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The Quest
              
Inside this issue:

Single transaction bonds required for suspected AD/CVD shipments

Appeals court reverses case involving ‘independent contractor’

$5.2 million verdict against a transportation broker and driver in negligent hiring case

C-TPAT and AEO to be mutually recognizable in June 2012

Goods from Argentina to lose GSP benefits

Claims Review:
International Coverage

      

                    



                    

              
$5.2 million verdict against a truck broker and driver in negligent hiring case

In a key decision against a transportation broker for negligent selection, an Oregon jury awarded a $5.2 million settlement, including punitive damages, to the family of a man killed in a truck accident.

The case, Linhart v. Heyl Logistics LLC, et al., was brought about after a truck driver fell asleep at the wheel while under the influence of crystal methamphetamine and slammed into another driver. Linhart, also a truck driver, was killed while inspecting his vehicle on the side of the road.

During litigation, the plaintiff’s attorneys argued that Heyl Logistics did not properly investigate the motor carrier and was liable for negligent selection. The carrier, Washington Transportation, did not have insurance and its operating authority was revoked for failure to conduct drug testing on drivers, among other violations. The plaintiffs asserted that Heyl Logistics should have discovered these facts when hiring the carrier.

According to industry attorneys, the case is the first time punitive damages were awarded against the transportation broker for a negligent hiring claim.

Transportation brokers arrange to move surface cargo domestically, but licensed motor carriers physically move the cargo on their vehicles under their bill of lading and have primary liability for bodily injury and third-party property damage as well as for loss of or damage to freight. The current case (as well as several others, see Sperl v. Henry et al.) has developed into a legal trend that third-party logistics providers or even shippers can be held liable for the acts of motor carriers that they hire.

Several types of liability insurance policies are available to protect brokers from claims arising from cargo loss or damage and third-party liability they assume when hiring truckers:

  • Non-following Form Contingent Cargo Insurance provides coverage for loss or damage to cargo when the motor carrier’s insurance does not pay a claim and the motor carrier is unable to pay. Coverage is typically triggered only in situations where the motor carrier is negligent.
  • Errors & Omissions Insurance protects the transportation broker if an error or oversight in the course of business causes a customer to suffer a financial loss. A transportation broker should ideally obtain a combined policy form with Errors & Omissions Insurance and Contingent Cargo coverage – this is not the same as purchasing separate policies. Doing so can create both gaps as well as overlaps in coverage.
  • Contingent Automobile Liability Insurance is also available to protect transportation brokers when they are held liable for death, bodily injury or third party property damage claims as a result of the motor carrier’s negligence, as in the case above. Coverage may be purchased as a separate policy or, as an endorsement (add-on) to an Errors & Omissions insurance policy.

Avalon Risk Management specializes in understanding the complexity of liability issues for transportation brokers. Our Combined Transit Liability (CTL) provides the tailored protection you need and is the only program of its kind endorsed by the Transportation Intermediaries Association (TIA). Cases such as the one above can take years to resolve resulting in significant defense costs. Our CTL program provides coverage for defense costs and attorney fees as well as the payment of judgments and settlement amounts you are legally obligated to pay.


    
For more information, please contact your local Avalon office or or Andriana Davis at (847) 700-8087 or at adavis@avalonrisk.com. A list of our offices may be found at www.avalonrisk.com.
             
       

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