You’ve probably done it. That time you had a load to haul, but you couldn’t do it yourself because you didn’t have a truck available. So you called a friend to see if he could haul it for you. Everything went well. Your friend delivered the load, and there were no problems.

But what would have happened if your friend had been involved in a serious accident? Who would have been responsible? Your friend who hauled the load? You and your friend? It depends. After serious accidents, situations like these become complicated, and they are often sorted out in court by lawyers and juries. Unfortunately, in too many cases following serious accidents, the decision is not a favorable one for the company that hired the other carrier. By hiring another company to haul for you, you are not always free from liability if that other company is involved in an accident. To help protect your company, it’s important to understand the risks when you hire others to haul for you and what you can do to reduce this potential liability.

To begin with, regulated motor carries are required to meet applicable state and federal insurance requirements, including minimum levels of financial responsibility. They are also required to have the proper documentation on file demonstrating that these requirements are being met. These documents, referred to as “filings,” are an indication of your company’s responsibility to indemnify the public for damages caused through the operation of your company’s vehicles.  

So what vehicles are considered your company’s vehicles? To start with, it can include vehicles you own, rent, or lease. Usually, there isn’t much confusion over who is responsible for losses involving these vehicles, since they are identified as your company’s vehicles by name and DOT number and thereby assumed to be operating under your company’s authority. The freight bill of lading, often used by courts to decide who is responsible for a loss, typically also identifies your company as the responsible motor carrier.

Unfortunately, your company’s vehicles can also include another carrier’s vehicle if you have hired that carrier to haul a load for you. That’s because your company can be viewed as the party ultimately responsible for arranging for the transportation of the cargo—the reason the truck involved in the loss was on the road. When small losses occur, there might not be an issue, as long as the motor carrier hauling the load is adequately insured. In serious cases, however, such as bodily injury or fatality accidents, attorneys quickly find out that two motor carriers are involved, both with insurance policies that potentially can be drawn on to pay for liability damages.

One way to protect your company from this potential liability is to avoid it altogether by using only your insured vehicles—those operating under your company’s authority—to transport your company’s freight.  However, if this isn’t feasible, and your exposure is limited because you seldom hire others to haul for you, it’s important to consider adding hired auto coverage to your liability insurance policy. Depending on the specifics of your hiring arrangement with the other motor carrier, this may provide the additional liability coverage needed to protect your business financially in the event of a loss. Talk to your insurance representative to learn more about Northland’s Hired Auto Coverage Endorsement.

If you hire others to haul for you, hired auto coverage may provide some protection. However, it’s important to note that having this coverage won’t protect your company’s safety reputation if a serious loss occurs. In a serious accident case, the other motor carrier’s loss can still become your company’s loss.

Besides completely avoiding this exposure, there is another way to protect your company. It involves establishing a brokerage company that is completely separate from your trucking business (separate name, accounting system, payroll, phone contacts, advertising, etc.). It requires registering as a broker with the Department of Transportation, obtaining broker operating authority (US DOT Form OP-1), and meeting the $10,000 surety bond or trust fund requirements outlined in 49 CFR Part 387 of the Federal Motor Carrier Safety Regulations. Using a brokerage company to channel loads from your customers to other carriers can be an effective way to reduce your trucking company’s potential liability for losses involving motor carriers who haul those loads.

As with many complex business decisions, consult with qualified experts for guidance on meeting business and legal requirements related to operating a freight brokerage business. Talk to your insurance representative to ensure your insurance coverages meet the unique needs of your business.