Carrier selection comes under scrutiny

The Supreme Court's recent Montgomery v. Caribe Transport II ruling primarily brings broader legal attention to broker liability across jurisdictions. (Transport Topics)

The U.S. Supreme Court’s recent Montgomery v. Caribe Transport II ruling has raised the stakes for how freight brokers approach carrier selection, documentation and liability exposure, even as many in the industry say it will make existing practices more formal, consistent and defensible rather than introduce new operational responsibilities.

“For those of us in the industry who take risk seriously, nothing really is going to change,” said Jeff Tucker, CEO of Tucker Company Worldwide, who added that the issue has long been part of responsible brokerage practices. “For me, it is interesting and maybe a little bit alarming that people think this is a new issue.”

Brokers were already exposed to risk if they were not taking proper care in selecting carriers, said Greg Sanders, CEO of RDS Capacity Solutions.

The ruling primarily brings broader legal attention to broker liability across jurisdictions, he said. “All this did was put a microscope on it and opened it up to all judicial districts.”

As part of the May 14 decision, the Supreme Court held that negligent-hiring claims are not pre-empted by the Federal Aviation Administration Authorization Act because they fall within the statute’s safety exception.

“There were 30 states this already applied to. This opens it to all 50,” Sanders said.

The ruling reinforces the need for brokers to “be thoughtful, consistent and well-documented in their processes,” said Chris Burroughs, CEO of the Transportation Intermediaries Association. “That means having a written carrier selection policy, using reliable data sources, maintaining records of what was reviewed and applying standards consistently.”

However, the primary concern for brokers is that there is no single national standard, which could lead to differing expectations depending on the state and create pressure for brokers to overcorrect in ways that may not improve safety, Burroughs explained.

Brenny Transportation Inc. has already tightened its requirements. The company uses Highway, a freight security and fraud detection platform, to vet carriers and has added four steps to its carrier approval process.

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Brenny

“We monitor each carrier and they must agree to tracking while under dispatch of our brokerage,” said Joyce Brenny, CEO of Brenny Transportation. The company also requires photos of the driver’s license, the driver and the motor carrier number displayed on the side of the truck before loading.

One of the biggest problems is a dearth of formal safety ratings from the Federal Motor Carrier Safety Administration.

When Brenny started 30 years ago, she had an audit and rating within six months of opening the business, she said.

“What happened to that time frame?” Brenny asked, adding that she won’t use unrated carriers.

Shannon Breen, CEO and founder of FreightVana, said about 90% of carriers are unrated by FMCSA.

Brokers are already performing their own vetting, but Breen questioned expectations that they can assess carriers more deeply than regulators. “[The question is] how we’re expected to know more about carriers than the government that licenses and oversees about 400,000 of them,” he said.

TIA’s Burroughs said brokers cannot replace FMCSA’s role in ensuring carrier safety.

“Brokers do not inspect equipment, hire drivers, supervise training or manage carrier operations,” he explained.

TIA has asked FMCSA to clarify which standards brokers should use when selecting carriers. The association also supports stronger safety oversight, better data and more effective enforcement.

“Litigation after a crash does not prevent unsafe carriers from operating. Better federal data and enforcement can,” Burroughs said.

Tools and Data Fill the Gaps

Brokers are typically left to evaluate insurance, authority status, inspection history, compliance information and their past experiences with a carrier. Many are also turning to outside technology tools.

RDS uses Bluewire, a safety analytics platform used by insurers to evaluate carrier risk, and Highway to help assess risk. Sanders said companies need a well-documented policy.

“You vet it with your insurance company and your attorney, and you train your associates to be very consistent,” Sanders said. “If there are going to be any overrides, it bubbles up to your management.”

Carrier evaluation may also need to become more frequent. Historically, a broker might vet a carrier during onboarding, but Sanders said today’s environment requires ongoing evaluations.

“The original vetting is step one, but at the time of dispatch, you also have to re-vet the carrier to make sure everything is in place,” he said.

Tools can help verify whether a driver picking up a load has a valid commercial driver license and proper insurance, but Sanders said brokers lack the level of driver-specific visibility available to asset-based carriers.

“As a broker, we don’t hire drivers,” Sanders said. “All we do is select carriers, and we use the best information we have to make sure that carrier is safe to operate.”

That driver-level gap is not lost on major shippers. Doug Cantriel, head of North American transportation and modernization for Ford Motor Co., said he asked his transportation partners what they are doing since the ruling and found that vetting is increasing.

“They’re actually getting down to the driver level as they look at this,” he said. “There is a cognizant approach to how deep they’re going to make sure they’re vetting these drivers at a deeper level than they ever have before.”

John Pemberton, CEO of Pemberton Truck Lines, said asset-based carriers have a different level of visibility and control.

“With asset-based operations, we’re in charge of the entire transportation process,” he said. “They are our trucks, our drivers, we’re the ones that qualify the drivers, and we can track visibility on the shipment 24/7.”

Litigation after a crash does not prevent unsafe carriers from operating. Better federal data and enforcement can.

Chris Burroughs, Transportation Intermediaries Association

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The ability to vet drivers is one of the key differences between asset-based and brokered transportation.

Pemberton expects shippers to increasingly favor carriers that can demonstrate safety and not just a clean record.

“I think shippers are going to rely more heavily on carriers that have a deep culture of operational and accountability excellence,” he said. “It boils down to the accountability a carrier takes for the drivers they partner with.”

The ruling could push shippers to look more closely at asset-based carriers or brokers that also operate an asset-based business, which can signal accountability.

Asset-Based Providers May Benefit

Kenneth Johnson, executive chairman of Leonard’s Express, which operates both asset-based and brokerage divisions, said several customers that previously allowed the company to broker their freight have since requested asset-only service. Others have structured agreements that set a baseline percentage on company trucks with brokerage filling surge capacity.

“I think in certain circumstances it can be an advantage,” Johnson said of having asset and brokerage operations.

Deen Albert, vice president of operations for Grand Island Express, said the ruling is pushing shippers to place greater emphasis on defined standards and reputable partners.

“The decision is pushing shippers to look to more reputable solutions than they have in the past and look to see where standards have been put in place,” he said.

For Grand Island Express, which also has asset and non-asset operations, nothing, functionally, will change.

“As a carrier, we are safe and well known for that. On the non-asset side, increased vetting is something we’ve done regardless,” Albert said. “It doesn’t change our carrier selection, but it does formalize it, so we have a very defined process to stand behind.”

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Tucker says not much will change for risk-aware brokers. (Tucker Company Worldwide)

Tucker said any party, not just brokers, selecting the carrier should be independently evaluating safety beyond federal authorization. “Something like 80% to 90% of global forwarders are using outside carriers for the vast majority of their ground transportation, and forwarders, generally speaking, are far less fluent, exercised and trained in carrier selection,” he said.

Increased attention on vetting also could affect load boards, which remain an important source of capacity and market information.

“Posting services should require more than just someone paying to post, to allow loads to be hauled by anyone who has a truck,” Brenny said.

When brokers establish carrier relationships through load boards, technology tools and internal controls become more critical to ensure those carriers meet vetting standards, said Sanders of RDS.

“With the right technology tools in place, you can make sure your carriers are pre-vetted,” he said.

Sanders noted that major shippers are already beginning to extend their expectations outward, in some cases developing recommended vetting selection criteria for third-party brokers in their networks to use.

“It’s a brand issue, but it’s also a safety issue,” Sanders said. “I suspect most shippers with a great supply chain reputation will start moving in that direction.”

The Supreme Court decision is expected to drive some brokers and carriers from the market, but Tucker said the companies that are best positioned are those that can demonstrate they have sound processes in place.

“It is going to be incumbent on everyone else to get with the program,” he said.