Imputed Liability & the Law of Agency

The False Hope of Indemnity & Joint and Several Liability

Shippers' exposure to liability for the conduct of carriers and brokers is nothing new. Under the doctrine of vicarious liability, shippers have faced this risk for decades. Where a shipper acts as principal, and a carrier or broker acts as agent of the shipper, liability for the conduct of the carrier or broker may be imputed to the shipper. This is the essence of vicarious liability. In brief, vicarious liability will extend to a principal (here, a shipper) where the principal has the right to control the conduct of the agent (here, a carrier or broker) and the agent, acting within the scope of agency, is found negligent, reckless or liable for intentional misconduct.

Minimizing exposure to vicarious liability is well understood, the practice grooved. Virtually every shipper is familiar with the risk management solution of hiring an independent contractor transportation specialist (a motor carrier and/or freight broker) and relying on the contractor's expertise to reduce incidents of freight loss, damage, hazmat release, highway accidents, and so forth. Thus, as transportation managers know, reducing (virtually eliminating) exposure to vicarious liability requires (1) creating legal relationships with carriers and brokers that are expressly not principal-to-agent relationships, and (2) establishing procedures specifically designed to avoid controlling the conduct of carriers and brokers.

For decades, this solution has served to protect shippers. The fact is, however, that In light of recent court decisions, shippers may no longer rely on this solution. Without sound risk management practices within the shipper's organization, shippers are exposed to substantial risk