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Read it or regret it
Clauses buried in broker-carrier contracts could lead to your financial ruin

By Donna Ryun, OOIDA Communications Manager

Anyone who is involved in the trucking industry knows that time is money… and there’s never enough of either. You need to get that freight loaded and headed down the road to its destination, so you can turn right around and do it all over again. That’s how you keep the bills paid and food on the table.

Trucking is hard work, so when a broker shoves that contract at you and hands you a pen, you might be tempted to take the easy route and just sign it so you can get down to the business of driving. After all, it’s probably a standard contract and everybody else just scribbles their name and hands it back. Good enough … or is it?

Not according to Diane Adams, an outspoken adjuster with Commercial Truck Claims Management (CTCM) who handles cargo claims for OOIDA. She doesn’t mince words when it comes to broker-carrier contracts that include confusing and ambiguous terms, which often result in financial ruin for the unsuspecting small carrier who is involved in a claim with an unscrupulous broker.

“These guys are being brutally victimized by brokers who clearly don’t care about anything but the money they can make off of the backs of hardworking small-business truckers,” she says as she slams a one-sided broker-carrier contract down on the desk. “It breaks my heart when a claim is denied because of a clause in the contract that allows the broker to take unfair advantage. No one should sign a contract that they haven’t thoroughly read and understood. OOIDA will help.”

One of the clauses that Adams refers to allows the broker “in its sole discretion” to withhold the carrier’s compensation in order to satisfy claims or shortages arising out of “this or other contracts with the carrier.”

At first glance, this sounds reasonable enough until you discover that these terms allow the broker to withhold any outstanding payments for any freight that the carrier has hauled for them before this load.

Let’s say that you hauled two loads for this broker in the past week and the broker owes you $2,000 for your services. The customer determines that the load you delivered today is damaged.

The terms of your broker-carrier contract allow the broker to withhold not only your compensation from this load, but also the $2,000 they haven’t paid you yet for this past week’s loads. And the contract terms forbid you from seeking payment for those loads from any of the broker’s customers. That could definitely be an unpleasant hit to your wallet.

Here’s another example of a one-sided clause in a broker-carrier contract: Your cargo insurance provider has faxed a certificate of insurance to your broker that clearly states the limit of liability to be $100,000. Your broker has checked your credentials, including the certificate, and loaded you up with $200,000 worth of electronics and sent you on your way.

If you didn’t read and understand your broker-carrier contract, you wouldn’t notice that the terms specify that you’re liable for the “full, actual value of the shipments tendered.” According to the contract that you signed, no other limitation of cargo liability is valid, including the fact that a certificate of insurance indicating your liability limit to be $100,000 was presented to them before you were loaded with $200,000 worth of electronics.

And if you haven’t purchased enough insurance to cover the entire value of the load, and your cargo policy contains a co-insurance clause, claims will only be paid on a percentage basis, not dollar-for-dollar. That could certainly put you up a well-known creek without a paddle.

Some broker-carrier contracts contain a clause that allows the broker’s customer to determine, at its sole discretion, whether damaged branded or labeled goods may be salvaged and, if so, the value of the salvage. The contract makes the carrier responsible regardless, but any salvage receipts will be deducted from the broker’s claim against the carrier. However, some customers simply won’t allow branded or labeled goods to be salvaged.

“I’ve had cases where the customer, a major retailer, refused to permit the freight to be salvaged, even though I assured them that the branded goods would never be made available to the general public,” Adams said. “That left the carrier responsible for paying the full, actual value of the damaged goods with nothing to show for it.”

One-sided broker-carrier contracts have caused financial hardship and even ruin for far too many carriers who failed to read and fully understand the terms of the agreement before signing. There may be two parties signing this agreement, but one of them is definitely getting the shaft, and it isn’t the broker.

In addition to the examples I’ve given, there are contract terms that allow the broker to charge a carrier who had a breakdown just 20 miles from destination for fees/expenses of sending a second truck to transfer the load and continue the delivery. The original carrier got no money for the part of the load that he hauled, and yet was required to pay the fees for the second truck.

Why? Because the carrier agreed to the terms when he signed the contract that he either didn’t read or didn’t understand – or maybe both.

We’ve seen some contracts that include an indemnification clause that makes the carrier (that’s you) responsible for defending the brokers and their customers from all claims for loss, damage or injury (including attorney’s fees) against legal proceedings brought against the broker or its customers. Does your cargo policy cover this? If you actually agree to these terms, you’d better make sure that you have the coverage; otherwise, it’s going to cost you big.

Adams is dedicated to helping small-business professional truckers with their cargo claims. However, she is determined to take that dedication a step further by convincing them to read and fully understand their broker-carrier contracts before signing.

OOIDA’s Business Services Department has staff that will point out these potentially devastating contract terms for members, and help you understand your contract before you make a costly mistake. Just call 800-444-5791 for assistance.

“These examples are the real thing,” Adams stressed. “I see the damaging effects on our guys nearly every day … and that’s just the tip of the iceberg when it comes to the terms some brokers include in their broker-carrier contracts.”

Read it or regret it. It’s as simple as that. LL