Shippers at Risk: Understanding Vicarious Liability in the Transport Industry

Could you imagine asking your boss for $23 million?  In a landmark 2004 case, C.H. Robinson, a third-party logistics provider, contracted Dragonfly Express to transport a shipment for one of their customers.  Unfortunately, the driver, who falsified logbook entries and drove at an unsafe speed, caused an accident resulting in two fatalities and a serious injury.  Despite C.H. Robinson's defense that they were "not responsible for the actions of an independent contractor or its driver," the court held C.H. Robinson, the driver, and Dragonfly Express liable for over $23 million in damages.

The Role of Vicarious Liability

This case highlighted the doctrine of vicarious liability, which can extend responsibility beyond the carrier to other parties involved, including shippers.  Under vicarious liability, if a shipper acts as a principal, they can be held liable for the conduct of the carrier or broker acting as their agent.  This principle implies that shippers, who have the "right to control" the conduct of carriers or brokers, can be imputed liability for any negligence or misconduct.

Historical Context: Schramm v. Foster

Before 2004, carriers were solely responsible for any damage or injury caused while transporting freight.  However, the Schramm v. Foster case changed this precedent.  In this case, a shipper hired a 3PL to transport freight, and the carrier selected by the 3PL was involved in an accident, seriously injuring two people.  The court ruled that the 3PL was also liable for not properly vetting the driver using the FMCSA’s Safestat database.

Implications for Shippers

This ruling set a new standard, indicating that shippers are not immune from liability simply because their carrier has liability insurance.  Vicarious liability means that shippers, as principals in the hiring process, can be held accountable for the actions of the carriers or brokers they employ.

Preventing Vicarious Liability

To mitigate the risk of vicarious liability, shippers should utilize the Safety Measurement System (SMS).  SMS collects data from a variety of sources, including roadside inspections, crash reports, and investigation results.  This data is used to evaluate the safety performance of carriers and drivers. 

Scoring reflects a carrier’s BASIC scores compared to other carriers in their group.  The scoring/categories are as follows:

  • Unsafe Driving: Evaluates driver behavior, including speeding, reckless driving, and improper lane changes.
  • Crash Indicator: Uses historical crash involvement to predict future crash risk (not publicly available).
  • Hours-of-Service (HOS) Compliance: Monitors compliance with regulations that limit driver hours to prevent fatigue.
  • Vehicle Maintenance: Assesses the condition of commercial motor vehicles, including issues with brakes, lights, and other critical systems.
  • Controlled Substances/Alcohol: Tracks violations related to drug and alcohol use by drivers.
  • Driver Fitness
  • Hazardous Materials Compliance: Evaluates compliance with hazardous materials scores range from 0 to 100, with higher scores indicating poorer safety performance.  Carriers with high scores may be placed on "alert" status, which signifies that they require closer monitoring and possible intervention.

By utilizing this system, one can identify if a carrier has a satisfactory or non-satisfactory rating as well as their out of service rates in the vehicle, driver and hazmat categories (made public).  This allows shippers, brokers, and the public to make informed decisions when selecting carriers.

Vicarious liability underscores the importance of shippers conducting thorough due diligence when selecting carriers.  By leveraging tools like the FMCSA's SMS, shippers can make informed decisions to protect their freight and minimize the risk of being held liable for the actions of their carriers or brokers.

Visit https://ai.fmcsa.dot.gov/SMS to check a carrier’s safety and performance data today.

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