ATA President and CEO Bill Graves says the Federal Motor Carrier Safety Administration's Compliance, Safety, Accountability (CSA) program unfairly ranks carriers based on all truck-involved crashes—including those the carriers did not cause and could not have prevented. This is red meat for lawyers in a litigation-happy culture in which Johnny Cash's “Boy Named Sue” could easily be rewritten as a law school recruitment jingle. Why else would a transportation broker feel compelled to send out a press release announcing insurance coverage for liability protection?
I got one of these recently from Apex Freight Services, offering up to $26 million in liability coverage as well as errors and omission coverage of up to $6 million. “This is especially important when dealing with hazmat and other challenging freight, and it reflects the increasing liability risks facing the shipping industry,” the p.r. firm representing Apex stated in its cover letter.
After reading this I thought, couldn't liability insurance lull lazy shippers into a false sense of security and away from doing their homework on carrier safety records? I called Tracy Pellerin, Apex's president and CEO. He told me why his company started offering this coverage—and it had to do with the case of one particular client.
This customer represented a global brand and Apex was managing a fair amount of their stuff. All it took was one carrier to cause them a world of legal trouble. This carrier had been hauling for them for more than ten years on a regular route. It would drop an empty trailer at their site on Friday, pick up a loaded one and deliver it on Monday morning. The only variable in all those years was the driver—and all it took was one to deprive everyone of that comfort factor.
This driver picked up the load on a Sunday instead of Friday, and falsified his logs. On top of that he got into an accident that killed two people and severely injured a third. Both the carrier and Apex's client were sued.
Although this client felt their situation was defensible and that they could have won the case in a court of law, they didn't want any bad publicity to tarnish their brand. They ended up settling. But they also asked Apex and other logistics partners for a way to avoid ever being brought into a lawsuit again.
Apex did some research and learned more about high-profile crash fatality cases involving shippers and their brokers like the recent Sperl and Schramm cases that C.H. Robinson is still litigating. Based on what Apex learned, it decided to transfer carrier selection responsibility from its operations department to its safety department. Now a safety manager approves all carriers for its clients, following a stringent carrier selection process. On the liability front, Apex's attorneys helped it develop an insurance package that protects Apex and its customer. If they are ever sued the cost of litigation is built into the coverage.
But this brings us back to my question: Can't this lead to a false sense of security?
“This is also balance sheet preservation for my own company,” Pellerin told me. “One accident and I could be out of business and all of my employees would be without a job. Hazardous material represents 25-30% of my business. We're also getting a lot of really complex high value cargo involving multiple stops and temperature protection. CSA and the other regulations coming down the pike are requiring not only carriers to evolve to a much stricter, safer environment, but it's also requiring the brokers and shippers to do their due diligence and to change their practices.”
The moral is, if you or your broker continue to approve carriers without regard to safety records, eventually something will happen and you could get sued. Your insurance carrier may pay out, but then they'll drop you because you're exposing them with your sloppiness.
Then there's that little matter of conscience. As Pellerin told me, “I don't want to be the broker that knowingly hires an unsafe carrier that gets into an accident and kills someone. I couldn't live with that.”