On today's episode, we're going to talk about the biggest mistakes that a younger brokerage can make early on in the process from a legal perspective as well as a client relationship perspective.

Today we have with us Rob Hasman from Burns and Hasman.

He's our transportation attorney here at Veritas.

And we're glad to have you on the show again, man.

Thank you for coming on.

Thank you.

Excited again to be here and hope that I can provide some decent information for the viewers out there.

Yeah, I think that, you know, this is something.

This is a topic that I call it like a secret society.

Right.

And it's not really a secret society, but I think it's.

These are things that nobody really understands fully in the brokerage side.

And I think if we can bring more of this out and bring more awareness to these type of topics, I think we'll be better off as a whole and we can try to protect ourselves, which is, you know, the name of the game.

Right.

How do we mitigate risk, especially when you're, you know, fighting for every penny.

Which is.

Which is a comment you just used a few minutes ago, so.

That's right.

What are.

Let's start from the top.

What are some of the biggest mistakes that you see from a brokerage that just started maybe 3, 412 months ago?

What are some of those big mistakes?

I'm going to focus this on more with management and those that own the company and would make decisions on potentially, you know, what risks they're willing to agree to in terms of liability with customers, shippers and whatnot, rather than what your employees might do on a daily basis when there's a load out there?

Because we all know how that goes.

What do you mean, man?

There's financial incentive to be gained.

You mean people are willing to cut corners from a legal perspective to.

As long as they don't get cut, no one will know.

Right?

Got it.

Yeah.

Too many times in the past that.

Yeah.

You know, it's funny, I laugh because it's so many sales employees that are financially motivated come to me with questions and they say, hey, can I move this $600,000 load of whatever?

And it's like, oh, well, let's think about this.

Let's have another conversation.

But go ahead, back to the big mistakes.

What do you got, man?

So, again, this is going to focus on the way you operate your business globally, not on a daily basis, you know, in the weeds.

I would say that when you start out, it's a hugely important.

And I'm And I mean before you've moved a load, it's hugely important, obviously to have adequate insurance.

And when I say that, I don't mean, I do mean the coverage limit of your insurance, whether that be a million, five million, ten million.

But I also mean your cut.

Your customers are going to ask you to sign contracts.

And we'll get into what I think you should accept and not.

Okay.

In a minute, but it's going to happen.

Customers are going to ask you to sign contracts.

So the insurance provider that you seek in this industry needs to be a Gallagher or someone in transportation that is familiar with writing a policy that covers transportation issues and covers transportation contracts.

So real quick, so you're talking about the policy for a brokerage like ourselves.

Correct.

We need to make sure that we're vetting out like a Gallagher or a Reliance Partners or a.

I know, Cottingham and Butler.

Those are agencies.

I'm your underwriter.

Right, right, right.

Rather than buy an insurance policy from Progressive, you need to.

And I'm not saying Progressive wrong.

Sure.

I'm just saying the policy you buy should probably be from someone who specializes in insuring transportation.

Okay.

Because there's going to be certain things that they cover and don't cover.

And the policy is going to be written in a way to contemplate those things.

But again, customers are going to ask you to sign contracts.

And if your contract, if your policy of insurance isn't written in a way that it covers potential contracts you sign with customers.

As I said on a former podcast, brokers are generally not liable for claims.

Okay.

If you pick up liability because you've signed a contract with a customer that says, hey, if a carrier damages a load of widgets, we'll make it whole.

Yeah.

So real quick, so with a lot of those shipper contracts, what you're saying or what I'm hearing is these shippers or clients, the people that pay our bills, they want us to sign a contract.

If there is a claim or a loss, then we as the broker are held liable.

Is that.

That's going to be the starting point.

Okay.

Okay.

And we'll get into a little bit about what I'd like to see or negotiate.

Ideally, some of the.

What I would accept.

Yeah.

Because.

And then what I would absolutely never tell you to accept.

In a minute.

Love it, man.

Yeah, I want to hear about those non negotiables.

Yeah.

But what again, at the end of the day, your insurance policy, when you start out, should be one that contemplates that it's going to have contractual coverage, contractual indemnity coverage.

And what your insurance company is willing to give you is going to be less at the beginning, but at least you'll have that coverage.

And if you, you'll know what it covers.

And if you get a contract you're iffy about, you can send it to your agent and they'll be like, yeah, that would be covered by your policy.

Or no, it wouldn't.

And that helps you also to know what you can accept and cannot accept in terms of the contract itself.

Yeah.

Because if it's never going to be covered, you know, you probably don't want to sign that contract.

Sure.

So I think getting an insurance policy, the right one with the right terms in it is hugely important.

Now, they're expensive.

I get that.

But the last thing you want to be one have happen is you be 10 months down the road making lots and lots of money.

Yeah.

You have a death happen, you picked it up and your insurance is just out the window.

Sure.

Okay.

Yep.

So I think that's hugely important.

The other thing that I would say is starting out and should bleed.

Bleed into your policies forever.

Brokers cringe when I, when I say this, but this is reality.

You need to be as absolutely hands off as you can in terms of checking in with carriers.

Okay.

Monitoring where carriers are on the road, provided you can look at that.

But you don't want to have.

You do not want to dictate.

You need to be at this mileage by this point.

Hold on real quick.

So you like, are you talking about like, coercion?

Like you need to get to the delivery spot by Friday.

Is that what I'm hearing?

Or is that you can tell them.

They need to deliver.

You can tell them they need to pick up at certain times.

So we're talking about like a standard check call.

You know, I know all brokers do that.

Yeah.

And I know that that's something that you guys find valuable and so do customers.

Sure.

But the law out there is ever changing.

Judges and plaintiffs attorneys are ever changing.

And when somebody dies on the road or a load of gold bars gets damaged.

Sure.

Again, generally a broker doesn't have liability for that.

Okay.

Two ways to get the broker liable for that are three ways.

One, sign a contract, which we were just talking about, accepting that liability.

Two, what they call negligent entrustment.

So like, let's say your customer engages you to move a load of widgets and you hire someone with 10 DUIs.

The law could say you were negligent.

You should have never hired that guy.

Probably a safety rating in our terms or our world.

Right.

Twice the national average safety rating, which we should be vetting on the carrier selection front.

And the third is what we call agency.

Okay.

Okay.

So when you, when you engage a motor carrier, you are from the start, especially in your broker carrier agreement, you have language that says you're an independent contractor.

We're hiring you to a do a job.

Yeah.

And when you have under the law, an independent contractor relationship.

Yeah.

That means that independent contractor should have full ability to control the method in which it performs its services.

Okay.

And so when you start to exert more and more control over how they do their job, the law can morph that or a judge can determine that they are now an agent of yours.

Okay.

And under the law, a principal is liable for the actions of its agent.

I get a journal once a month from what's called the TLA Transportation Lawyers Association.

And every day these courts and plaintiffs attorneys are moving the needle to find brokers liable because you have C.H.

robinson's out there, you have TQL's out there.

And when 20 people die in a pile up, an owner operator is never going to be able to cover that.

Someone with huge pockets can.

So they're trying to find ways to.

Get more to attach to people from a liability perspective.

Correct.

Do you like?

I guess my question here is.

So, you know, just from what I'm hearing you say is we should be.

You said we should be hands off.

How do we get daily updates from our driver to our clients?

I mean, how do we do that?

I know it's a part of your industry.

I know it's something that you're, that you want to do and everybody out here is wanting to do.

Yeah.

I would tell you from a purely vacuum in my mind as a lawyer, if I could have a world where a broker sends someone in and doesn't know what happens until they deliver, that is the perfect liability vacuum.

You're gonna give a lot of brokers heart attacks here with daily updates.

I'm just telling you that when you go from here to here, somewhere in the middle is where the scales tip.

Real quick.

I wanna hone in on this.

Cause I think this is pretty important.

So with that, is there any language?

Cause I think like as far as I can remember, I've been in the industry for, you know, since 2009.

Check calls or daily updates have been part of the process throughout.

How do we navigate that?

Or is there any language that we can say?

Or do we just Go super caveman and say, you know, city, state, reefer, temp.

And I mean, I would say this.

I know it's going to happen.

I know it's got to happen.

The more that you require them to check in with you or to be at a certain point at a certain time seems more like you're dictating what they have to do, if that makes sense.

Got it.

And that's going to feel more like control.

The more that that happens, the more that they are required to call you or they have to do stuff that you're dictating to them.

Yeah, that's going to seem more like control.

What about tracking everybody?

That's what I was going to say.

If you could get to a situation where you could just see where they are at any time and you're just passing that along and you're your just checking on them, I feel okay about that.

I feel like that's fine.

And I hope that that makes the customer satisfied.

And again, I'm not.

It'll.

It'll make some satisfied but I'm not.

The one dictate or choosing.

No, it's good information whatever of control.

Is going to get you in trouble or not.

That's great information.

But the less you can do to stick your hands into how the carrier does its job, the better you're off you're going to be because you know, I have customers that will tell their carriers that they need to do this, this and this and you're then creating the way they do their job.

So I'd say those are two things starting out.

Okay, you mentioned a couple of those.

What's the third thing or what's we mentioned?

You know, the shipper broker contract also is the least amount of touches possible.

I think that's paired with the insurance piece.

Right.

You want to make sure that you get a, an insurance company that you partner with that has a reputation, has a brand name that everybody recognizes and is going to pay out on claims.

If that happens, what's the third piece or what's another piece of that?

And then I want to dig in here to the shipper broker contract because I think that's so important today.

That's going to be the third thing is and broker shipper contracts, co broker contracts, contracts in general play a role in this.

But the third thing is the amount of risk you take with respect to any circumstance has to out be outweighed by the benefit of the situation you're undertaking.

So when a customer comes to you and says and puts this Contract in front of you, and it says you're going to do all these things.

And the two most important things in there in terms of my job are you're going to pay us when a load of widgets gets damaged.

I would love to have that change to say we're going to hire a motor carrier by contract and they're going to agree to pay you and we're not liable.

One thing that I think you've brought to light in our scenario is a lot of these shippers, they send over contracts and they say shipper carrier.

Correct.

Right.

And the language in there represents us as a carrier.

And I know you've always disputed that and said, hey, this looks like a shipper carrier contract.

Can we get a shipper to broker contract?

Correct.

Where that language is different.

Just like you were saying, we're going to hire a motor carrier to do the job, which I think is something that a lot of people and a lot of brokers out there, they oversee.

Right.

And they say, oh, well, it looks good.

I'm going to go ahead and sign this.

There's opportunity, but to close a deal.

Right, right.

But go ahead.

So you're right.

You want to have a broker shipper contract, because if you have a carrier shipper contract, you're going to have all these various things that you're supposed to do that a carrier is supposed to do that you just can't because you're not a carrier.

You're not going to have equipment, you're not going to have eld, you're not going to have a satisfactory writing rating, but you need to have a broker shipper contract.

And when it comes to picking up losses to the widgets, ideally we'd like to just take it out.

Sure.

If the customer says no, then second position would be we would like to enforce our broker carrier agreement on your behalf and have the carrier pick up liability to you.

Okay.

If they still say no.

Okay.

Then I have a.

Then I would have a conversation with you, Brian.

How big of a customer do you think this is going to be?

We might do 20 loads.

Well, then let's get rid of this contract.

Let's not do business with, oh, we're going to do a million dollars this year.

Okay, well, then we can live with this.

You know, if you have two.

Two claims this year, 100 grand apiece.

Well, you still made 800 grand.

Right.

If we go that scenario, we would want to add in language that the maximum we're picking up is 100 grand per shipment, because that's going to be the requisite amount of insurance that generally is going to be out there.

And I think.

I mean, you nailed it, man.

Like, is you nailed on the client side?

If we're going to do business with this customer, how many loads a week or how many loads a year are they doing?

Like, is the risk.

It's the risk versus the reward.

Correct.

Does the risk outweigh the rewards in these types of contracts?

Well, I can't tell you how many times that I've gotten into a stalemate with the other side on.

Yeah.

Why would we pick this up for you?

This is the first load we're going to.

And they're like, well, this is what we require.

And I've said back to them, all right, we'll pick this up.

And I do this on behalf of my client.

We'll pick this up for you.

But you're.

And they'll say to my client, yeah, my clients.

The brokerage.

The brokerage, or the salesperson who's beating on you.

Brian, one of your people upstairs, we need to get this signed.

We're going to do 500 grand this quarter.

Huge opportunity.

I'll go back to them and I'll say, we'll put this language in here because you say we have to.

Yeah.

Can we put in a caveat that if you don't provide this level of revenue, then this provision doesn't kick in?

Because if you're telling me that I gotta pick this up because of the business you're gonna give me.

Yeah.

Then shouldn't you have to commit to me, to that business?

And sometimes they'll give it to me.

A lot of times they won't.

But that's a way to kind of play devil's advocate to them.

Okay, you know what?

We'll make this fair.

You want me to pick this up for you?

But you have to make the commitment to me it's going to be worth my while.

I love that.

I think.

So you mentioned a couple, like, provisions in the contract.

If I'm a younger brokerage and I've got eight to 10 people and, God, I can't really afford an attorney, you know, for 300 bucks an hour.

And maybe I just want to.

I'm pretty smart, you know, I scored high on my act or whatever.

Not me personally, other.

Other people.

But if I'm looking through this contract, what section is that usually under that you're talking about?

So that section with respect to cargo liability would be either under probably loss, damage, cargo claims, or Sometimes it's just labeled 49 USC 14706 Carmack.

But it'll be all your stuff about the claims.

But to.

But to your point.

And this concept is going to apply across the board forever.

Yeah.

No matter what any client I have in the broker industry, I get it.

On day one you have no customers, you'll sign anything.

No, we haven't done that.

What are you talking about?

Rob, come on.

So if this provision is in there and you signed it on day one, so what?

You don't have anything to lose.

Yeah, but once you get to a point where there's a nest egg or a good business or whatnot, this provision can sink the biggest something to go after.

There's a provision in every contract you're going to see called indemnification.

Yes, that was my next point, man.

I had it written down here.

I wanted to ask you about it, but I'm glad you brought it up.

So what that means is your customer or whomever is the other party.

Well, one is provision in there that says anything under the sun that happens out there, if it's caused by a carrier, you whatnot, including deaths, personal injury, whatnot.

And you're going to indemnify us for that?

Indemnify means.

It means defend them for the cost of a lawsuit and reimburse them for any and all cost, expenses, judgments, liabilities, whatnot they incur.

So if you sign off on the indemnification piece of that contract and you sign it, you are liable as a broker to pay if something happens, God forbid, you are liable for all of the loss that happens within that scenario.

Is that accurate or is that any.

Losses that may be imposed upon the carrier or your customer?

So let's say you have a carrier down there or out there hits a bridge, kills five people.

Sure.

Your customer gets brought in and is looking at a potential $15 million judgment because 10 people died pretty decent, you might be on the hook for that.

So those provisions can sink the whole thing.

Sure.

And again, when I went back to the insurance at the beginning, anytime you have indemnification, you need to make sure that your insurance company blesses that indemnification you're signing.

Okay, so when I said a while ago, the things I would like to see versus what I would accept versus the no nos like to see is no cargo liability, no indemnification.

What I would accept is ideally cargo liability.

We shift to the carrier.

We'll make sure by contract they pick it up.

Sure.

Or we'll pick it up and give us A good amount of business.

Yeah.

Or you know what, we'll take a risk.

We'll pick it up.

Limited to 100 grand.

Yeah.

But what I never want you guys ever to take on is indemnification across the board if your customer.

Because you.

What if it's Walmart?

What if it's Target?

What if it's Costco and you have.

To make a decision whether to do business with them.

But you know what you can always try to do is pare that indemnification down to say we'll pick it up to the extent our direct employees were negligent.

Sure.

Because what happens out there is a motor carrier did something.

Yeah.

And the language says you're going to pick up the negligence or indemnification for yourself, your employees, your agents, your subcontractors, the carriers on the road, anybody you hire.

If you can limit that to only people in your office, that doesn't mean one of them is not going to make a mistake.

But you can, you can narrow that ball of yarn down a ton.

Yeah.

So what I'm hearing there is like some 100%, no nos, some, you know, scenarios where it's like bend but don't break, where it's advantageous to you as the broker and then some other scenarios where you know you're signing it as is.

So to your, to your point on the first two.

Yes.

Because you can always make a decision on how much business or revenue from a customer is going to justify $100,000 claim.

Sure.

I mean, you can make, you can quantify that or you can say, you know what, I don't even know that I'm going to get this much business, but I'll take the risk because I might.

And I know that worst case scenario, I can lose 100 grand.

What you don't know is if you open this global situation out there, or you can't quantify whether it's going to be a $20 million nuclear situation.

Correct.

And that's just going too far because when you own something like you guys do, it's your livelihood, you got a good thing going, you don't want one.

You know, one scenario.

Yeah.

$5 million this year from this customer.

Sure.

5 million every year.

It doesn't justify the one situation where you lose your whole brokerage.

Well, I even think like you just said it, like even with the hundred thousand dollar mark, it takes a lot of loads to get up to that hundred thousand dollar mark in profitability perspective.

So even the risk that you do take, what does that look like.

But even if you decide to take that risk.

Yeah.

And you have one claim, all these contracts are going to say you can terminate.

Right.

So at least I'm not saying do it.

But at least you know that if I get $0.

Yeah.

I'm only out 100.

At worst case scenario, I'm at 100.

What you can't quantify is if I get $0, could I still be out 20 million?

Sure.

So again, indemnification is very important.

You don't want to voluntarily agree to pick up everything under the sun with respect to any liability out there that could depend on your customer.

So try to limit that, Try to eliminate it.

Try to limit it to only negligence of your employees.

And again, regardless if you're signing a contract that has that in there, you need to make sure that your insurance company is going to cover that contract because if you don't have any insurance for it, then you're writing a check.

Yeah.

So that's a big pitfall I think everyone needs to be aware of.

Okay.

The only other thing, there's so many things that you need to be aware of.

But the, you know, the other big thing that I think we should talk about right now because I know all of you are seeing it, is this concept of stolen loads and stolen identity.

I think we need another like three part series on top of this.

It's a hot topic, man.

It is, it is, you know, running rampant in the industry.

We've done a couple episodes on it.

I love that you brought it up.

So I'm not going to get into what's happening because I've actually been on a webinar where I've seen video of people from the Ukraine and I mean, there's a lot going on with this.

But I would just say that there are things that brokers can do to whittle this down and cut down, try to eliminate this.

First and foremost, be smart.

You know, you need to have someone in charge of customer intake and carrier intake.

If you see broken English in an email, if you see, you know, something looking weird, if it doesn't smell right, it might not be right.

Yeah.

And you know, if you, whoever's in charge of setting carriers up when they get the insurance cert, call that agent, make sure that that is a company that exists.

If you call John Doe Insurance agency and they say we've never heard of, you know, whomever.

Yeah.

That's a good red flag.

Yeah.

Now that's all stuff on the front end.

There's still gonna Be things that can slip through the cracks.

And I tell all my customers this, nothing's ever gonna be perfect.

And they all tell me, rob, there may just not be enough time.

And I said, maybe for you, but you have employees out there brokering.

And by the way, a lot of you have load coverage, people below them that are just in charge of making sure who picks up and doesn't pick up.

Sure.

When you know that Acme company is going to.

Is supposed to pick up your load at John Doe shipping yard.

Yeah.

Yeah.

Pick up the phone, call John Doe and say, read me the MC number off the side of that truck.

Sure.

If the MC number for the motor carrier that you were supposed to send in doesn't.

Doesn't line up with that.

Yeah.

Stop the damn thing.

Yeah.

If you're better off get having an upset customer over a late load than you are $100,000 worth of beef tenderloin gone.

Yeah.

So if you, if you can get someone to tell you what truck is actually there, you're going to cut down on this a lot.

Now I get there are shippers out there going to say, I'm not doing that.

Not for every single load.

I 200 loads a day.

Right.

I'm not doing shipper verification on, or, you know, truck verification on every single shipment.

Right.

I do think.

I mean, to your point there, I think there is.

I have a couple clients that we work with today where they are very stringent on the, on the.

The driver check in.

They do driver first name, last name, CDL picture.

Because they're getting hit with it too.

Correct.

And like, one of them is a meat wholesaler, and they do a great job with all the care.

Like, I've had drivers call me before, like, oh, my God, man.

Like, I did everything minus the fingerprinting.

Right.

And I'm like, well, they want to make sure that, you know, they want to make sure that they know who's picking up their product.

All that stuff's awesome.

Don't get me wrong.

Especially in my world.

Yeah.

I can't tell you how often I need.

When I'm trying to do a claim, I need to prove who the driver was, what the VIN on the truck was.

Lord.

And if I can get that stuff, that's great.

Yeah.

But regardless of that, it all boils down to the.

The motor carrier engage.

Not really the driver.

The driver's an employee of that motor carrier.

So if you send in xyz, it needs to be xyz.

I don't really care who's behind the wheel.

Yeah.

The MC number on the door is how you verify that.

Yeah, yeah.

And I get.

There's not, there's, there's never going to be a global policy that all your shippers or customers are going to do that for you.

Sure.

But let's say you can even get it to 30%.

Yeah, 30% is better than nothing.

Yeah, that's true.

And I think that's, you know, that is a huge step in our industry, getting verification of that to make sure that, you know, like you said on the back end, the people that are dealing with the claims, especially if you're a younger brokerage, usually, usually you have a founder or a.

The best salesperson out there dealing with this, taking away from time that they could be setting up new clients.

Correct.

So I think more vetting on the front end is huge.

Rob, I really appreciate you joining us today, man.

There's so much information here that you've been able to share with us and our guests.

If you've enjoyed the content today, please put any questions, comments that you see fit.

And you know, for your sake, man, how can we get ahold of you?

If somebody is looking for a legal opinion, hopefully they've listened to the past, you know, 30 minutes to an hour of this and gained so much information.

How do they get a hold of you, man?

So you can get me at my office by phone at 513-321-0900.

Okay.

Just ask for Rob Hasman.

You could also get us at the website, which is www.

Burns hasmanlaw.com, which is b U R N S H A S as in Sam S as in Sam M A n l a w.com and my email is very similar.

It's R Hasman, which is my, the first initial of my first name.

Rob.

R H A S as in Sam.

S as in Sam M A N at that same domain.

Burns hasman law.com awesome, Rob.

Appreciate it, man.

Thank you.

Thank you.

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What are the expectations for each role?

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Whether it's quarterly, annual, whatever it may be, what's your goal as a team?

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So if there isn't role clarity, there's going to be a lot of confusion.