Waynes World - December 2004

THE DIFFERENCE BETWEEN INTERMEDIARIES
SUCH AS BROKERS & AGENTS, AND...

PROTECTING YOURSELF WHEN
USING BROKERS
By Wayne Schooling

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 pickup 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. 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, stop you from assisting your customer. 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 seems 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. And 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. But never just take “No” for an answer. If necessary, you can 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 pay the bill timely. We had a problem recently when a carrier called and requested payment, claiming that they had not been paid by the broker. We told them to call the broker as we had paid our bill. How can we protect ourselves? Carl W., Modesto, CA

A: This is a problem that continues to come up. 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 also check the broker through the various broker credit companies. Second, I recommend that shippers who use brokers always 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 must 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 the shipper or the consignee to pay the charges, depending on who set up the move, even though they paid the broker.

Q: What are the differences between intermediaries like Brokers, Agents and Third Party Logistic Companies? Also, how can we protect ourselves from liability, claims and/or chargebacks when an intermediary does not pay and the carrier comes after us? Carlos T., Gulfport, MS

A: Your question cannot be completely 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 Edition, 1995) which covers the liability of freight forwarders and intermediaries for loss, damage and delay to goods. There are also sections describing the differences between freight forwarders, brokers and shipper’s agents. 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.

~ Do you have any transportation-related questions you would like me to address? If so, send them care of Wayne Schooling at NorthAmerican Transportation Association, 2533 N. Carson St, Suite 346, Carson City, NV 89706-0147. Or, if you prefer, you can e-mail them to wayne@ntassoc.com.