Category Archives: Legal / Lawyers / Attorneys

The Risks of Rebrokering

We received this from our friend Mark Stoyas at Basic Enterprise in Chicago.

There are compelling arguments for maintaining a separate brokerage authority, as summarized here. However, don’t forget the simple fact that, if you don’t have a separate brokerage authority, a brokered load that is involved in a costly accident can bring down the rest of your trucking operation–and we believe that is too high a risk to take.

–The Editors

Collecting Small Trucking Invoices

Local trucking sometimes involves the collection of small invoices.  Sending out bills is good;  but getting a new customer can be nerve-wracking.  Will they be happy with the service?  Will they pay their invoices?  Did they switch because their previous carrier cut them off?  References and credit checks only go so far, and that is not far enough.  Ultimately, it is always a risk to add a customer.  Here are some ways to lessen the risk.

Let’s suppose that your shiny new customer has failed to pay the first few invoices.  What to do now?  Legal action is very expensive, and you can never be sure of the outcome.  Here are a few ideas to try after your in-house efforts to collect are exhausted:

  1. Invoice Other Parties to the Transaction:  There are numerous court cases and their rulings sometimes conflict, but there is enough case law out there to justify your taking this step.  Unless section 7 of the BOL is executed, you can try to collect freight charges from other parties to the shipment.  It may be the shipper, or consignee, or both if arranged by a third party.  Start with an apologetic call in which you inform them that, even though they may have paid for shipping already, they are liable to you for the charges because “……………” (whoever is not paying you) did not pay the freight invoice.  You can tell that other party that you are sorry, of course, to have to take this course of action, but the law is clear, and it was put in place to protect carriers like your company from situations exactly like this.  Gently suggest that they call the offending party and encourage the invoice to get paid, solving the problem.  This puts huge pressure on your customer, as now THEIR customer or vendor is angry with them.  If this initial call does not do the trick, go ahead and issue an invoice, and follow with collection calls to everyone.
  2. Find a Specialized Attorney:  There are attorneys and firms that specialize in small collections and can be effective with claims under $1,000.  Typically they start with a series of letters and then go to lawsuit.  Here is a common arrangement:  You send the attorney copies of unpaid invoices (with supporting documents and any explanations).  The attorney will try to collect and, if successful, will charge you a fee between 20-30% of anything collected.  If this fails, you may be offered the choice to file a lawsuit by paying for court costs (different in every state, often over $100).  After this point the attorney keeps about 50% of anything collected.  The attorney may suggest you accept less than the amount owed, meaning you end up with well under 50% of the original charges.  What you’ll be left with is better than nothing, and in particular, the act of documenting the deadbeat customer will help future carriers make better credit decisions.  Word gets around.  Because some shippers are in the habit of stiffing local trucking companies on a regular basis, your taking strong action in this way will make it less likely that shippers will pick your company as a victim.
  3. Settle:  It is unpleasant, but sometimes the situation calls for a business decision.  Try calling and asking what THEY think is the fair amount to pay–and then, when an amount is mentioned, just accept.  Better to get something rather than nothing. The process of settling is not only much faster but also probably yields the same amount (after fees) as a collection placement.  Make sure you have a system in place that prevents accepting more work from that party in the future.

Credit Application for Local Trucking

Getting a signed credit application from every customer is one of the most important actions a local trucking company can do to protect itself.  What is most important is NOT the bank information, or the references.  The important part is the fine print.

Somewhere in every credit app there should be statements that:

  • The customer agrees to pay invoices within XX days
  • If not paid on time, the interest rate is XX%
  • Customer pays collection costs

If your credit app does not contain this verbiage, find one that does and copy the key sentences.

The reason this is so important is that, without this language, a court may rule that the customer never promised to pay and therefore does not have to!  Without a formal contract, the credit app is the only document wherein the customer promises to pay you.  This is very important if any collection effort is needed in the future.  If there is not a provision for interest, the court will not grant any interest!  Finally, it is very expensive to take a customer to court–and unless the customer has agreed in advance to pay for this expense, the court WILL NOT award collection expenses!

You never want a prospective customer to think about these issues, so present the document in a non-threatening way.  Say “I know you have not decided to use us, but I want to set up an account just to be ready.”  If they do not want to give a bank reference, or even customer references, NO PROBLEM!  The most important thing is the signature anyway.  We recommend wording, in big bold letters, that signing the credit app DOES NOT obligate the prospective customer to ever use the local trucking services.  Point to it when asking for them to fill out and sign the credit app.

Your local trucking business will benefit from following the simple steps above for a credit application with teeth.

Texting (or Not) While Driving — the Local Trucking Angle

As of this writing, 34 states, the District of Columbia, and Guam have adopted laws prohibiting texting while driving. These laws cover all drivers, not just truck drivers.

Click here to see a table of all current state texting laws.

Illinois, Texas, and Arkansas also ban any use of cell phones in school and construction zones.

safe local trucking driving

Don't Text and Drive Your Truck!

Also, for just over a calendar quarter now, no truck driver in the nation may text while transporting hazmat.  Click here to read more.

What is your experience with local trucking and the new texting laws?

–The Editors

Indemnification Clause in Local Trucking Contracts

Many local trucking companies have been confronted with contracts containing an Indemnity clause.  It typically states:

“CARRIER shall at all times indemnify, defend and hold harmless BROKER, its parent, subsidiaries and affiliates, and their respective directors, officers agents and employees against and from any and all claims arising from the services provided hereunder (including, without limitation, claims for personal injury, death and damage to property, clean‑up costs from commodity spills and damage to the environment, whether or not caused by (a) by any agent or employee of CARRIER or (b) by any other person or entity.  The provisions of this Paragraph shall survive cancellation, termination, or expiration of this Agreement.”

This means that even if an accident is caused by the broker’s negligence, or shipper’s negligence, or by any reason whatsoever, the carrier is responsible to pay legal fees, claims, and judgments against the broker. Of course, this is very unfair.  The problem has been that carriers are rarely given a choice.  The attitude is typically, “sign this or forget about getting work,” and, because of business pressures, many sign.  Some insurance policies would not pay such a claim, so the carrier is risking its very existence by signing such a document.

Well, help is at hand in most of the USA.  During the past two years, most states have passed, or are considering passing, an “anti-indemnification” law.  The law invalidates any clause that forces the carrier to indemnify the broker.  If you live in a state that has passed “anti-indemnity” laws, you can safely sign contracts that contain the clause and know it cannot be enforced.

WARNING! If the contract states that it shall “be construed under the laws of …….”, with a different state filled in, make sure THAT state is one that has passed an “anti-indemnity” statute or you WILL NOT be protected.

To see a map of states which have passed “anti-indemnity” statutes, click here.