Opinion: Freight Broker Liability

By Dean Matt

President

MuchoDeanAero Inc.

This Opinion piece appears in the May 18 print edition of Transport Topics. Click here to subscribe today.

Against the backdrop of a recent multimillion-dollar verdict against one of the world’s largest freight brokers, now is a good time for freight brokers across this country to review their procedures to reduce exposure to similar liability. 

It was a harsh wake-up call that demonstrated the risks involved in freight brokerage and that the consequences of failing to have proper and prudent procedures — or having them but failing to follow them — are very real. Very few freight brokerages could survive and rebound after such a damaging verdict.

Because many freight brokerages begin as the proverbial garage start-ups, the culture initially may be more like a fraternity than a business. At that point, there isn’t much to lose, and so often as not, the attitude is: “Let’s have fun with this.” It may be a stereotype, but it isn’t far from the truth that the culture in many freight brokerages is young, commissioned kids slinging freight, wearing flip-flops and drinking Red Bull.

Many freight brokers are successful and professional, but I suspect the reality is that many who enter the profession never make it past the first year, and even fewer reach the critical mass necessary to be considered a full-service broker — i.e., an operation with a claims department, in-house billing, all modes of transportation, etc.

It’s trendy for a freight broker to hang out its shingle as a “3PL,” but the reality is that very few freight brokers make a successful transition to third-party logistics provider. 

Less-reputable brokerages give loads back rather than take a loss on a load. They are a disservice to the industry and to their customers.

With depressed freight volumes, now is an excellent time to review and tighten up internal processes and procedures and continue to move the pendulum toward more professionalism and discipline on the broker floor.

The days of rewarding the brokers with beer on Friday afternoon are over. Can you imagine the field day a plaintiff’s lawyer would have if the truck that killed his or her client was found to be managed by a freight broker who was drinking during work hours?

Almost all freight brokerages have written rules and procedures, and you can rest assured that they will be scrutinized after an accident. Freight brokerages must review and practice the processes and procedures that sit in those dusty manuals on cobwebbed bookshelves — not just on the majority of loads but on every load. Best efforts won’t cut it anymore; procedural expectations must be met.

For instance, if before a load is booked, the written procedures require checking the carrier’s safety rating on Safersys — the Federal Motor Carrier Safety Administration’s Safety and Fitness Electronic Records System — that process must be followed on every load.

Here’s another example: If a carrier’s insurance expires midway through a cross-country run and your procedures say that you will not use a carrier without proper insurance, then you should transload the freight to an insured carrier.

Be careful how stringent your rules and procedures are, because you should expect them to be followed. Your adherence to written procedures should be audited regularly.

Owners and managers must accelerate a move toward professionalism and discipline in all functions of the brokerage. Now more than ever, disregard for the rules — or even just sloppiness — must be eradicated from the broker floor.

In commissioned environments, the temptation is great to cut a few corners in the quest to book more loads. The verdict is in and ringing loudly: The future of your company and the livelihood of your employees are clearly at stake. Your company can be brought down by one employee cutting corners.

Don’t confuse having a “fun” culture with taking care of business. Make sure the tone at the top of the organization shouts professionalism and carries deeply into its heart. Unlike a start-up, brokerages that have reached a critical mass have everything to lose.

Accidents happen, but the jury has spoken: Broker negligence in following procedures is no accident.

MuchoDeanAero Inc., Naperville, Ill., specializes in corporate finance, strategy, business coaching and turnarounds.