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In this series, we are going to try to answer some of the questions that I come across my desk. Hopefully, we can pass on some of this knowledge to our readers.
Q: I brokered a load from Los Angeles to Pennsylvania. Prior to giving the load to the carrier we obtained their authority and insurance, and then sent them a confirmation for pick up and delivery which they signed and faxed back. After missing their 3rd scheduled appointment for delivery, they informed us by letter that the freight rate had increased and that they must have payment prior to delivery. We offered to have a cashiers check at the consignee’s dock when they delivered, which they refused and subsequently their phone has been disconnected and they have disappeared with the freight. We have contacted authorities for help without success. The carrier’s insurer is denying the claim on the basis that their client will not respond, and I’m not sure my contingent cargo insurance will cover us. What can we do? Edmund B… Los Angeles, CA.
A: Initially, as a broker, you should not be in the middle. The shipper or owner of the goods is the proper one to bring a claim against the carrier. As a broker, you have no property interest in the goods and are not a party to the contract of carriage (Bill of Lading). This does not, of course, prevent you from assisting your customer with the claim. Second, from the facts as stated, the shipper has a legal action against the carrier for the non-delivery of the shipment, and also probably for “conversion”, but it would be necessary to get a lawyer, and start a lawsuit as soon as possible. Even though the carrier appears to have disappeared, you would be able to force the carrier’s insurer to step in to defend and/or pay the claim. Third, depending on the value of the shipment, it might be worth filing a claim against the carrier’s MMC-32 cargo endorsement, which would provide coverage up to $5,000.00. Finally, with regard to your broker’s contingent cargo policy, it is my experience that many of these policies have so many exclusions and conditions so as to be almost worthless. However, you should never take “No” for an answer. If necessary, you can also sue your insurer to enforce the policy provisions.
Q: We occasionally have the need to utilize the services of a transportation broker to secure flatbed trucks. I would like to know the proper way to utilize the transportation broker and make sure that our company is protected against false claims. In the past, we have received a quotation, given the final destination to the broker, requested and have received certificate of operating authority, and a copy of the carrier’s insurance. We also put the name of the broker on the bill of lading as the transportation company and we pay the bill timely. We had a problem recently when we received a telephone call from the carrier requesting payment, as they claim they had not received payment from the broker. We told them to call the broker as we paid our bill. How ca we protect ourselves? Carl W, Modesto, CA.
A: This is a problem that continues to arise and first, you should ALWAYS know the party with whom you are dealing. Always get a copy of the broker’s license and if there is any doubt, check with the FHWA to make sure that the information is current and the broker has a surety bond on file. You should check and double check the broker through the various broker credit companies. Second, we recommend that shippers who use brokers insist on a written shipper-broker contract, and that the brokers have written contracts with their carriers. This is the best protection. Third, I would not recommend that you show the broker’s name as the carrier on the bill of lading. If you show the broker’s name, indicate “broker” to show the correct legal capacity. Fourth, there are several cases on the books (case law) that the motor carrier can force either the shipper or the consignee to pay the freight charges, depending on who set up the move, even though they paid the broker. Trust me, when the shipper or consignee get that letter they will immediately get in touch with the broker to get that carrier paid or they will file suit and not do business with him anymore. NTA can recommend an attorney who specializes in this.
Q: What are the differences between intermediaries such as Brokers, Agents and Thir Party Logistic Companies? Also, how can we protect ourselves from liability, claims and billing chargebacks (when an intermediary does not pay and the carrier comes after us)…Carlos T.. Gulfport, MS.
A: Your question cannot be easily answered in this article because of space. I would start by recommending that you look at Chapter 13 of “Freight Claims in Plain English” (3rd Ed. 1995) which covers the liability of freight forwarders and intermediaries for loss, damage & delay to goods. There are sections describing the difference between freight forwarders, brokers, shipper’ agents and shipper associations. With regard to liability for freight charges, the law is quite different depending on whether you are dealing with a freight forwarder, broker, etc. As a general rule, if you are dealing with a freight forwarder and you pay the forwarder, you should have no liability to the underlying carrier for freight charges. If you are dealing with a broker, and you pay the broker, but the broker doesn’t pay the carrier, you could be liable to the carrier depending on the factual issues. In the case of a shipper’s agent or a shipper association, the shipper generally will remain liable to the carrier if the agent or association does not pay the carrier. Send your questions to Wayne Schooling at NorthAmerican Transportation Association, 2533 N Carson St, Suite 346, Carson City, NV 89706-0147
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