The question keeps popping up… what is a freight broker’s exposure to vicarious liability and negligent section claims associated with selecting an unrated or nonrated carrier? An unrated or nonrated carrier rating means that a safety rating has not been assigned to the motor carrier by the Federal Motor Carrier Safety Administration (FMCSA) as part of the U.S. Department of Transportation’s Carrier Safety Rating System,1 and has nothing to do with the carrier’s performance. Many carriers, e.g., new carriers, do not have a safety rating. Earlier this year, the Fifth Circuit Court of Appeals shed some light on the issue. While the broker in that case sidestepped liability, how the facts would play out in other jurisdictions remains an open-ended story.
In Dragna v. KLLM Transp. Servs., LLC, 2 shipper BASF Chemical (BASF) engaged motor carrier KLLM Transport Services, L.L.C. (KLLM Transport) to haul chemicals from Louisiana to Michigan. KLLM Transport determined it could not handle the load, so it transferred the job to its sister company, freight broker, KLLM Logistics (KLLM Logistics). KLLM Logistics arranged the shipment to be transported by another motor carrier, A&Z Transportation (A&Z). En route, A&Z’s driver injured Plaintiff, Dragna, when he crashed into Dragna’s car. Dragna sued KLLM Transport, KLLM Logistics and A&Z, asserting vicarious liability, negligent hiring and joint venture3 theories. Luckily for KLLM Logistics and KLLM Transport, the court did not hold either liable to Dragna under any of these theories.
Settling the Score: Negligent Selection and Carrier Ratings
The court determined that KLLM Logistics was not negligent in hiring the “unrated” motor carrier (the Department of Transportation had not yet conducted a safety audit of A&Z). Helpful to KLLM Logistics in succeeding on this claim was that KLLM Logistics had selected the motor carrier twice before without any problems. Although Dragna argued that the carrier’s three high BASIC scores, particularly the unsafe driving score, supported that KLLM Logistics should have known that the carrier had safety problems, the court did not agree. Instead, the court found that there was no evidence that KLLM Logistics knew or should have known at the time it obtained the safety scores (before hiring the carrier in November 2011) that the three high BASIC scores indicated that the carrier was unsafe. At that time, the BASIC scores had only been made publicly available less than a year before the November 2011 accident, and the March 2011 report that KLLM had obtained with the BASIC scores, prior to hiring the carrier in the first instance (in March 2011), did not give any indication as to how to use the BASIC scores. Thus, the court was not swayed by Dragna’s expert, who testified regarding the BASIC scores actually correlating with unsafe driving—this is because KLLM did not know about any correlation at the time that it had downloaded the scores.
Other Lessons Learned: Vicarious Liability
KLLM Logistics was not held vicariously liable for A&Z’s driver’s alleged negligence in causing the truck accident. Applying Louisiana law, the court found KLLM Logistics had insufficient “operational control” over A&Z to convert their independent contractor relationship to one of employment. This was despite evidence that KLLM Logistics had required A&Z’s drivers to call KLLM Logistics to check in or for emergencies, and penalized or fined A&Z for the failure to make such calls. The court reasoned that KLLM Logistics had a contractual right to receive check-in and emergency calls, and the resulting penalties were viewed as an appropriate remedy for failing to comply. Further, A&Z, and not KLLM Logistics, directed how it transported the BASF load, so long as the delivery was made on time. This was different than in Sperl v. C.H. Robinson, Inc., 4 where C.H. Robinson was found vicariously liable for the motor carrier’s truck driver’s negligence in causing a truck accident primarily for fining drivers who did not comply with its special driver instructions.
As was KLLM Logistics in Dragna, a freight broker certainly could find itself wrapped into a lawsuit stemming from a truck accident caused by the negligent acts of a carrier it selects. Plaintiffs’ attorneys have routinely looked to the information provided by the FMCSA to argue that a freight broker has been negligent in selecting a motor carrier. However, it is unlikely that hiring an unrated carrier, alone, would subject a broker to negligent selection liability. Even high BASIC scores would likely have to be associated with violations that actually caused the accident at issue for a freight broker to be found liable for negligently selecting a carrier. Nor would the rating have anything to do with operational control over a carrier resulting in vicarious liability. Nonetheless, before using an unrated carrier, brokers should engage in further due diligence, including: (1) determining whether any adverse reports have been made regarding the carrier on www.tiawatchdog.net; (2) obtaining and contacting carrier references; (3) verifying that steps are being taken by the carrier to obtain a satisfactory safety rating; and (4) maintaining a current file on the carrier.