Brokers and carriers are litigating who is responsible for knowing the value of a shipment and obtaining appropriate insurance coverage when a trucker hauls a high value load for a transportation broker and a subsequent cargo claim is made. A recent court decision once again shows how the responsibility usually
falls to the trucker when accountability and duties are not spelled out in the contract.
In Complete Distribution Services, Inc.
(CDS) v. All States Transport LLC (All States), the Court again examined this question. In this case, the broker arranged for transportation of shipments with carrier All States. Subsequent to a significant cargo loss, CDS settled with its customer and then pursued recovery from All States.
All States asserted an affirmative defense to the broker's claim based on negligence. All States argued that CDS had a duty to know the value of the shipments for which it had arranged transportation and to inform the trucker when those values exceeded its cargo insurance limits. All States argued
that CDS had caused it to accept shipments that exceeded its insurance coverage and that CDS must bear some responsibility and liability for damages arising from cargo losses in these situations.
The Court rejected this argument. It noted that, "In general, courts have not imposed a legal duty on transportation brokers to hire carriers with specific insurance coverage.” Even where such a duty was imposed on brokers, "The obligation arose from a contract; courts have not recognized a
general tort duty to hire carriers with specified insurance coverage." The Court struck the affirmative defense, finding that there was no case law "establishing or recognizing a duty on the part of a broker to ensure that a carrier has adequate insurance to cover potential
losses or damages to the cargo." The court also found that the broker had no duty to inform the trucker of the value of the shipment in order to obtain a certain level of insurance.
These findings have some very good lessons for truckers and freight brokers:
- The Court recognized that the parties can control who is responsible for informing the other of the value of the shipment and of any necessary insurance in contracts. Brokers and truckers should both look to include language in their contracts defining who has responsibility to address value and necessary
- Truckers must take steps to be aware of the value of freight that they are hauling and ensure that they have the appropriate insurance.
Read more on how third-party logistics providers can protect themselves from taking on too much risk.
HUB transportation advisors can help you navigate murky matters related to contractual issues and compliance.
Contact a HUB transportation specialist today.