On April 13, 2023, the United States Court of Appeals for the Eleventh Circuit (“11th Cir.”) issued a ruling favorable to freight brokers in the case of Aspen Am. Ins. Co. vs. Landstar Ranger, Inc., No. 22-10740 (11th Cir. 2023), when it decided that the Federal Aviation Administration Authorization Act (“F4A”) preempts state law negligence claims for a cargo theft loss.
In Aspen the 11th Cir. was presented with facts including that Landstar brokers loads in accordance with a process that requires motor carriers to create an online profile to be eligible to bid on a load. Once registered, Landstar verifies information before dispatching a load. Landstar did not follow its usual verification process, and dispatched a load to an imposter posing as the authorized motor carrier. The load was stolen and not recovered. The subrogated insurer of the owner of the goods filed claims against Landstar based upon Florida state law theories of negligent selection of a motor carrier.
The United States District Court for the Middle District of Florida (“FL DC”) concluded that such claims were preempted by F4A because they relate to the services of a broker to arrange the transportation. The 11th Cir. affirmed the FL DC, agreeing that the cargo claim did not fall within the safety exception of F4A regarding operation of a motor vehicle.
Counsel for the freight broker in Aspen advised GTU that they expect an appeal of the 11th Cir. decision to be filed with the Supreme Court of the United States (“SCUS”). Aspen is the second time a Federal Circuit has considered whether state law claims against a freight broker are barred by F4A preemption, and arguably creates a conflict that increases the likelihood that the SCUS will accept jurisdiction.
On September 28, 2020, the United States Court of Appeals for the Ninth Circuit (“9th Cir.”) issued a ruling unfavorable to freight brokers in the case of Miller v. C.H. Robinson Worldwide, Inc., 976 F.3d 1016 (2020), when it decided that the F4A does not preempt state law negligence claims for personal injuries sustained in a motor vehicle accident.
In Miller, the 9th Cir. was presented with facts involving a motor vehicle accident caused by a trucker who lost control of his vehicle in adverse weather. The trailer crossed the median and collided with a passenger vehicle, whose occupant sustained severe injuries. The injured party filed claims against C.H. Robinson based upon Nevada state law theories of negligent selection of a motor carrier.
The United States District Court for the District of Nevada (“NV DC”) concluded that such claims were preempted by F4A because they related to the services of a broker to arrange transportation. The 9th Cir. reversed the NV DC, concluding that the claims fell within an exception to preemption for regulation of motor vehicle safety. C.H. Robinson filed an appeal with the SCUS, which declined to accept jurisdiction of the case without opinion.
The freight broker industry is hopeful that Aspen will be appealed to the SCUS and jurisdiction will be accepted to obtain a favorable ruling and resolve the apparent conflict with Miller. However, there is no guarantee that the SCUS will conclude that such a conflict exists. Narrow readings of Aspen and Miller can support a conclusion that each case deals with a different portion of the F4A statutory language, and different liability exposures, such that no conflict among the Circuits exists.
Regardless of the ultimate outcome with SCUS, the fact patterns in Aspen and Miller demonstrate unfavorable trends of diminished safety on America’s roadways and in the chain of custody of goods which create significant tort and contractual liability exposure for freight brokers. Prudent freight brokers will apply best practices in carrier selection to minimize these exposures and protect their business.
Freight brokers insured with GTU possess a unique advantage over their competition with the opportunity to apply our proprietary algorithm to their motor carrier lists to identify those most likely to create losses. In addition to obvious lessons like never use the services of motor carriers rated conditional or unsatisfactory with the FMCSA, our algorithm assists with nuanced identification of motor carriers who present an increased likelihood of a motor vehicle accident, an uninsured cargo claim, and theft of a load.
Through effective utilization of this resource alone, GTU freight broker customers can promote public safety and protection of the chain of custody of goods; reduce frequency and severity of claims; lower loss costs; create the opportunity to enjoy most favored premium rates; stabilize risk management costs over time regardless of size or expertise, or the coverages and insurance limits purchased; maximize goodwill in its shipper relationships; and improve profitability.