Avoiding Negligent Hiring: A Broker’s Guide to Carrier Safety Policy
Checking a carrier for its FMCSA safety rating and monitoring carrier performance is an easy-to-overlook aspect of brokering. I’d wager to say most companies do not have a formal carrier safety policy at all, much less one that is monitored routinely. Most probably do not know what negligent hiring is or what it entails. This facet of brokering is all too often put aside when availability for trucks is slim and the need to cover a load for your customer is a top priority.
We can easily internally justify putting carrier safety on the backburner when preserving a relationship with a customer, securing revenue for one’s company, and, ultimately, maintaining a job for oneself that may be (potentially) on the line. Lady luck is on our side here, and brokers know it. Almost all of us have had to deal with a claim at one time; at Interstate 48 we’ve had only 4 claim situations in 11 years, all minor damage and half were solved through offset/compensation adjustments, which we are happy and lucky to say. But these incidents are rare for most brokers. And if claims are rare, and accidents are even moreso, why should we concern ourselves with protecting against negligent hiring? Ready for some stats? Cool, me too.
Truck Safety Stats
Large trucks are involved in injury crashes at a rate that is less than one third that of passenger vehicles. This study includes all vehicles over 10,000 GVWR. If we were to isolate the tractor-trailers we normally utilize the data would show an even lower incidence. Further, the U.S. saw reduced fatality and injury rates across the board from 1975 to 2015. This is despite over 65 million more total registered vehicles on the road, including around 5 million trucks.
We don’t know the reasons why, but we could guess, which is fun. Are we driving more safely as a society? Are stricter regulations to credit? (Can of worms grasped firmly in hand) Better policing? (Oh snap I’m gonna open it!) How about the fact that most people probably know someone who has been involved in a car accident. Or that because generally, people do not want to be and we are getting better at teaching children and new drivers the importance of safe driving. Decide on your own, but the facts remain and the numbers speak.
Risk it for the Biscuit?
So, we know that the rate of incidence is low and getting lower. We know that we can, in most scenarios, get away with hiring a truck without checking the safety rating. We can even hire the truck and knowingly approve them with a subpar safety rating. So, is it worth the risk? Is it worth covering this load and becoming a hero to your customer? Is it worth the immediate benefit of making your company some good money when there’s a small risk of being named in a suit for negligent hiring of a carrier?
Wrecks are Rare but Very Expensive
According to LogistIQ, our insurance broker, 90% of the trucking companies operating on the U.S. highways have $1,000,000 of Auto Liability coverage. But, some statics support the average settlement for a fatality at $2.6 million. According to Truckdrivingjobs.com, this number is well over $3 million. A high profile suit against Heyl Logistics resulted in a $5.2 million verdict for negligent hiring. This would take out most businesses operating in the broker and/or trucking space. Ninety percent of the trucking industry is made up of small business trucking companies with ten or fewer trucks. Let’s say for the sake of this example the brokerage industry is equally dominated by small brokers. This is a safe assumption since small business accounts for about 99.7% of employment in our country. In the least, it would make owners question the prospect of moving forward or dissolving and cutting losses.
6 Simple Ways to Protect against Negligent Hiring
We don’t want to see companies go out of business. We want this crazy industry to thrive, small and big companies alike. So, in light of the above, we have established a list of 6 things we do, and you should too, to ensure the carriers we use are safe, reliable, compliant and high-performing. Interstate 48 believes that by following this list we limit our exposure to lawsuits for negligent hiring. We also have the added benefit of placing only the safest and most reliable carriers under our customers’ freight.
1)Have a carrier broker agreement in place
I’m not going far into this one. One of the simplest ways to protect against the negligent hiring of a carrier is to have a carrier broker agreement in place. If you don’t, you probably shouldn’t be in business as a broker. This defines, among many other things, the relationship between your company and the carrier. Leave no doubt that the relationship is one of an independent contractor and not employee/joint venture. Also, it may be wise to have your agreement checked by a transportation lawyer.
2)Sign up for and use a carrier performance monitoring software program
Truckstop.com’s CPR rating system is priced low enough that no broker should be without it. It covers details of performance history based on voluntary “good” or “other” (bad) reports filed on that MC from other brokers. Carriers can do this for brokers as well. It also details the authority history, whether it has an active authority and what authorities (if any) are active. It also provides both the Government safety rating and the CSA BASIC scores.
Carrier411 is another site that provides brokers with a comprehensive “snapshot” of carrier performance and safety history. The report is a bit more thorough and helps provide proof of due diligence required to protect you against claims of negligent hiring. Priced at $99/month it’s a premium product for a small company. Especially when the bulk of the material one might need to determine compliance, safety etc., is publicly available. A great service nonetheless with the benefit of a free trial.
3)Save and file ALL documentation for your carriers
The most common sense of the list. Insurance, carrier packet, carrier broker agreement, signed rate confirmations, PODs – when you get paperwork from carriers, don’t just enter the info in your dispatch system or accounting system and discard the email. Save ALL of the files and store them in an electronic file system, or a paper file cabinet (if you’re a dinosaur). This will help show due diligence in researching your carrier. The paper trail is important!
Simply having the safety/performance monitoring software in place is not sufficient. Checking it routinely is not sufficient from a due diligence perspective. You need a written company policy regarding standards to which you hold carriers. One way to do so is to benchmark against large and reputable carriers. Check the BASIC scores of your new carriers or current carriers against theirs and create a standard to which you hold every carrier. This removes the emotion from the process. If we work with carriers we know and trust it is easy to overlook a bad mark, even though it might be the sign of company-wide deterioration or a lax safety department.
5)Frequently and routinely update your records
Interstate 48 checks our carriers’ safety records on every load we haul to ensure we have the most accurate and up-to-date information on all of our carriers. We also request a certificate holder for most carriers. Especially ones with whom we work frequently. We then make notes in our dispatch software for all employees/agents to see so everyone knows when we performed the last carrier check, and whether they can use the carrier. To show due diligence one needs to consistently monitor the carrier’s info and update records accordingly. If you make internal carrier notes, ask that your employees/agents check these notes before they place the carrier on a load.
6)Inquire further if something is fishy
There are times when a carrier’s safety record will come up as “conditional” despite a lack of crashes or excessively poor BASIC scores. Or maybe they have scored slightly below your standards or the industry averages. There could be a number of reasons that aren’t indicative of overall poor performance or non-compliance. In some cases, this will be enough to justify not using that carrier. Other times doing so will send both 35,000-pound baby and bathwater sailing out the window. The point is this: if something looks suspicious, then take the extra 5-10 minutes and call the carrier’s safety department. Most carriers have on file letters from their heads of safety to send should there be a questionable stat somewhere. Oh, and if you get one, see #3!
Doing the above is not a bullet-proof way to protect against accidents. There is actually nothing you, the broker can do at all to protect against accidents; but that isn’t the point. Even great drivers and carriers have accidents on record. As we all know there are a lot of variables when driving on the road in a Honda Prius. Compound those omnipresent variables with a 35,000+ pound tractor-trailer carrying 45,000 lbs. of freight, in the rain, in low-light, in commuter traffic, down a steep grade, and everything changes.
Most carriers have great safety ratings and most drivers on the road are incredibly safe and cautious. We offer many different service options and contact many carriers. We are happy to say that we very infrequently turn down new carriers or stop using current carriers due to deteriorating ratings or performance. Carrier safety is of utmost concern to Interstate 48 Transportation and should be a staple policy to protect against negligent hiring claims. Establish a solid set of standards and follow them religiously. Help ensure the long-term sustainability of your company and service to the industry. Shippers and carriers need us, as much as they may not want to admit it (smirk).