September 2006 | Commentary | Fine Print

Negligent Hiring: Not Just a Broker/3PL Problem

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William J. Augello, Esq. is an adjunct professor at the University of Arizona's College of Law and author of Transportation, Logistics and the Law.

It may come as a great surprise to shippers that, according to a recent ruling by the New Jersey Supreme Court, they may be held liable for "negligent hiring" of truckers.

Since the Schramm v. Foster case—a Maryland court ruling that found a 3PL guilty for hiring a carrier that caused an accident injuring two young men—many shippers assume only brokers or logistics providers can be held liable for negligent hiring.

When hiring a carrier, shippers now must be able to prove due diligence to the same extent that third parties do. It is critical that any company hiring a carrier understands what the courts look for when determining negligent hiring.

"An employer may be charged with negligence in hiring an independent contractor where it is demonstrated that he should have known, or might by the exercise of reasonable care have ascertained, that the contractor was not competent," says New Jersey's law, which is similar to most states' laws.

So, how much should shippers examine a carrier before giving it a load? Must shippers check the tractor-trailer's brakes, the driver's logs, and the carrier's insurance filing the day they wish to hire it? Do they need to give the driver a drug and alcohol test?

In the New Jersey case, a carrier's truck was in a highway accident that killed two passengers and injured a third. The truck was uninsured and unregistered—and therefore uninspected. The tractor-trailer in question also had defective brakes.

The carrier was hired by the shipper to haul waste and recyclables across state lines, but it used an affiliated carrier to transport the load involved in the case. The shipper believed both carriers operated as one company because they had the same address and the same owners. (The owner of both carriers was charged with manslaughter, and pled guilty to lesser charges.)

The shipper was charged with negligent hiring of an incompetent contractor because it had not checked to determine if the carrier's registration, insurance, or licenses were in order. The court ruled that the shipper violated its duty to use "reasonable care" in selecting a trucker.

This decision, along with the Schramm case, illustrates a new trend in tort cases where the courts seek large awards from secondary parties. The effect of these awards must be taken seriously by shippers, brokers, freight forwarders, and 3PLs. They can no longer assume their due diligence in selecting a carrier is satisfied by having a certificate of insurance and a copy of the carrier's registration on file.

Plaintiffs' attorneys and the courts are demanding more evidence. They want to know how recently companies hiring a carrier checked the carrier's Federal Motor Carriers Safety Administration insurance filing, as well as its safety and accident record, and the driver's record. If the carrier does not have a safety rating, courts will check whether the shipper conducted an independent investigation of that carrier.

What Can Shippers Do?

Meeting these standards may prove difficult for shippers, but the courts are not sympathetic when people are killed or injured by a truck on the highway. Therefore, shippers and intermediaries need to reassess their carrier hiring procedures to determine how they will testify if and when they are sued.

A good first step for shippers is to have transportation attorneys, insurers, and risk managers review their truck-hiring operations. In addition, shippers can benefit from carrier monitoring services, which keep subscribers informed of every change made to carriers' insurance, operating authorities, safety and accident record, and driver compliance. These services can save shippers millions in damages if they are sued, and will prove that they monitor their truckers daily.

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