contract should override any general provision in a load board’s terms and conditions or policies. The contract reflects the specific agreement between the parties to allow offsets.

Answer:   Shippers can protect themselves from having to pay twice. Shippers generally prepare the Bill of Lading (BOL), which the motor carrier “issues” when it picks up the load and the driver signs the BOL. In these situations the shipper can sign what is referred to as “Section 7,” which is the non-recourse provision. However, the BOL needs to contain the correct language. I have seen BOLs that refer to Section 7, but Section 7 is no where to be found – indeed, very few BOLs these days contain Section 7 or the other “standard” BOL terms and conditions. However, you can use alternative language rather than the standard Section 7 language. In addition, shippers should have a written Shipper-Broker Contract that (1) provides that the Broker is designated as the special limited agent for purposes of collection of freight charges so that payment to the Broker constitutes payment to the motor carrier’s agent and therefore the motor carrier, and (2) requires the Broker to enter into a written Broker-Carrier Contract that provides in part that the Carrier agrees to look solely to the Broker for payment of freight charges and to no other party.

When it comes to preventing cargo theft, nothing is a replacement for a little common sense.

• Whenever possible, drivers should park in well lit and secure locations.  FreightWatch reported that 79% of thefts in the third quarter were from unsecured parking lots, while only 6% occurred at secured parking lots.
• Make it a company policy that drivers must shut off the engine, lock the doors and take the key with them when they park.  A thief will not think twice about breaking a window to jump in the cab of a truck that is left running.
• No one should talk about the cargo with anyone outside of your company.  According to FreightWatch, food/drinks, electronics and building/industrial materials were the most targeted product types accounting for 54% of all cargo thefts.  Don’t advertise the fact that you are hauling a high value or desirable load.

Technology can also be a great way to prevent cargo thefts.  From GPS, to RFID, Air Cuff Locks, Glad Hand Locks, and King Pin Locks etc., today there is an abundance of products available to help ensure the security of your cargo.  There is even a new product that can immobilize a truck remotely if it is stolen.  However, if your drivers fail to use or do not know how to use the security technology available to them, it becomes worthless.  Make sure that you have the training, policies, and procedures in place to ensure your drivers use all of the technology available to them to keep your cargo secure.

Regardless of the precautions you take, you may find yourself the victim of a cargo theft.  In these cases it is important to ensure that you have taken the proper precautionary steps to limit your liability.  Prudent carriers will limit their liability through a tariff, shipper-carrier or broker-carrier contract.  Without a valid limitation of liability through one of these documents, the carrier may be held liable for the full actual loss by virtue of the Carmack Amendment.  It should be noted that cargo insurance limitations or exemptions do not limit a carrier’s liability under the Carmack Amendment.  If a carrier only has $100,000 in cargo insurance, but the cargo stolen is valued at $500,000, the carrier will be held liable for the excess $400,000, unless the carrier’s liability is limited through a valid tariff, shipper-carrier or broker-carrier contract.  The most effective precaution a carrier can take is to validly limit is liability contractually prior to hauling any load.

Shippers must also take proper precautions.  First and foremost, shippers need to know what carrier is going to be hauling a load and only tender the load to that carrier.  Too often shippers load carriers without confirming their credentials.  This can often lead to a shipment being driven off by a thief pretending to be a legitimate carrier.

Shippers also must know the value of their cargo and ensure that the shipment is properly insured.  If a carrier has contractually limited its liability, the shipper should declare the value of the shipment and ensure the carrier has the wherewithal to cover the maximum possible loss or obtains appropriate insurance to cover the full value of the specific shipment.  Most often the shipper will need to pay additional freight charges in order to compensate the carrier for the additional liability assumed by the carrier.  For its own financial well being, a shipper should not tender a shipment to a carrier that has limited its liability below the full actual value of the load.  If the shipper does and the shipment is stolen, the shipper will be the one taking the financial hit.

While thieves are getting bolder, there are easy common sense steps that carriers and shippers can take to ensure the security of their cargo and limit their liability if they are the target of a cargo thief.

Question:   What determines the difference between an independent contractor and an agent in a broker/shipper relationship?

Answer:   The distinction between an independent contractor and an employee is very murky and the subject of MANY lawsuits, most often by the government seeking to reclassify independent contractors as employees.  There is no bright line test.

Generally stated, an independent contractor is a separate and distinct business. An independent contractor must provide service under his own “direction and control” and determine the “details, manner and means” of doing the job. How much “direction and control” a shipper or broker exerts over a trucking company is critical in determining if the trucker is an employee of the shipper or broker or an independent contractor. Each state and the federal government has its own test(s) and policy(ies) for application and, in many instances, states have different tests for different agencies. The IRS has its own test and, in this regard, publishes a list of 20 factors to be considered in making the determination. The IRS publication on current worker classification law can be found here.