When I succeeded William J. Augello as author of this column in 2007, I knew the column would be about transportation law. It was not until later that I realized why it is so important for readers to know transportation law: to identify and minimize legal and financial risks in the supply chain. Thus, learning about transportation law is not merely an academic exercise — it has real-world economic significance.

Vicarious Liability for Accidents on the Highway

Vicarious liability is the imposition of liability on one person for the actionable conduct of another based solely on the relationship between the two persons. In transportation, this arises when a shipper or broker who hires a carrier is sued along with the carrier when the carrier is alleged to have caused a highway accident.

The liability is vicarious because neither the shipper nor the broker were behind the wheel of the truck. Jury verdicts for vicarious liability have been as high as $23,000,000.00.

One theory is “negligent selection.” The reasoning behind this theory is that the shipper negligently chose a carrier who was not safe. This is a risk that cannot be totally avoided, but through the development of careful practices and appropriate liability insurance, it can certainly be minimized.

Another theory is that the trucker is an employee of the shipper, not an independent contractor. If a shipper exercises too much control over the carrier, the independent contractor relationship is destroyed. This form of vicarious liability can be avoided through proper contracting and appropriate conduct of operations.

Having to Pay the Same Freight Bill Twice

This situation arises when a shipper uses a broker, pays the broker the broker’s invoice, and then the broker fails to pay the trucker who actually moved the load. This is a risk that can be minimized through the use of due diligence in the selection of a broker. It can be further reduced by appropriate contractual requirements with the broker… and then spot auditing those contracts… and spot auditing the broker’s accounts payable.

Late Payment Penalties

These penalties arise when a carrier asserts a penalty against a shipper for paying “late.” For most carriers, the allowed credit period is 30 days. Many carriers have tariff provisions that trigger a substantial financial penalty for paying “late,” i.e., 31 days or more.

The penalty can include a retroactive loss of a pricing discount. These penalties can be tens or even hundreds of thousands of dollars. This risk can be avoided entirely through contracts and with a negotiated reasonable late fee, e.g., one percent per month.

Criminal Activity

Since I wrote about the above three risks in the April 2019 issue of PARCEL, a new risk --- criminal activity --- has exploded to the point where it is now called the “Frauddemic”. The scams take many forms. Two of the most common are “imposter pickups” and identity theft of legitimate carriers and brokers.

The perpetrators of these crimes are very sophisticated and well-financed. They operate from locations throughout the world. They are extremely technologically knowledgeable. An expert in this field at a recent Transportation & Logistics Council Virtual Workshop stated that whatever protections one had in place six months ago are now obsolete.

Even the largest companies struggle to protect themselves. Most small- and medium-sized companies in America are not equipped to deal with this level of crime. Nevertheless, there are things that a parcel shipper can do.

One is to explore obtaining insurance policies such as Cyber Insurance and Fraud and Deceit Insurance. Unfortunately, these policies offer limited coverage and premiums are rising rapidly. At a minimum, one should designate a person at your organization to educate themselves about this new risk and follow developments on prevention. All for now!

Brent Wm. Primus, J.D., is the CEO of Primus Law Office, P.A. and the Senior Editor of transportlawtexts, inc. Previous columns, including those of William J. Augello, may be found on the PARCEL website. Your questions are welcome at brent@primuslawoffice.com.

This article originally appeared in the September/October, 2024 issue of PARCEL.