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Is Transport Broker Company Responsible for Damages by Third Party Carrier? Business Contracts

Discussion in 'Business & Corporate Matters' started by sumo_mayor, Apr 9, 2021.

  1. sumo_mayor

    sumo_mayor Law Topic Starter New Member

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    Hi, I'm a manager for a transport broker company. We received an order from a customer to tow a trailer from PA to NV. We brokered the job to a third party carrier who is licensed, bonded and insured to operate. While in transport, their assigned driver was involved in an accident which resulted in the trailer being totaled.

    Our company filed a damage claim with the carrier's insurance on behalf of the customer. After the case was reviewed by the carrier's insurance company, they denied the claim and stated that the driver and truck that was dispatched by the third party carrier was not listed on their insurance policy.

    We've been as helpful as we could with the customer's insurance claim. We've stayed in contact with everyone involved in the insurance claim. We've been constantly pressing the carrier's insurance company to review the case again. We've asked the carrier to cover the damages or to ask their insurance company to cover the damages. Despite all the help we've been able to offer, customer feels that our company is responsible for the damages and that our company should pay.

    We kindly disagreed with the customer and asked him to review our transport contract agreement which he signed an authorized when he submitted his order. In our transport contract agreement under 'Terms and Conditions' we have a clause regarding damages caused by a carrier that states:

    [Our Company Name ] is not responsible for claimed damage caused by subcontract driver/carrier. [Our Company Name] can only be responsible for the deposit from the quote provided to the customer in the order.

    My Question: Per our signed contract agreement, does the customer have a case going after our company for damages caused by third party/subcontract carrier?
     
  2. Zigner

    Zigner Well-Known Member

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    You should report this to your own insurance company. They will handle the matter, including defending you based upon your disclaimer.
     
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  3. adjusterjack

    adjusterjack Super Moderator

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    Worst case scenario you could be liable under some legal doctrines and your disclaimer might not hold up.

    I hope you have liability insurance that is appropriate for transportation brokers. Report the claim to your insurance company.
     
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  4. zddoodah

    zddoodah Well-Known Member

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    On what factual and legal bases? Take note that, while you told us that the carrier's "driver was involved in an accident," you didn't tell us anything about who might have been at fault. Nor did you tell us anything about the terms of your company's contract with the carrier.

    On what factual and legal bases?

    Does this mean it is your opinion that the damages were caused by the carrier?

    That's a little oddly worded. Do you know why it also doesn't say that "[your company name] is not responsible for claimed damage caused while while the [property] is under the control of a subcontract driver/carrier, regardless of whether the subcontract driver/carrier is at fault for the damage"? Disclaiming liability only when the damage is "caused by [the] subcontract driver/carrier" seems a bit odd.

    Impossible to say without more information. In addition to the questions I asked above:

    Does your company have in-house legal counsel or an outside lawyer on retainer for consultation about issues like this? If not, do you have the authority to seek and obtain legal counsel? That's something you should do, in addition to reporting the matter to your company's insurer.
     
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  5. sumo_mayor

    sumo_mayor Law Topic Starter New Member

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    We have our surety bond insurance required for transportation brokers
     
  6. sumo_mayor

    sumo_mayor Law Topic Starter New Member

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    Driver stated that he tried to avoid a vehicle that cut him off and crashed into a freeway guard rail. Highway patrol suspected the driver fell asleep and crashed into guard rail.

    I guess our terms are pretty straight forward. Carrier must have an active MC/DOT authority number. Must be licensed and insured and must provide us with a Certificate of Insurance naming our company as certificate holders.

    Good question. We may add something like this to our disclaimer.

    We do not, but are looking into hiring counsel. Thank you for the advice
     
  7. zddoodah

    zddoodah Well-Known Member

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    While surety is a class of insurance, a surety bond and an insurance policy are very different things. I assume you're referring to the ICC broker bond (which I believe is a $75k bond). Correct? If so, while that bond might be of benefit to your customer, it will provide you with no protection. If the surety pays a claim, your employer (along with any indemnitors) will be obligated to reimburse the claim payment. If your company does not also have a liability insurance policy, then someone completely dropped the ball. If your company does have liability insurance, then the insurer needs to be put on notice. The surety on the bond should also be put on notice. If there is insurance coverage, then the insurer may assign legal counsel or handle it in-house until and unless it starts to look like litigation will happen.

    So a single-vehicle accident with only some unknown other vehicle to point the finger at.

    Sounds to me like it will be difficult for the carrier to pin fault on anyone other than its driver, which is good news for your company if the carrier is sufficiently solvent to pay the damages (given that it may have been without insurance for this incident, that seems at least questionable).
     
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  8. adjusterjack

    adjusterjack Super Moderator

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    Did you obtain that certificate before assigning the job?
     
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  9. sumo_mayor

    sumo_mayor Law Topic Starter New Member

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    That is correct. I don't think we have a liability insurance.

    I forgot to mention that our company, in good faith, offered the customer to cover some of the damage costs and he refused. The next day he had his lawyer call us to inform us that he would be getting involved, so we're assuming he's going to sue our company for the damages.

    We contacted our surety bond company to explain our situation and they advised us not to pay.

    That's what I was thinking. The responsible party for the damages is the carrier, correct?

    The carrier has an active insurance on file. The insurance company is saying that specific driver and truck that was handling the transport was not listed on their insurance policy and therefore will not cover this claim
     
  10. sumo_mayor

    sumo_mayor Law Topic Starter New Member

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    Yes we did
     
  11. adjusterjack

    adjusterjack Super Moderator

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    You don't think? Ouch. How do you run a business without liability insurance? And not even know whether you have it or not?

    Then how did you get a certificate of insurance on that truck and driver? Or did you overlook that, too?
     
  12. army judge

    army judge Super Moderator

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    I suggest you speak with your management team about retaining the services of an attorney to defend the inevitable, a lawsuit.

    You hired the transport agent to move your client's property.

    Your customer hired YOU, not the transport agent.

    If you can't see where this is headed, allow me to assist you.

    You're on the hook for any damages sustained by your client/customer.

    You potentially can go after the transport agent, when your client/customer goes after your company.

    At this point, the person/entity you retained to move your client's property might be underinsured or even uninsured.

    The surety bond might turn out to be useless.

    Why?

    By their very nature, surety bonds fall far short of insurance.

    A surety bond is a promise to be liable for a debt, default, or failure to perform of another party. It is a three-party contract by which one party (the surety) guarantees the performance or obligations of a second party (the principal) to a third party (the obligee).

    That alone can very often be far more problematic, and less productive, than filing an insurance claim.

    I suspect you'll need (your firm will need, rather) the services of an experienced attorney to help you mitigate the damages that will eventually be awarded to your INNOCENT customer/client.
     
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  13. sumo_mayor

    sumo_mayor Law Topic Starter New Member

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    The certificate of insurance that is generally used between brokers and transporters in our industry doesn't show specific drivers or specific trucks. It usually shows transporter's information, expiration dates, coverage types and coverage amounts. We then contact the insurance provider and request a certificate of insurance naming our company as certificate holders.

    Something like this
    upload_2021-4-11_21-40-59.png

    Anyone you recommend for this type of case?

    Even if we have a signed contract agreement from the customer where he acknowledges that our company is not responsible for damages caused by subcontract driver/carrier? Is he not releasing our company from responsibility for damages caused by a carrier upon signing our contract agreement?
     
  14. adjusterjack

    adjusterjack Super Moderator

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    Depends. How prominently is that waiver displayed in the contract? Is it buried in fine print? Seems to me that if I was going to hire you to transport my property and you handed me a piece of paper to sign that says you aren't responsible for anything that happens to it, I'd be out the door in a heartbeat.

    Anyway, that waiver may give you a defense to a lawsuit but isn't going to prevent the lawsuit.

    How much money (in dollars) is your customer's claim?
     
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  15. zddoodah

    zddoodah Well-Known Member

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    Sigh... I'd suggest your company owner(s) strongly consider ceasing operations until proper insurance is obtained.

    If that did happen, the employee who did it ought to be reprimanded by his/her supervisor. A bond claim rep has no business advising a principal how to deal with a claim.

    If the carrier's driver was liable for the accident, then the carrier is vicariously liable as the employer of the driver. If the driver was an independent contractor, then that becomes a more difficult issue.

    Which is the same thing as being without insurance for this incident.

    Can't comment intelligently on a contract I haven't read. Here's the thing, though: a waiver doesn't stop someone from suing, and it could cost your company a lot of money to hire an attorney to defend it.
     
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  16. sumo_mayor

    sumo_mayor Law Topic Starter New Member

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    30k
     
  17. adjusterjack

    adjusterjack Super Moderator

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    Well, you can get a lawyer now and try to nip this in the bud quickly without too much expense or you can wait until you are sued and a lawyer and a defense will cost you a lot more.

    I'd be hiring a lawyer now.
     
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