The US Supreme Court has unanimously ruled that freight brokers can no longer use federal law to shield themselves from state-level negligence claims when a carrier they hired causes a road accident.
The decision, in Montgomery v. Caribe Transport II, LLC, closed off a defence that brokers have relied on for years and immediately raised the legal exposure of Canadian logistics companies operating in the US market.
For Canadian freight brokers, the ruling means the preemption defence – the argument that federal law removes brokers from liability as mere intermediaries arranging transport – is no longer available.
"This does not create new causes of action or make brokers automatically liable for carriers’ conduct. It does, however, eliminate a key defense and increases focus on whether brokers exercised reasonable care," said Manish Bissa, national transportation and logistics leader at Marsh Canada.
The exposure does not stop there. Bissa noted that Canadian cargo owners and shippers who manage their own carrier relationships through in-house logistics divisions now face heightened scrutiny as well.
"You also have to look upstream," he said. "There are a lot of Canadian cargo owners and shippers who hire carriers on their own – they have their own logistics divisions. There's going to be greater scrutiny for that process as well."
On the insurance side, Bissa does not expect widespread rate increases in the near term. What he does expect is a sharper underwriting lens on how brokers select and monitor carriers.
"Underwriters are likely to increase scrutiny of risk profiles – greater underwriting information, a deeper dive with respect to an intermediary's carrier vetting, what type of carriers they're using, are they safe carriers, what protocols they have in place," he said. "They're going to look more at the risk profile rather than implement widespread rate increases."
Longer term, the picture is less certain. If loss trends deteriorate as a result of the ruling, capacity could erode and premiums would likely follow.
"If there are severe loss trends, it could erode capacity and ultimately may drive higher premiums," Bissa said.
For Canadian freight brokers, the first priority is a review of internal processes – specifically how they select carriers and how well they can document those decisions if they end up in court.
"What they should be doing is reevaluating their own internal processes," Bissa said. "How are they vetting carriers? How are they documenting this – not only from a carrier compliance perspective, but from a litigation perspective?"
The question, he said, is whether a broker could defend its carrier selection in court – and whether the paper trail exists to support that defence. That means documented protocols, not informal decisions made under time pressure.
"If an exception was made, there's a clear documented reason why – it's not just 'we needed to move a load,'" he said.
The bar, he said, is documentation that can withstand legal scrutiny – not just internal box-ticking. That means clear protocols for selecting motor carriers, dual sign-off where appropriate, and a paper trail that shows every material decision was deliberate.
Beyond process, the ruling is also a prompt to review insurance programs. Bissa said brokers should be asking whether their current coverage actually responds to negligent selection exposures – specifically whether a transportation broker liability policy or errors and omissions coverage would respond if a hired carrier causes harm.
Limits are another consideration. Canadian freight brokers have traditionally purchased between $2 million and $5 million in coverage, he noted, and the heightened exposure created by the ruling may warrant a fresh look at whether those limits are still adequate.
The broader message, Bissa said, is less about a wholesale shift in rates and more about a fundamental change in how the industry thinks about liability and process.
"It raises the stakes around carrier selection and record keeping," he said. "From a defendability perspective, you want to bulletproof your organisation – dot your i's, cross your t's, and ensure the carriers you're working with are reputable and running safely."
That scrutiny now extends to decisions that Canadian brokers and cargo owners may not have examined closely before. Bissa pointed out carriers that are not considered best in class from a safety standpoint – as one area where the ruling will force a rethink.
"Intermediaries and even cargo owners are going to have to rethink that position," he said. "If motor carriers are viewed as not best in class from a safety perspective, people are going to start to reevaluate those decisions."
