Freight 360

Broker Liability After The Supreme Court Ruling (with Danielle Spinelli) | Episode 343

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The Supreme Court’s 9-0 decision in Montgomery v. Caribe Transport II, LLC just changed the liability conversation for freight brokers, especially around negligent hiring and what “reasonable care” really means. We sit down with Danielle Spinelli from GenLogs to break down the ruling, the limits of carrier safety data, and why brokers need a documented, provable carrier vetting process before claims, insurers, shippers, and regulators start asking harder questions.

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A 9 To 0 Ruling Lands

SPEAKER_02

The Supreme Court dropped a unanimous 9 and 0 ruling last week about freight broker liability. And Ben, we just wrapped up a really good episode. We had Danielle Spinelli from Gen Logs on with us. She was in DC uh meeting with FMCSA when the ruling dropped. Uh, we break down what happened, what it means, what it doesn't mean, and kind of best practices uh for brokers to make sure that you are doing everything in your power and control to you know run a safe operation and and select carriers properly. Um, which takeaway on this episode?

SPEAKER_00

Very interesting conversation. I mean, to be honest, like uh we could have spent two or three hours on that conversation. So really enjoyed it. There are so many open questions, but beyond just the unanswered questions that hopefully we'll get answers to sooner than later, we did go through, I think, some really important things you can do immediately to limit your liability, limit your risk, whether you're a broker as a W-2 employee, an agent, or own your own brokerage. So definitely listen all the way through the end on some of the things that you can start doing immediately to reduce your risk of lawsuits now that this I don't even know what you want to call it.

SPEAKER_02

This has happened. Yep. Correct. All right, well, let's hop right into it. All right, welcome back, everybody. This is a uh really special episode. We've got a guest here today. We'll get to her in just a second. Um, if you are new to us, make sure to check out all of the other content. You've got Freight360.net for a searchable library. That's our full website. The podcast is embedded in there. YouTube is great for all of our videos. They're

Meet Danielle And Her Background

SPEAKER_02

separated by category for the full-length podcast, the clips, the shorts, uh, educational videos are all in there. Um, share us with your friends. We get a lot of folks that are new to the industry and you know, hopping in and joining our newsletter and listening to our stuff every week. So we appreciate all of that. Um we'll kind of hop right into uh our guest here. So we've got Danielle Spinelli with us. You guys have probably seen her from various platforms online, whether it's her podcast or LinkedIn or whatnot. So, Danielle, for anyone who maybe doesn't know you or doesn't know the whole story about you, give us a quick rundown on kind of what you're doing, and then we're gonna dig into the week that you just wrapped up.

SPEAKER_03

Yeah, first of all, thanks for having me. I really appreciate it. Um, so yes, I'm Danielle Spinelli. I'm director of partnerships at Gen Logs. Um, I also have a podcast called Tell Me Everything, where we talk about like industry leaders, and then we also do Frog Girl Fridays. So basically, like my thing is cargo theft. That's kind of like my jam. I was a broker back in the day. Um, and I dealt with like high value freight. So I got to learn how to carrier vet. And so went from there, worked for uh to uh my care portal, now Gen Log. So really in the cargo theft carrier vetting world of things. Um, but also being a broker for a long time, I kind of had that industry knowledge, I guess you could say. I was in carrier sales, so I don't know all the things, but I I did that. So, anyways, that's a little bit about me.

SPEAKER_02

That's awesome. Well, we're we're glad to have you on here. We did, we hopped on your podcast um in the last couple of weeks. So that was that was a lot of fun. So, Ben, how's things in Florida today?

SPEAKER_00

No complaints. Still not super hot yet. So, like, still pretty nice here.

SPEAKER_02

There you go. And Danielle, you're in, you said you're at the Rock and Roll Hall of Fame. So you're in Cleveland, Ohio.

SPEAKER_03

Yeah, so apologize if anybody hears, if anybody hears like a bunch of music in the background. Um, I'm at the Freight Laves Fraud Symposium here in Cleveland, and it's kind it's a really cool, like it's at the rock and roll museum. And so, like, I was actually trying to do film at the uh, they have like a garage band area where it's like, I guess like a mock-up of like where people play in their garages. But the I went in there and it was quiet at the time. And the guy's like, yeah, we're about to like play music and it's about to be super loud. So I got kicked out of there and I'm in a hallway. And so I apologize if it's loud, but it's super cool here.

SPEAKER_02

I haven't been there in like almost 20 years. Is it isn't there like a bunch of guitars like out front, like I guess like standing music today, like giant guitars in front of me.

SPEAKER_03

There's outside. So outside's like under construction right now. So I think I went into like a weird tunnel when I got in here, but inside's super cool, and like every floor you go on is like a different type of I don't know, rock and roll thing. They have a full tour that we're doing at five, so I get to see the whole thing. So I'm pretty stoked.

SPEAKER_02

Fun stuff. Um, well, cool. So you were in DC last week. Obviously, the big news was, and Ben, I feel like it's ironic. We put our newsletter out last Thursday at like 9:30 a.m. And it was like, you know, nothing too crazy. And literally, like 30 minutes later, like the SCOTUS um Montgomery case gets announced. But Danielle, you were in DC when this is happening gets announced. So kind of talk us through what all, first of all, what were you guys doing there? And kind of your reaction to this, and we'll we'll just kind of break it apart, break it down.

SPEAKER_03

So I was in DC. I was actually with uh Dale Prax, Scott Cornell, um, Isaac from Highway, and um, I know I'm missing somebody, uh, Verified Carrier Alex and um the Banner Report. Anyways, um I was there with those guys. We were meeting with FMCSA, um basically the registration side of things

FMCSA Meetings As News Breaks

SPEAKER_03

to kind of talk about how what we do as an industry to kind of protect ourselves and like things that we think they could do to like on a federal level that would make a difference as far as like stopping the front door of bad guys getting in. Um really great session there. And then like mid-session, Scott Cornell's like, by the way, they just ruled on this on this VODIS rolling. We're like, what? And then he was like, Yeah, that it, you know, they were all in favor of uh whatever the plaintiffs or whatever. And we were like, What? What did what did he say? And then Montgomery, yeah. And he was like, um, and then kind of we were like, that wasn't supposed to be announced yet. And so then we just kept kind of rolling. And then afterwards, like when we were on break, we were like all on our phones and scrolling. So yeah, it was very weird being in DC um during the whole thing. And then we kind of got to hear FMCSA's feedback on it too, which was pretty cool.

SPEAKER_00

What was it?

SPEAKER_03

Their feedback was just like this will be very interesting, and there's not enough um officers to actually enforce like all the safety, so it's gonna be hard difficult for brokers to actually be able to tell what the carrier is like. Kind of same thing we talk about, but FMCSA acknowledged that. So it's interesting.

SPEAKER_00

Yeah. To me, the thing that I think and I get this is just kind of how it works in the United States, too. So it's not like this specific one was that there was like specific, I should pull it up. The language from Brett Kavanaugh was like, this does not mean that brokers are gonna get sued every time there's an accident. But then later, it's like, well, we're gonna have to see how the case law is formed to determine the standards. And I'm like, well, for the second to happen, the first has to happen, which everybody's gonna get sued until they're actually case law, which costs thousands of dollars in lawsuits, hundreds of millions of dollars in lawsuits, and millions of dollars in insurance across the entire supply chain to enforce a standard that doesn't exist, that nobody's put out, there's no guidance on. And to your point, the FMCS, what is it like 85 or 90 percent of carriers haven't been inspected for any safety rating whatsoever?

SPEAKER_02

So it's like okay, 94% or something like that.

SPEAKER_00

It's something crazy. And it's also like, well, like now I kind of feel like and again, definitely my personal opinion was that the Supreme Court kind of went, let's let the market fix the safety issue, because clearly the government can't. And it's like this is just gonna drive inflation on everything because everybody's costs are gonna go up. And Leffler talks about that a lot. Safety is not cheap, it will get more expensive, it is not gonna get cheaper no matter how this shakes out. Things will cost more money in both litigation and insurance, and it's just gonna be uh the wild west until there's some type of framework that exists.

SPEAKER_02

Yeah, I want to I just want to kind of break down what exactly happened, and then we can give our analysis and opinion on it. So if you're not because a lot of our audience is newer to brokerage and they're learning, so um, you might not understand what all happened and what this means. So I'll try to explain it. So what originally happened is a a motor carrier

What The Montgomery Case Actually Says

SPEAKER_02

was Kareeb is the name of the carrier. They um they were hired by C. H. Robinson, a broker, to haul a load of, I think it was like plastic something. And the carrier had a conditional safety rating when they were when they were uh booked by C. H. Robinson. And this carrier, while driving down the road, um hit a there was a truck. So Montgomery is the the plaintiff in in this case. Um, and I believe he was outside of his truck on the side of the road. And the Carib Transport, whatever the name of the carrier is, hit and injured the uh hit Montgomery, and I think he had his leg amputated. So they went to court trying to, you know, obviously sue the carrier for um the accident and the injury for damages, and then also um trying to sue the brokerage, CH Robinson, for negligence in hiring that carrier. Now Can I ask you a question?

SPEAKER_00

Yes, can I ask you a question though? Because I don't know this, and maybe one of the two, like, what was the specifics on why they said they were negligent? Was there like something with that carrier that they used to define?

SPEAKER_02

The driver had crash history previous to that. The carrier had crash history and safety issues. So if you look at CSA scores and out-of-service percentages, all the things that we would normally look at safety-wise for a carrier, they're they're claiming that C. H. Robinson saw that information and still chose to book that carrier, which is uh negligent on their part. That's the claim.

SPEAKER_03

That was like in 2017 or something, right? Or what was the year?

SPEAKER_02

16 or 17, yeah.

SPEAKER_03

Right, which is like a like if you also think about back then, that was like pre-dates highway that predates a decent amount of tech that's out there now. Anything.

SPEAKER_00

Yeah, we were using like Safer back then. I mean, I worked at TQL then, and like we would literally go to Safer and look at the FMCSA. There was no third a carrier 411, maybe, and that's like opinions.

SPEAKER_03

Yeah, but that's just a copy of FMCSA data. That's not really any other analysis with reviews.

SPEAKER_02

So then here's where everything shakes out is that historically brokers have been shielded from legal liability for negligence from F4A, which is the Federal Aviation Administration Authorization Act, uh, which basically said, like, hey, as an intermediary, we don't hire the driver. We're not the one driving the truck, so we're gonna be shielded from any negligence that that carrier has. So then when it went to the Supreme Court, the Supreme Court, all they did was they didn't say C.H. Robinson's at fault. They're just saying that no, F4A is not going to shield brokers, correct? Danielle, is that to your understanding? Right.

SPEAKER_03

So the case is still, yeah, the case is still technically like open. Like nobody won anything. So CH. Yeah, so CH could be found like you're fine, which I feel like they still have a good length to stand on because a conditional means like they could still come back, you know, like the carrier could have came back and fixed everything and you know, whatever. But um, yeah, so that's kind of why it's like we still don't know anything. And I think kind of everybody freak like the whole market's freaking out, sky's falling. We don't know everything yet. And also, it's interesting whenever I because I just had Brian on my podcast and um Brian Nelson, and he was saying, you know, this is the only place that this wasn't applying is in six states. So unless if you were not operating at all in any other states but those six, you were already at risk of this. Like this isn't really anything that new. Um, and I think that's something that everyone's forgetting. Like we everybody still had this risk. Um, now, in one hand, I'm kind of happy about this because I have two teenagers on the road, and it's like I'm happy that, you know, hopefully maybe we can get out of service percentages to go down and people have better equipment and you know, my kids are safer on the roads type thing. But on the other hand, it's uh difficult as a broker to be able to see things. But coming from a carrier vetting platform, whenever I worked with Mike AirPortal, I can tell you there's a ton of brokers out there that don't even check, like they unclick that because it's like, unless if they're unsatisfactory, they don't they don't care. So I do think there should be better standards in place.

SPEAKER_00

The cause cut like I have so many questions that come to mind, right? It's like one, like I've lived in Pennsylvania half my life and Florida roughly half, right? Pennsylvania has like very stringent um inspections every year. So like what you have to do to keep just a regular vehicle on the road, you have to go pay to get inspected. It passes emissions, tires, all of the safety standards. You're in Florida, you don't have that. And in Texas, you don't have that. So like my son lives in Texas. He's like, oh, you'll see cars driving down the road with like literally no doors, no mufflers, and like three donuts on it and one real tire. Reminds me, and nobody looks at it. Yeah. And but like in Pennsylvania, like you just don't see that because of that regulation. I'm like, okay, like I get it from like the federal standpoint, like you can't. And I know that a lot of these are states on where you get your DOT, obviously. However, there are police on the road, whether it's state law enforcement, local law enforcement, sheriffs, federal, like, are we not able to do the same thing we do with just like normal vehicles with like tractor trailers? Like whether it's tri uh tread depth, safety, just like very basic things. Like, I just don't understand how that is unenforceable from like a staff perspective. When I feel like if you drove your car down the road in most states, somebody would pull you over and be like, uh, you don't have a windshield on your car. Like, you can't keep driving, like whatever the exaggeration is. But like, how can't you just why is that?

SPEAKER_03

So, whenever um the bad guys were like, you know, like the back in the day, it was like if you had no inspections as a carrier, like no care, no broker would use you because you were a bad guy. So then all of the bad guys were like going through wait stations and do whatever they play to get inspected. Well, then DOT was like, hey, we're not gonna be doing all these random inspections just to help the bad guys. So now we're only doing inspections if it's like you have no windshield and if we see dangers on the like that's when they're doing it. So they are helping with those guys are supposed to be.

SPEAKER_00

Here's what I found too. So, like, this was a client of Nate and R's. This is like th four years ago. It's a little while back, but not forever ago. Um, their California carrier, um, not huge, like 25, 30 trucks, maybe, um, been in business like 10 years. They're like, we can't get a safety rating. Like, we can't get one. So I helped try. Like, we literally got on the phone, called the FMCSA and went, like, can we schedule this? Can we do something so they can get a safety rating because they're legitimate, they've got, they'll give you the records, whatever you need, maintenance. And I was on the phone when they said this. They were like, oh no, if you call us and request it, we're not gonna come out and do it because we know you're fine and we're not gonna waste our time. We don't have enough people. So, like, literally told him and me on the phone that, like, oh yeah, if you need this, like, we're just not gonna do it because we can't get to the ones that we think need it and you're probably good. And it was just like, because he had a big customer that wouldn't let him take their freight. He won the bid and they're like, until you have the safety rating, we can't work with you. So he lost all that business, and the government was just like, yeah, we're not gonna help. Like, just no.

SPEAKER_03

Well, I think what's interesting. So what kind of what I talked about with Brian was like, A, the sky's not falling. I think if you are, if let's say if a carrier, so let me back up. Whenever I was a broker, the biggest thing that we checked was if you're a conditional or unsatisfactory, we went load. Sometimes on conditional ratings, it was like if they had a safety letter, if they had like a full, like if they're a larger carrier and they kind of are like getting their stuff together, they fired drivers, like they had this all in writing. My my compliance uh manager would look at all that. And I guess that's kind of the route that they wanted you to take at. But also it's like at that point, why would you even take the risk of knowing, like taking the safety letter, knowing that we don't really know how to read it? We're not carriers. Like, I I couldn't tell you what they have to do. You know what I mean? So it's like, then again, you don't want that risk, and also then just don't load a conditional. But then is it gonna get down to where, okay, they had an alcohol violation or they had whatever? I actually just talked to a carrier the other day where they were saying that their driver got pulled over, or they have um like terminals, like basically like smaller carriers sign onto them. And one of their terminals, the driver didn't even have a CDL and got pulled over. And so they're like, we fired that whole terminal because we don't know how they're operating, but now our safety rate is gonna be hit from it, but we got rid of them. So then it's so then it's like you go down this whole rabbit hole where you're like, how how big is this gonna be? Where like we just don't use anybody because they have one mark on them. I think that's unrealistic and we won't have any capacity. We all have no drivers at that point. So I think that's kind of why everyone's freaking out. But I think business as usual through your due diligence, like same tactics that we did with cargo theft, where you're doing your due diligence, you're digging in, you're asking questions, applying that same thing to safety, because we haven't done, or at least I don't know anybody that really does that.

SPEAKER_00

Yeah, you can't, because you can't. We we also try to do this too, where like you can't get driver level safety records because the driver has to sign off on it like HIPAA for medical. Basically, hey, in order for the FMCSA to get it, the driver signs a document, you pay money, then they give it to you. So you can see the company level, but we're not even able to get to a driver level to say this driver, to your point, is safe. You can see the company, but to your point, the company tells you what already happened. Those drivers might not even be working for this company. Right. So you can have a good company that got rid of bad apples years ago that looks bad but isn't, and you can have a terrible company with terrible drivers, but you can't see their driving record because they just got hired and that's not visible in any system whatsoever.

SPEAKER_03

Because that's but I think because it's not because it's not visible, though, we can't be held liable. Like it's it's kind of what they said in that ruling was like, if you are able to see things, you should go off of that, is basically what I got from it. As like a dumbed down version.

SPEAKER_02

That's like the big argument that people are making is that brokers are now being exposed to liability when they don't even have access to a lot of the information. And I think one of the bigger takeaways for a brokerage, and I we've been doing this at uh Pierce Worldwide Logistics for since I've been with them, is we have a very detailed and documented standard operating procedure or SOP of how carrier vetting and selection works. And we regularly communicate that. And as a brokerage, if you don't have that documented, what your process is, you're putting yourself in a in a weak position to defend if you ever were to be um brought in on litigation for you know negligence here. So things like, and for example, if you're a member of TIA, they have their carrier selection framework that it's it's not like guaranteed to like you know give you amnesty, but like it's giving you a good set of guidelines and what proper carrier selection can look like and does look like. So, for example, that can include things like hey, we are verifying that every carrier that we load has an um active authority with the FMCSA and that they have a satisfactory, or that they could have satisfactory, unrated, or conditional, for example, but they're not an unsat

Broker Defense Starts With Written SOPs

SPEAKER_02

carrier. They have proper insurance. Um, and then you can go further down with your selection of your rules. So if you're using something like gen logs, highway, mcp, etc., right? That you're talking about how you're using your your technology and the data available from the FMCSA and inspection history to then apply, you know, your subjective screening process. And if you don't have that SOP documented and available, like I said, you put yourself in a vulnerable situation to defend um against a court and against a uh a plaintiff and an attorney. So one of the things that our carrier compliance team always does when a broker comes to them and says, Hey, I'd like to use this carrier, and the compliance team, you know, is kind of going back and forth of, you know, saying why they won't use them. Oftentimes they'll say, Look, I would not be able to defend my decision in a court to say that you can use this carrier because the information that I have available to me tells me that they're they're not a great option for us to use. So that kind of thought process is really what brokers should be doing and should have always been doing. Um I agree. But people that are just like, oh, I'm just gonna go get a carrier vetting and onboarding tool like highway and set some basic rules and set it and forget it. Like, that's not, I don't think that's enough personally. I think you have to constantly refine it and have like, you know, for sure, you know, thought-driven processes in place. That's that's my big take on it for just your own process.

SPEAKER_03

Full training. Yeah, and full training throughout your staff because it's not just a compliance manager, but you do want everybody to understand like who they're hiring. Um, I know at my care portal they actually just came out with a way where like if it is a reviewed carrier, you can then type in like your read, like what's your reasoning or like what kind of like document how you reviewed them, which was also super essential to have documentation. If it was a reviewed carrier, how you would do the um, like what all did you check? Like, did you check their, you know, did you get a safety letter or did you do a VIN verification? Did you ask for the CDL? Like, what all did you do? And that part does need to be documented too, because if something does happen, you can't just be like, well, they were a review and we checked other things. It's like, well, what all did you do? And it needs to be written down. Um, so I know they just came out with that. And then at um logs were actually. Updating it where, like, you can see like kind of a different analysis of their safety data. So, like, if it is like a higher, like let's say it's like because they they do the weighted um on those violations, which is like super foreign language to me. I'm sure most brokers feel like this, and it's like 80 pages of a document you can read from FMCSA that no one's gonna do. Um, but if it's like weighted eight or higher, making almost like an algorithm of knowing. And so I think that's basically I'm getting at like the type of platforms that you use, I think will then help you be able to make those dis educated decisions because you're not like you don't know what all how all like a DOT officer judges a carrier. I would I have no idea, you know.

SPEAKER_02

So 100 100%. Yeah. I mean, what's crazy, Ben? Think back to like when you and I were young in brokerage. Um, we didn't like like you like we said before, like highway didn't exist at the time. I remember we had we switched to it was my carrier packets, um, it was my carrier portal, but like we ended up switching to MCP um a couple years in. But originally it was just like our TMS checked FMCSA for we use Safer to pull like their safety rating and CSA scores, and that was pretty much it. Like it didn't go beyond that to look at really anything else. Um, you know, we and we're just like, all right, they have insurance and they have an authority, and there's you know, exactly satisfactory. All right, let's load them.

SPEAKER_03

And cargo theft wasn't like a thing back then, too. So, like, really the only reason why we did start checking things was because of cargo theft. But we really were like, okay, maybe you have like worse safety rating, but I know you're not gonna steal the thing, so I'm gonna roll the dice. I mean, I know I was like that. So I'm sure I know there's so many brokers that are like that. I think it's just kind of readjusting our thought process to go back to, hey, safety actually is a big deal.

SPEAKER_00

You know. I have like two very simple, but I feel like obvious questions, right? Because I'm reading the brief again and like the summary, right? And it's like choosing a carrier based on safety. Like we just outlined, like, we have no information to define safety. We can define what happened may or may not have happened before, but don't know if those people still work there. So that literally tells you nothing about safety. We don't know if the drivers there are safe or were safe with their previous employer. So there's no information there, right? So, and third of all, what is safe? Because the federal government said they're legally able to drive. Our job is not to define if somebody can legally operate a motor vehicle. Because in my head, I always thought like you could not sue the federal government, but I swear I just saw like three days ago that Trump sued the IRS for something. And I'm like, well, clearly somebody's suing the federal government. Why are we not able to sue the federal government or the FMCSA or DOT and go like, we have no safety data. So like you're responsible and you're liable. Like because the other thing in the I think that would be CH.

SPEAKER_03

I was gonna say, I think, I mean, CH is a powerhouse. So I think that if they do have something like this happen to them, like if they do get convicted, that's exactly where that will go next. That's what I'm thinking.

SPEAKER_00

Because, well, here's the other thing. Because this I was looking for this line in here because I knew I read it before, but it says this decision removes the federal shield that was blocking an old theory. Negligent hiring is a tort theory that has existed for generations. Then tort section 411 imposes a duty of reasonable care in employing a contractor for work carrying a risk of physical harm, Barrett cited in an opinion, basically saying, like, in other industries, you could be held liable for hiring somebody that does physical harm. Like I just did, we're getting our roof put on our house. So yesterday, I went back to the contractor in my HOA. And do you know how I was able to mitigate my risk as a homeowner? Can I have your insurance certificate? Great. Do you have workmen's comp certificate? Great. I gave that to the HOA, they gave that to the city, they'll give me a permit. I don't know anything beyond that. Like, I literally don't know if the people they're hiring are employees of like I can't go beyond insurance to know, okay, if they don't do what they said they would, the insurance company will pay. That's how it's handled in other industries. I don't understand how in the world that doesn't just happen here, which I guess is the point. Everybody's just going to need insurance that didn't exist because you can't actually do this from a practical standpoint. I mean, at least not now, anyway.

SPEAKER_02

Well, here, let me go a step further, right? What about the mega shippers that go direct to a large fleet and a broker's not involved? Is the shipper the next one? I mean, like the shipper is liable. The shipper's definitely liable. They have even bigger pockets than you know, a lot of the big brokers have. Like, where's their liability going to come in place?

SPEAKER_03

I think they were always part of it though, because they do see the truck. So, like, I think they were a lot of times in lawsuits. It's just wasn't like I know, like the Hope Trans thing, they were trying to sue USPS for that too. Um, and so, but like taking the broker out of it. And now it's like they actually could loop back in the broker.

SPEAKER_00

So Well, Lefty said, and he did a pretty long interview that day, and he said, like, this definitely has created more risk directly to shippers. Because he's like, listen, if you can go at the broker, you can go upstream one more to the shipper. And he's like, think of four PLs, where a four PL has brokers underneath it and a shipper's hiring them. They can now be looped into it. Like the liability net just got enormous and basically encompassed everyone with no guidance. Because someone else, I think I can't remember who it was, but he was like, Okay, like, think about this. Like, I actually think Craig Fuller said this. He's like, if you have a big trucking company, you could have everything you're supposed to, all of your maintenance, driver training, cameras in a vehicle. But if a driver just decides to drive when he was tired, or because he looked at his phone, or because he got distracted for any reason, and there's an accident. Or he's even furthermore, say there's an accident where the driver didn't actually cause it but was involved in it, you're still gonna get sued all the time. As a trucking company owner, he's like, we were getting sued all the time at a big trucking company for things that like we had no ability to affect. Like, could not mitigate it, could not train it away. They're just the risk of things happening. So, like, I I feel like this is just a massive boon to the law industry where people are just gonna be suing everybody in every scenario and it's just gonna drive up the cost everywhere for everyone.

SPEAKER_03

I think the biggest thing is that brokers are gonna now have spent have to spend more on, hopefully, not so much more on insurance. Hopefully, insurance companies are like, if you do your due diligence and you have like a written thing, then you're okay. But I they're gonna take the opportunity to to charge more. So on them, and then I think Oregon should be spending a lot more money on legal fees. So it's almost like you better begin an in-house attorney because it's probably cheaper than having a you know retaining counsel. But essentially though, it's like Craig Fuller was saying, I think it was him from now. I feel bad if I'm misquoting, but he was saying, like, all the small brokers should get out. It's like, I think small brokers do a better job at vetting than big brokers personally, from everything that I've seen in as being a vetting platform.

SPEAKER_02

Yeah, and I think so to the insurance point, right? Historically, when you would go to get a liability policy, like the what are the criteria that that a um insurance company looks at? They're typically looking at like your size, like what is your load count, what's your annual revenues, etc. And that's kind of like what they looked at, and they would quote out your policy. When you I think you're gonna see that change. Like, for example, um, I've had a couple of shippers' interest policies written. And so these are basically on behalf of a shipper, we are going to an insurance company and getting a policy that covers the cargo, if it's damaged, stolen, whatever. Um, and it's gonna cover all of their shipments that they run it. So that way we're taking the carrier's policy out of it and we're getting the um the customer a policy directly through us. And oftentimes it's because it's high value or an excluded commodity from most carriers' policies. But when we've got when we've gone through those underwriting processes, they were very stringent with us. They're like, we need to know your carrier selection policies, we need to know your um your customer, we need to understand what their loading and um driver vetting and verification policies are. How do they get checked in? Do they verify with, you know, check in their ID? Do they have security cameras? What are what technology are you as a broker using when you're selecting a carrier? So they obviously understand that when they want to analyze how much risk they have, they want to know every little detail of what every party's doing before they quote and uh uh bind that policy. I think you're gonna start seeing the larger insurance companies, just for your standard um general liability insurance policy for a freight broker, I think you're gonna see them get more strict too and say, hey, before we quote this, we need to know what technology you're using, what your pro what your uh procedures are and your standards from within your organization. And if you fail to meet a certain standard, they might just not, you know, not write you a policy at all. Um, or based on how, you know, you how your history has been with um, you know, cra, you know, carriers involved in crashes or stolen loads, et cetera, they're gonna probably uh write that policy at a different premium versus someone who's got their stuff very squared away, very tight knit. So uh I think Craig Fuller did, and again, I I hope I'm not misquoting him here. I think it was him. He said something to the tune of like, you're not gonna see insurance policies go up marginally. You're talking like 10x in some cases, is is like the the number he threw out there. And I was like, that's crazy. Like some of these smaller brokers just they won't be able to afford um afford that premium as it is. And Ben, we've always talked about how low the barrier to entry is to get into brokerage, like 300 bucks to file your registration, get you know insurance if you even need it, get a bond, and you're off to the races in like a couple of weeks. And that's gonna change.

SPEAKER_00

But Tim pointed Tim Higgum um from his end pointed out uh a couple of days ago. He was like, But if you're an attorney, like you're not gonna spend as much money and time or effort to sue a small company because one, they just don't have the deep enough pockets to settle, and the insurance company will fight. So, like the reality is in practice, he made the argument that like smaller companies are less likely to be looped into these lawsuits because they just don't have the deep pockets and they currently don't have the insurance, is the second thing. Right. Because the other thing is like there is no Congress, there is no, I mean, there is no minimum for a broker to have liability insurance like a trucking company. So if you get looped into an insurance as a broker, I mean, into a lawsuit like this, like, yeah, you're not gonna pay $200 million or $100 or $400.

SPEAKER_03

Like you would just And you think that they're not gonna just close up shop and open up and up a new one?

SPEAKER_00

It's like exactly what's gonna happen, right? I'm like, I mean, who's gonna pay if you're paying $10,000 for insurance and you're not gonna pay $50, you'll just take the risk. And if you get sued, move your customers to another brokerage. Right. Because you don't have assets, like you're just yeah.

SPEAKER_03

I mean, to me, that that's I that is I think exactly what's going to happen. And I do think it'll be more of like these Mecca, mecha type companies. Because I I mean, think about even like whenever you get in like a car accident. Like I was in a car accident, and like almost a year, or I was almost, I think it was like a two-year burial or whatever. So like right at two years, there the lady sued me, being like, Oh, I got hurt. And it was it was technically like a no-fault, none of us were at fault type accident. And um, just because I had good insurance, they just settled and they just they wrote her a check. And I'm like, why then that's gonna affect my premium? But I like so I got punished because I have good insurance. I was on the insurance. Now I don't have as good as insurance. Oh, or you still have a new side.

SPEAKER_00

I no,

Insurance Costs And The Liability Net

SPEAKER_00

I got run over on my bike, and the person who ran me over had had Florida, they were in a rental car. So the minimum required insurance is $10,000 in PIP personal injury protection. So, like, my ambulance bill was $10,000. It exhausted the insurance just getting to the hospital. So, like, there was like three years of litigation to cover just some of my medical bills because literally the exact same scenario. Which I could see that it's like somebody just pay for the damage you did to me and not these hundreds of thousands of dollars of medical bills you have.

SPEAKER_03

Yeah, I think this girl forged a bunch of stuff, but whatever. This is like my conspiracy.

SPEAKER_02

But yeah, I I have a couple questions about the FMCSA meeting you guys had, but first, uh Ben, you reminded me of it when you mentioned Tim Hyam. Uh, this episode is brought to you by a Send TMS. So if you guys are out there looking for a TMS, you can get 90 days of their pro version for free. You have to have a referral code, which we do. It's down in the show notes, so check that out. Uh, but Danielle, so before all this happened, I don't I think we all kind of knew the SCODIS ruling was upcoming, but didn't I I didn't know the exact date that they were gonna be hearing it? Um supposed to be June.

SPEAKER_03

What's that? It was supposed to be June that they were coming out, was it?

SPEAKER_02

Okay, yeah. So we knew it was upcoming. We didn't expect that it was gonna be last week. But you originally were going to talk about the registration side of things. So um, can you talk us through kind of what your points were to take to DC and then how did how did those meetings go with the members from FMCSA?

SPEAKER_03

So what was really interesting with the whole meeting is I got to understand, everybody got to understand more clarity of like what FMCSA's uh limitations are and like where the pro like where we can step in as an industry and like help push, you know, kind of like kind of like the safety thing, I want to say like we can kind of push a standard because they can only do so much. Um and they do have their hands tied on a lot of things. So that was it was nice knowing that, like, okay, at least you guys know this is happening. But um, you know, I was talking to them about you know, it depends on the registration and how they have everything, um, you know, with the new, the new modus and they're doing like identity checks and whatever the um Idemia stuff. And it was not identity checks, but um, I'm like, why don't you make it where like the payment section, like you can tie like this credit card paid for this the same registration here or you know, whatever. Like, why aren't we doing further checks similar to what we do on carrier betting? And so we we were able to break down like this kind of like the secret sauce to our carrier betting and like what we do on the background, and like why can't you guys apply the same thing here? Um, and so I do like I don't want to give away all the things for the things they're gonna be doing, things that they're not gonna, you know, tell people about, but um, they are making some updates. And even like um one thing like a suggestion was if a carrier has their FNCSA information hacked and their their uh contact information gets changed currently in every platform, when that whenever any type of contact contact changes happen, they get that red flag, right? Like highway, MCP, RMIS, they all have a last 60 days, they have a contact change, they look bad, nobody wants to use them. And if the carrier had like a fraud situation happened, they reached out to FMCSA, FMCSA is a full process where they get verified and um or they where they verify the actual real contact, fix everything back. So I'm like, whenever you guys do that, why don't you tell the industry in some way like, hey, FMCSA checked this? This isn't a bad guy now. It was, it's not anymore. They're they're good to be used. Because I was like, you guys are hurting a lot of carriers by not putting that stamp of like, hey, I we looked at them. Yeah.

SPEAKER_00

Ryan and I've been talking about that for like four years. Like these people that are victims then become victimized again by the entire industry because they're ostracized.

SPEAKER_03

Exactly. So they totally hurt us on that. They're writing stuff down and like thinking about how they're gonna update that and notify us. Because I was like, even if you just put

Closing The Front Door On Fraud

SPEAKER_03

the name of who updated it and just say FMCSA, like that would be enough for us vetting platforms because then could then analyze that data and say, okay, it was actually you know them that did it. So it it was like things like that. Like, I you know, how do you fix, how do you fix a problem that like we've just been making like industry's been like, everybody's bad, and not everybody's bad, how do we decipher? And then how did FMCSA put more barriers in? Um, and and they definitely were listening.

SPEAKER_00

So you know what it reminds me of? It's like with what you just said, basically we had to just band-aid and duct tape standards to go like, well, how do you not get robbed? First it's inspections, then it's name changes, then it's victims with name changes legitimately being further victimized. And it's so funny because it's like literally now the exact same thing is happening with safety. What's safe? I don't know. Everybody's not safe. Who's not safe? The 10% of carriers with a safety rating. The other 90%, we don't know. Conditional, absolutely not. Some brokerage somewhere is doing that right now and basically just cut everybody's capacity and went, you can only use these people until this is figured out, and they're just losing a ton of money and carriers are going to be losing a ton of business.

SPEAKER_02

I actually had that conversation with somebody the other day where they obviously there's a happy medium, but if you if you let your brokerage be 100% driven by compliance without any scrutinizing or discussion or finding that sweet spot, you're gonna go, you're gonna be like the compliance person could potentially go so far to say, well, the only way to protect us is to move no freight, right? That's the only way we're gonna, you know, not get a load stolen or not hire a negligent driver is to just we'll just not move any loads at all. And obviously, that's it's not realistic. You can't run a business that way. Um, and I think that's where you need to like sit down and you have to have the meeting of the minds between sales and operations, because that tends to be a huge disconnect in any industry historically, is that sales obviously wants less restrictions so they can go out there and sell and bring in revenue. Operations wants less headaches, they want more protection. And so you have one, you have on one side someone's trying to get a yes, another person's trying to give a no, and you got to find that happy medium where where can we identify that these are always gonna be no, these will always be yes, and then this group in the middle is gonna require a very intelligent analysis and you know, a deep dive into the records and the different uh data and analytics on this carrier to determine yes or no. And I think it comes back to that whole if I say yes, have I done enough, you know, checking on this carrier with the available information at my disposal to defend myself in a lawsuit if someone tries to sue me for negligence. And if you can't say yes, then you probably have to revise your process or not use that carrier or you know, something along those questions.

SPEAKER_00

Again, theoretically, and playing Devil's Advocate, right? Could you not basically just ask four questions before you booked a carrier or a driver and use that to defend? Ask every single dispatcher or driver, hey, are you fresh on your hours of service? Has your ELD been verified by the FMCSA? Is your vehicle maintenance up? Do you have anything I should be aware of on your driver record for drug and alcohol? No, no, no, no, no. Recorded call, write that down. Something happens, they sue you, you go to court, like, well, I can't see the ELD. You guys verified it. I can't check the hours of service. That's the main reason for a crash. Driver told me he was fresh on hours, told me he was driving legally, told me his tires and maintenance were up to speed, told me he had nothing on his driver record I should be aware of. And none of these things I can verify from you guys. So, hey, tell me what else I should have done. So because anything else in the data is company level and not driver level, and a company doesn't cause an accident, a driver does.

SPEAKER_02

So, but here's here's the other side of it, though, is that there are ways to verify some, not all, but some of those things now, not through the DOT, but through third-party tech platforms, right?

SPEAKER_03

So, like not at a driver level, not at the driver left, not yet.

SPEAKER_02

That's the driver level. I don't think we'll use there. Isn't it because of so like 10 streets, for example, that has as a broker, so like for example, I was talking with one of the guys from Tex Locate and they're owned by 10 Streets. They are getting down to driver level verification on CDL at this point. And because a lot of um carriers use 10 streets for a lot of their uh asset-based um, their their motor carrier side of the business uh for driver stuff, there is data out there that could in the future allow brokers to vet down to a driver level. If you go on highway now and you're using load lock, when you go to assign the VIN below that VIN, it's gonna ask you who's the driver. That they're not fully there yet and you can't get driver level information, but it seems like it's coming. So, but let's take the driver's driver part out of it. The ELD, right? You can get ELD um connection information through platforms like Highway. You could see who their ELD provider is the last nine hours it's been seen.

SPEAKER_00

You can't get hours of service, and you can't tell if that ELD has been verified.

SPEAKER_02

But you can get CSA.

SPEAKER_00

You cannot tell if it's been manipulated from the driver end.

SPEAKER_03

Even locations are getting manipulated. Yeah. Yep. I so I agree with what you guys are saying.

SPEAKER_02

I'm telling you, if I'm if I'm an attorney trying to sue a brokerage, I would probably try to argue those points though. And this again, this is why I say that as a brokerager. Broker, you need to have a very good documented process to be able to defend yourself saying, hey, given the information that I have available to me, we made the best decision given what we knew at the time. Um because yeah, outside of what we know, we can't make a decision on I don't know if the drivers tell me the truth about their hours. I don't know if they're telling me the truth about if you know there actually is a team in that truck or not. Um, you know, all the things, right?

unknown

Yeah.

SPEAKER_03

Yeah, they pass the phone over. Well, I was gonna say, I almost hope tech companies don't make it on a driver. I mean, that's that is a nightmare. You know what I mean? And like all you really can do on safety is on a VIN level, which ties the driver's license, but they don't put I mean tries the license plate, but they don't put the drivers flop trucks all the time. So that that doesn't even happen. So I think on a safety level, it's very difficult to do. Um, so yeah, I'm hoping that we tech companies like all you tech companies out there, don't get on a driver level because that's gonna be a nightmare for brokers.

SPEAKER_02

Yeah, I feel like what you ideally want as a broker is I should be able to vet the company from the information I have, and it's on the company to make sure that they're selecting the right person. Right. If you apply the concept of us being liable for a driver's individual decision, um, if you apply that to any other industry, it's it becomes like absolutely just crazy.

SPEAKER_03

Um I mean, they could just one day be like, I just want to run over a bunch of people, you know what I mean? Like who knows? That's unpredictable, and you there's no way, but I'm sure you can find something somewhere where it's like, oh, he was on antidepressants, you shouldn't have known. You know, it's like, what?

SPEAKER_02

Yeah, he got in a fight with the boy this morning. How didn't you know that? Like it's like insane. It's insane. Yeah. Wow.

SPEAKER_03

So I think that I think sky's to me, sky's not falling. This, like you were saying, your processes need to be in place. Um, but the same tactics that we've been doing for cargo theft where we've been having processes in place, just copy and paste to safety, make sure compliance vendor knows what's going on with safety. That's I think the takeaway.

SPEAKER_00

There's two things I want to cover before we wrap up. One is I'm pulling back out from this article, right? As I think this was, it says, okay, like that means did you track the legal standard is ordinary care. The question a jury will now be permitted to ask in every state in America is whether the broker exercised reasonable care in selecting a carrier. Did you check the carrier's safety record? I get that. Yeah. Was the carrier's FMCSA data available? Did the data show elevated crash rates, conditional safety ratings, out of service, or prior enforcement? Or did you book the cheapest truck? Because the last one made me laugh. Because I'm like, okay, so what if my shipper says you can only pay this amount, pay whatever truck can and I'm okay with it? Am I liable or are they liable? Because I did what they asked me to. And where does that fall? Because there are so many holes in every single one of these things that are going to be litigated forever that I just find comical. But the thing I wanted to cover before we broke is did you see the other thing in the transportation bill related to something all three of us talk about, which was the House Transportation and Infrastructure Committee is marking up the Build America 250 Act today or tomorrow. Um, but it includes the largest, well, bridge investment and infrastructure, blah, blah, blah. But this was the piece. Brokers are going to need actual qualifications. Here's something most people probably didn't know. The federal statute has required experience and qualification standards for broker officers since the law was written, but nobody's ever enforced it. Now, like Nate said, becoming a freight broker, you need a bond for 75 grand. No enforced experience or training or minimum liability. This new bill basically says the DOT is ordered to issue a final rule within two years that actually implements those requirements and have to brief Congress every six months. So TIA courses like ours, like hopefully are going to be all at the very least a requirement to educate brokers as opposed to just requiring my own insurance, which is wonderful.

SPEAKER_03

Which is great. Yeah, I was gonna say that that was part of the thing we talked about with FMCSA too, was uh it's very difficult for carriers to even be able to vet a broker because the brokers aren't even required to put their phone number down. Like, how are they supposed to call and verify that it's not a real person and not a fraudulent actor? And I'm like, why are it is written? And they go, well, just because it's in the law, it doesn't mean it's a rule. And we're like, well, who makes the rules? They're like, we do. And I'm like, then make it a rule. Like, yeah, what? So I remember so like mind-blowing.

SPEAKER_02

I I remember so that experience or education like policy has been like you said, it's been around, but never really enforced. That's why I remember talking with so Paul Leahy's like one of the education guys or membership guys at TIA. And a few years back, Ben, I remember when I was in DC at policy forum after I talked to him, I was like, hey, I was like, good news, because we we teach their new broker certification course. And he's like, hey, we're gonna we're thinking about requiring all new TIA members. If they don't have X amount of experience, they're gonna be forced to take uh the class that you guys teach. And we're like, oh, you know, more students, that's better for us. Um now they do, right? And we've seen the the last like probably year or so, Ben, of the students that go through that, it's a higher population. Now we we had times in the past where like maybe we'd have like one person in a live session or maybe two, and now we've had like five, six, and this is uh they run these like every couple of months, a new a new class. But

Broker Qualification Rules And Wrap Up

SPEAKER_02

um I I fully support that. I mean, it's it is crazy. We've talked about it, like the low barrier to entry in our industry, and anybody can just go historically, right? Go through the URS and do your registration and all that. And I'm curious how MODIS and the FMCSA's push to improve the front door, we'll call it, to getting in, you know, getting registered, how that will impact brokers. Because right now, MODIS is is it just for motor carriers?

SPEAKER_03

Just for motor carriers and only new registration. They are working on going backlog. The actually they are currently working on backlog. So anytime you have to log in to make a change, you have to go through the certification, is what they just they just kind of went live with that. But that's only for carriers, that's not brokers. Yeah. So even brokers, you don't even have yeah, you don't even have to list who your main person is. I mean, it's it's definitely wild. And it makes no sense. It's like it's a win-win for everybody to have something listed. Um, I I is yeah, I agree that brokers need to have training. And I mean, especially with this new liability, like if they are gonna be held liable, which like I said, it has been a thing other than a couple states. So it's really not anything crazy new, but they need at least be educated before they have like their whole life through. And I mean, I guess their business shut down. But yeah.

SPEAKER_02

Yeah. Agreed. Um, anything that we missed or anything you want to add, Danielle, from your thoughts or experience in the last week?

SPEAKER_03

Um, I think that's really about it. I mean, my biggest thing is like sky's not falling. Just look at what you're doing and kind of re-educate yourself. Um, I think I'm hoping that there's some more educational classes that come out on safety. Like that, there's like that 80 page um, my podcast on it just came out um where Brian was talking about. There's like the 80-page guidelines of what each safety violation means and why the all the different breaks on. Like, I'm not gonna read 80 pages, so I'm hoping you guys need to come up with a class on that, is kind of what I'm getting at.

SPEAKER_01

There we go.

SPEAKER_03

Um, and educate us because I don't know, I want to take that class. Um, so I I'm hoping that the industry does a little bit better things about that. And like I said, I'm I think this is a good thing for us, other than pricing and other than like the best that can happen. But if you're doing the right thing, like you're good.

SPEAKER_00

Yeah. So yep, agreed. 100%. All of it. And I'm like, yeah, it was in the back of my mind as of when I heard that ruling. I'm like, we need a safety class. And I'm like, Nate and I are accredited educators for the TIA, I think the state of Virginia. And I'm like, we need to research the definition of accredited course because there isn't anyone to accredit it because they don't require it yet. But I'm like, I do think that is something we should do. And I do think we should put a safety course out, um, whether it's for a public service or whether it's paid because there isn't one. Like this doesn't exist. And Nate and I've been teaching it for eight years. We probably should put that together.

SPEAKER_03

There is for carriers.

unknown

Yeah.

SPEAKER_03

Well, so it's like you can almost copy and paste what carriers learn and just be like, hey, this is what carriers have to go through, brokers, because like I have no idea what goes into a pre-check. I don't even know what a pre-check will you have to do. I have no idea.

unknown

Correct.

SPEAKER_00

I I do think that like that's not a bad thing to have gone through. You're not gonna remember all of it, but like in every state, if you're gonna sell real estate, like just residential real estate, like it's like three months, I don't know, 180 hours. Like it's not nothing. Most of that stuff is like legalese. Like I've gone through them, like you're probably gonna remember almost none of it. But the fact that you actually took the time to go through it shows you probably care enough to be responsible when you're in the business, whether you remember all those things or not. So I do think there is like validity and I think a reasonable expectation that brokers at least learn those things.

SPEAKER_03

Think about whenever you take a certification in a class and it does teach that, and then you say, like, you know, in the case like, oh, I don't know, they're like, Yes, you did, because 10 years ago you took this class. There's another thing.

SPEAKER_00

We could have like reasonable doubt. Yeah. I'm like, we could have well, what is that? Like uh um ignorance isn't a defense. What's that saying in like a court of law? Like, I didn't know, doesn't get I don't know. But yes.

SPEAKER_03

You technically yeah. And I mean, I think that's what CH is gonna do whenever it goes further, like further, when it goes back down, and they actually like handle the cases that they I don't know how they lose that either because at the time there was nothing available. So it's like they can't say that they knew all these things, they didn't.

SPEAKER_02

Yeah, yeah. So we'll see. Maybe they'll settle out of court and we'll never know the uh the uh which I I hope not.

SPEAKER_03

They're in this deep. Keep going, keep finding CH. We need you.

SPEAKER_02

Well, Danielle, we uh we appreciate you taking the time to join us today and hope you uh enjoy the rock and roll hall of fame at the at the event you're at. Um folks connect with you or find your podcast.

SPEAKER_03

Uh LinkedIn's obviously the best place. So just find me Danielle Spinelli. My podcast is on there too. Tell me everything. Um, you can usually just find it through my LinkedIn, it's usually easier because I am working on a trademark, they tell me everything, but there's a decent amount of other ones out there like that. So, anyways, but that's me.

SPEAKER_02

Yeah, we went we went through the whole trademark process many, many years ago. And apparently uh Freight 360 was that JB Hunt has JB Hunt 360, and they originally were like, you guys were infringing on us, and we're like, Oh, it has to be fun to do.

SPEAKER_03

I am working on fraud girl. You know what's funny when you trade, sorry, one second, whenever you do a trademark, you um have to sorry, I have a bunch of people wrong with me. Whenever you do a trademark, I guess somehow it gets like leaked, and I'm getting hit up by attorneys like non-stop of like you should have filed through me and this. And I'm like, what? So I'm working on fraud girl good in trademark first, and then I'll do the tell me everything.

SPEAKER_00

Oh, we got a good trademark attorney for you. I can connect you with you. Good, yeah.

SPEAKER_02

Awesome. Well, thanks again, Danielle. We'll uh we'll have to do this again uh soon. So uh Ben. Thanks for having me. Ben, final thoughts?

SPEAKER_00

Whether you believe you can or believe you can't, you're right. And until next time, go bills.

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Benjamin Kowalski

Co-host
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Nate Cross

Co-host
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Danielle Spinelli

Guest