Historically, brokers have NOT been liable for a claim under the Carmack Amendment. A recent legal decision regarding broker liability will have an immediate impact on freight brokers. Within a FreightWaves article, a Federal Judge held that Seneca Logistics, LLC “the Broker”), a freight broker, was liable to their customer, Richwell Group, Inc. (“the Customer”), for a stolen load of lobster (“the Cargo”) valued at over $300,000. The Court held that the Broker put themselves in a position to care for cargo and, as a result, shall be liable for the cargo theft despite the traditional protections afforded by the Carmack Amendment.
With limited exceptions, the Carmack Amendment holds carriers strictly liable for cargo damaged lost or stolen in transit. The Judge’s ruling removed that shield by stating brokers who fail to properly vet carriers, or, who hold themselves out to be a carrier shall be liable as a carrier. This legal holding creates a negative precedence that brokers hope will be overturned on appeal.
The Broker argued the carrier packet submitted by the Carrier was fraudulent and that the Carmack Amendment otherwise insulates them from liability. The W9, U.S DOT Certificate, Driver’s License, Certificate of Liability Insurance and other documents provided by the Carrier were fake. The Court maintained the Broker failed to properly vet the Carrier after receiving this documentation and cannot shift the blame.
In determining whether the Broker should be held liable as a carrier under the Carmack Amendment, the Court analyzed how the Broker represented themselves during the course of the transaction. The Court noted the Broker represented themselves to be carrier by using terminology such as “our driver,” “our trucks,” “we will pick-up/deliver,” “we can agree on a good rate” instead of referring to the “carrier’s truck” or “carrier’s driver,” etc.
The Court also maintained the Customer had no knowledge of who would be transporting the Cargo and that the Broker’s representatives were the sole contact point for the Carrier. Finally, the Court maintained the Broker took on the role of the carrier in the transaction by accepting responsibility for the Cargo. As a result, the Court considered the Broker to be “a carrier” under the terms of the Carmack Amendment and were liable to their customer for the stolen cargo.
From an operational standpoint, this case serves as a reminder for brokers to watch the terminology used with their customers. It is good practice to create a distinction between the contracted carrier and Armstrong in communications. Specifically, it should be clear to the customer that Armstrong is a non-asset based freight broker who is arranging for the transportation of commodities and that the brokerage is not physically transporting the cargo.
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