News / Supreme Court ruling on broker liability will drive trucking costs up

The unanimous verdict of the US Supreme Court that brokers can be held liable for negligently recruiting truckers with spotty safety records will decimate the number of brokers and truckers and usher in higher trucking costs for shippers.

On the bright side, it can be seen as a catalyst for the establishment of a measurable standard of brokers’ vetting of trucking providers.

The ruling ends a legal odyssey that sprang from an incident in 2016, when a Caribe Transport truck struck a driver parked on the side of the road, causing injuries that required amputation of his leg. CH Robinson, which had hired the trucking firm, was charged with negligence in its trucker selection, but argued that as a broker it was exempt from state tort claims.

The Supreme Court’s ruling dismissed this argument, making the 28,000 or so truck brokers in the US viable targets in legal proceedings seeking damages for damage caused by truckers they selected.

The verdict was greeted with dismay by the Transportation Intermediaries Association.

“While brokers are fully committed to safety and to working with federally licensed motor carriers in good standing, the decision imposes an impossible task on brokers that entails evaluating safety of a motor carrier, despite the federal government deeming a carrier as safe to operate,” commented TIA president Chris Burroughs. “This is like asking travel agents to evaluate the safety of a given airline despite the fact that the airline has been licensed to fly by the federal government.”

Harish Abbott, co-founder and CEO of Augment, reported concerns voiced by several brokers about potential state-by-state standards for ‘reasonable care’, greater litigation risk for brokers, likely insurance pressure, and new urgency around documenting carrier selection processes.

“The concern is real — especially among smaller brokerages that may not have the resources to absorb or defend the onslaught of litigation this is going to cause. Nobody knows yet how 50 different states are going to interpret this, and that uncertainty is uncomfortable.

“What brokers can control is knowing who they’re putting on their loads and being able to prove it. The legal standard is going to take shape through litigation, and that means more scrutiny every time there’s a crash. The operational response is straightforward: tighten carrier selection, standardise the workflow, and make sure the audit trail holds up years from now,” he said.

The Supreme Court ruling does not render brokers liable in each case, but they have to be able to show that they performed due diligence in the carrier selection process. To that end, they need a defined and consistent protocol for the process.

“It really comes down to three things – set a real standard for carrier vetting, apply it the same way every time, and make sure you can prove it,” Mr Abbott noted.

The bottom line for this is checking the carrier’s record in the Federal Motor Carriers Safety Administration’s (FMCSA) database.

“Brokers need to layer in SMS BASIC thresholds, out-of-service limits, crash and inspection history, insurance verification, and identity checks. Make these criteria concrete enough that two operators evaluating the same carrier reach the same conclusion. The data to do this is largely free and public,” he said.

The standard has to be applied consistently, and every step must be documented, he stressed.

“This is exactly the kind of work AI agents are built for. They follow the SOP. They never skip a step. They produce an auditable record on every load. Set the standard once, and let it run,” he said.

Cassandra Gaines, founder and CEO of Carrier Assure, observed that many brokers were already employing carrier vetting tools that go beyond FMCSA records and insurance checks. The popular notion that these two elements sufficed constituted an outdated view in an industry moving towards a measurable broker standard of care, she commented.

More and more brokers review carriers’ inspection histories, monitor unsafe driving indicators, analyse out-of-service percentages and examine crash trends, she adde.

While all parties should welcome a nationwide standard of carrier vetting as a positive outcome of the Supreme Court ruling, they also stand to see costs rise.

Insurance premiums are bound to go up, both for brokers and truckers, notes Satish Jindel, founder and president of SJ Consulting Group.

“Brokers should expect insurance premiums to rise. Broker E&O and contingent auto policies were already hardening as plaintiffs’ firms pushed through the circuit courts. With the federal shield now gone in all 50 states, underwriters will re-price. Expect higher premiums, tighter terms, and harder questions around the vetting process at renewal. Brokers who can’t show a documented, systematic vetting process will feel that adjustment most,” Mr Abbott predicted.

The Supreme Court ruling is also expected to reduce the number of truckers and brokers, losing notably the smaller players that lack the financial wherewithal to absorb the elevated insurance and compliance costs. Brokers command higher margins than truckers, so the latter should be more impacted, said Mr Jindel.

Ultimately, shippers are going to face elevated trucking rates as a result.

“The downstream effects follow a fairly predictable chain. As brokers narrow their approved carrier lists to manage liability, smaller carriers with marginal safety records will struggle to find freight. Some will exit the market. When capacity tightens, rates rise, and shippers absorb that cost, which eventually flows through to consumers,” Mr Abbott commented.

“Shippers will see some price increases,” agreed Mr Jindel.

The next step in the litigation theatre could be for victims of accidents caused by trucks to sue the shipper, which could prompt another round of increased diligence, he reflected. This could lead to more direct contracts between shippers and carriers and less use of the spot market, he added.