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Freight Broker Liability
Toms vs C.H.Robinson Worldwide
A freight broker by law is an entity that “arranges” for the transportation of cargo. This means that brokers are not actually moving cargo. They generally contract with a motor carrier for transporting freight.
Yet, some brokers – for whatever reason – may unknowingly hold themselves out to be a carrier. This is against the law.
49 CFR 371.7(b) states that “A broker shall not, directly or indirectly, represent its operations to be that of a carrier. Any advertising shall show the broker status of the operation.”
Let’s look at a recent court case, Tryg Insurance vs C.H. Robinson Worldwide. C.H. Robinson, the largest freight brokerage in the world, became liable for the damage of $124,000 worth of freight even though the freight was hauled by National Refrigeration Trucking. The carrier’s refrigeration unit broke down and the shipment of candy product melted. Generally, whoever takes possession of the cargo assumes cargo liability. But, read on …
After delivery, Toms filed a claim against C.H. Robinson and they refused to pay for damages. Tryg Insurance then paid Toms who suffered the loss and both Tryg and Toms then brought a lawsuit against C.H. Robinson for breach of contract.
Based on the testimony and the shipment documents, the court held that C.H. Robinson had held itself out as a carrier and was therefore liable for the damages. Under the Carmack Agreement only the carrier is liable for cargo damage.
So, the central question in the case was: Is C.H. Robinson a broker or a carrier? It’s instructive to understand that the definition of “carrier” encompasses entities that perform services other than physical transportation.
“In determining whether a party is a carrier or a broker, the crucial question is whether the party has legally bound itself to transport goods by accepting responsibility for ensuring the delivery of the goods. If an entity accepts responsibility for ensuring the delivery of goods, then that entity qualifies as a carrier regardless of whether it conducted the physical transportation. Conversely, if an entity merely agrees to locate and hire a third party to transport the goods, then it is acting as a broker.”
Bottom line: if a broker assumes the liability to transport cargo or ensures the delivery of the cargo, he/she is holding himself out to be a carrier and is assuming the liability for cargo damage as well.
Brokers “arrange” for the delivery of cargo not “ensuring the delivery”.
In our freight broker training, we help prepare clients to avoid this liability trap.