Yesterday, we had a carrier show up to our warehouse in a small cube van rented from a local discount rental company.  The driver evidently rented this cube van and thus was in the trucking business working for a courier company attempting to pick up for same day delivery, heavy palletized freight in a truck that would have been severely overloaded on the rear axle had we loaded him.  The truck was a foot lower than our dock which presented a whole other issue.  Needless to say he left in great haste after we asked about whether he was insured and if he had a DOT number.  It got me thinking about a lawsuit that I read about in Transport Topics back in the spring and I thought I would share the facts of that with you.

Hiring motor carriers has always been a challenge for shippers and 3PLs.  In the wake of the Schramm decision involving one of the largest 3PLs in the country, shippers should be ever more vigilant in their due diligence for carrier procurement.

This decision will change the way shippers and third parties qualify carriers in the future and demonstrate the need to knowing and defining the relationship between the shipper and the carrier.

The Schramm decision is all about “due diligence” and demonstrates the need to be responsible in the selection of a carrier to transport your product over the highways.  This does present challenges to obtaining carriers quickly but it is very important to obtain documentation, insurance information and an agreement clearly establishing the relationship between the carrier and the shipper.

In March of 2009, an Illinois jury awarded a $23.7 million judgment against a freight broker, and other defendants for an interstate collision that killed two people and injured five others.  The driver and carrier for whom the driver worked admitted they were negligent and responsible for the damages caused by their actions. The driver was charged with falsification of her log book and driving on a suspended license.

Plaintiffs successfully argued that the driver was the shipper’s agent and should be liable for damages resulting from the carrier’s negligence.  The jury reached a verdict that the driver was the 3PL’s agent and therefore awarded the plaintiffs $23,750,000.00.

My Recommendations to protect you and your business:

1.      Know who you are doing business with.

2.      Create a file on every trucking company you do business with.

3.      Include a copy of the carrier’s operating authorities and insurance certificates, which you should insist is, provided to you by the insurance agent directly, and if you are shipping hazardous materials a HAZMAT certificate which is issued by the department of transportation.

4.      Check out the safety record of your carrier.

5.      Have an agreement with your carrier that clearly defines your relationship.

6.      Determine whether the carrier is well established. How long they have been in business. Do they use owner operators or independent contractors and are the independent contractors compliant with DOT laws and regulations? Are they an asset based company?

7.      Document your questions and answers from your carriers.

8.      Update your carrier files to coincide with the renewal dates of the carrier’s insurance certificates.

You can protect yourself and you should take the Schramm decision seriously.  Train your employees and shipping managers strictly adhere to the procedures you establish to guard your company against the consequences of thoughtless or negligent hiring of carriers.

All the best,

Bob Gray