Minimizing Freight Broker Liability for Loss or Damage to Cargo

By Brian Schrumpf

While freight brokers generally are not liable for cargo claims (i.e. loss or damage to cargo), there are several ways brokers can become liable for cargo claims. The primary ways a broker can become liable for cargo damage are:

• The broker agrees to be liable for cargo damage via contract with its customer.
• The broker portrays itself as a motor carrier.
• The broker exercises too much control over the motor carrier.

This article provides some tips brokers can implement to help minimize potential liability for cargo claims. These tips can also protect brokers from claims and lawsuits for personal injury arising from auto accidents.

Carrier selection. Brokers cannot control the acts of motor carriers, and brokers cannot eliminate all claims for cargo damage. However, developing good criteria for selecting motor carriers can help reduce the amount of claims.

Review and negotiate customer contracts. Customer contracts often require the broker to be liable for the motor carrier’s conduct, require the broker to be liable for cargo damage, require the broker to transport the shipment, or otherwise make the broker liable as a motor carrier. Review contracts carefully to ensure they do not impose unreasonable responsibilities and liabilities on brokers, such as liability for cargo damage.

Terms & Conditions. Brokers should create Terms & Conditions of service that disclose that the broker’s role is limited to arranging for transportation, not performing the transportation. Terms & Conditions should also include limitations of liability and other operational and legal terms to protect the broker.

Broker Disclaimers. Any documents routinely sent to customers (e.g. Invoices, Credit Applications, Rate Confirmations) should include a disclaimer that the broker’s services are subject to the broker’s Terms & Conditions. Broker staff should also include disclaimers and disclosures in their email signatures.

Broker-Carrier Agreement. Have a strong Broker-Carrier Agreement and require all motor carriers to sign the Broker-Carrier Agreement before allowing them to transport a shipment. Broker-Carrier Agreements can help to recover from motor carriers, even when the motor carrier’s insurance fails to cover the claim. Broker-Carrier Agreements can also create benefits for the broker under the motor carrier’s insurance, among other beneficial terms.

Act and talk like a broker. Broker staff should communicate and portray themselves as a broker, not like a motor carrier. For example, broker staff should not directly or indirectly state that the broker is transporting the cargo. Similarly, marketing materials and website content should portray the broker as a broker, not like a motor carrier.

Do not control the motor carrier. Do not exercise too much control over the motor carrier. The motor carrier should generally select their own routes and drivers. The broker’s role should be more limited to passing along instructions, monitoring status of delivery, and other middleman-type activities.

Cargo value. If the cargo appears to be of high value, verify that the cargo value does not exceed the motor carrier’s cargo insurance limit.