Supreme Court Ruling - Freight Brokerages

Yesterday, the U.S. Supreme Court issued a ruling in Montgomery v. Caribe Transport II, LLC that changes the liability landscape for freight brokers nationwide. Below I’ve outlined the key takeaways and where to focus next.

Here is what has changed:

The Supreme Court removed the federal defense brokers have relied on to dismiss negligent hiring claims
Brokers can now be sued under state law for carrier selection decisions across the country
Exposure follows the location of the accident, not your home state
Brokers in states where courts had been dismissing these claims before trial, including those operating in the 7th Circuit states such as Indiana and Illinois, lost that protection immediately upon this ruling.
The ruling is final, which means there is no further appeal, ambiguity, or remaining legal argument to revisit this question.

Here is what remains the same:

Freight brokers could already be sued for negligent selection in some states prior to this ruling, this is not a brand-new theory of liability
The standard of care, exercising reasonable diligence in selecting a qualified, safe motor carrier, remains the same
If you’ve purchased a contingent auto and broker liability policy, these will still respond to these claims. The thing to now consider is whether those current limits are still adequate.

The overall change is how consistently and aggressively these claims will be brought.

After evaluating the new ruling, here are our suggestions on how to move forward:

Revisit your limits
1. The $1M baseline was built for a different claims environment.
2. Large truck verdicts are routinely pushing well beyond that. Your structure should reflect your real exposure.
Make sure your coverage does what you think it does
1. Not all E&O forms pick up bodily injury framed as professional negligence.
2. This is where gaps show up.

Build excess intentionally
1. One bad loss can run past primary limits quickly.
2. Stacking excess is one of the cleanest ways to control that outcome.
Make sure your carrier agreements are doing the following:
1. Transfer risk where appropriate
2. Require strong underlying limits
3. Include additional insured status that holds up
In a negligent selection lawsuit, your defense rests on what due diligence you performed and whether you can prove it. At a minimum your process should include:
1. Verifying FMCSA safety ratings, CSA scores, and inspection history at the time of each dispatch, not just at initial onboarding
2. Confirming active authority and insurance at the time of booking
3. Setting written minimum carrier qualification standards
4. Monitoring approved carriers on an ongoing basis for safety deterioration
Consider technology platforms such as Carrier Assure, Highway, RMIS, and Carrier411 to automate vetting workflows and generate the auditable records that matter most if a claim is brought against you

Cassandra Gaines, CEO of Carrier Assure, will be hosting a virtual event on this topic next Tuesday, May 19th at 3pm EST. Click Here for more information This is a good opportunity to hear more about these changes.

We will continue to actively monitor this recent development. If you have any questions, please don’t hesitate to reach out to your OVD agent.

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