The U.S. Supreme Court's ruling last week in the C.H. Robinson Worldwide casereshaped the freight brokerage industry，in a landmark decisionin how they defend against future lawsuits.

The court unanimously ruled that brokers can be held liable for negligent hiring.

"Negligence claims under state law can be brought against you, and you can defend against them," said Ron Leibman, a partner at the law firm McCarter & English, told Trucking Dive. "The court said only that."

The opinion removed the preemption defense under the Federal Aviation Administration Authorization Act, but brokers can still defend themselves in negligent hiring claims.

"I don't think this is a doomsday event," said Chris Burroughs, president and CEO of the Transportation Intermediaries Association (TIA), adding that the industry is resilient and the supply chain will continue to function.

Meanwhile, "there will be a lot of small companies, especially on the carrier side, that may be screened out," Burroughs said, not because they did anything wrong, but simply because of this liability risk.

In an amicus brief filed with the Supreme Court in the case, TIA argued that if brokers must evaluate which carriers can operate,hundreds of thousands of motor carrierswould be eliminated. After the ruling, Burroughs said it is unclear how the market will react.

Safety still drives policy

The case, Montgomery v. Caribe Transport II et al., involved a Freightliner tractor-trailerthat veered off the highwayand struck Shawn Montgomery's parked Mack tractor-trailer. As a result of the 2017 accident, his leg was amputated.

C.H. Robinson Worldwide coordinated the freight in the case, and the broker expressed disappointment with the ruling but also emphasized its commitment to safety. "We continue to care deeply about victims of truck accidents," C.H. Robinson Chief Legal Officer Dorothy Capers said in a statement on the day of the ruling.statement.

The company added that its freight "operates accident-free in the vast majority of cases, with only one serious accident claim for every 500 million miles its customers' goods travel. But even one accident is too many."

C.H. Robinson and other stakeholders also said that safety is acontinuous process。

"Everyone in this industry wants safety," Burroughs said.

However, a major difficulty is that more than 90% of motor carriers do not have a safety rating from the Federal Motor Carrier Safety Administration (FMCSA) because the agency has limited staffing, he said. These carriers are considered safe until proven otherwise, and Burroughs said the brokerage industry must rely on them, or "commerce would truly cease to exist."

Safety audits typically occur within the first 12 months,and the vast majority pass, but more in-depth compliance reviews (which producesafety ratings) cover only about8% of the industry。

Stakeholders: Large carriers and brokers will benefit from the ruling

Looking ahead, according to a TD Cowen research report, the winners will be well-capitalized carriers, but large brokers can also succeed. Safety compliance will drive these transactions.

"The ruling pushes capacity toward compliant capacity while eliminating non-compliant capacity, further tilting supply-demand dynamics in favor of carriers," TD Cowen said in a research report.

The trucking industry already faces weak demand andtightening capacity, and the Supreme Court ruling could add another layer of pressure.

Leibman, who represents brokers, said he believes the freight landscape will shift more toward large brokers using established carriers and those that raise rates, especially those with self-insured retentions.

Brokers will see rising insurance costs, even if not entirely justified, which will drive some brokers out of business, he suggested. Insurance costs could rise three to five times, Burroughs said.

Landstar System, which hastens of thousands oftruck broker carriers in its network, addressed the issue in an Aprilearnings callbefore the ruling.

"I think the entire brokerage industry is going to have to look at insurance differently than they do today if the ruling goes against the industry," said President and CEO Frank Lonegro. "Right now, they basically look at F4A and say we're immune."

Lonegro noted that the company does have insurance programs compared to some competitors, especially small brokers that may not be able to absorb additional costs.

Uncertainty but not uncharted territory

The ruling does not push the industry into uncharted territory. The preemption defense had already been weakened in many states,according to stakeholders。

"This was just one defense that brokers used," Burroughs said. He added that the ruling will increase the number of future legal cases.

In the opinion, the justices rejected C.H. Robinson's arguments. The court interpreted the federal law as allowing state tort law to cover safety issues in such cases.

As a result, the case is now remanded to the U.S. Court of Appeals for the Seventh Circuit. But future legal battles for the brokerage industry may still take years to unfold, Burroughs said.

For large carriers like TA Dedicated, Russell Thorp, vice president of sales and logistics, said he expects the brokerage industry will face more lawsuits from lawyers than in the past, and shippers will reconsider who they work with. "There is now exposure that didn't necessarily exist before," he said, adding that indemnification clauses in contracts will increase.

Small carriers without established safety records may face challenges, Thorp added. "I think the first change we will see immediately is that carriers with poor safety ratings and scores that rely on broker business will be pushed out of the market," he said.

Safe carriers with strong safety performance will benefit from the ruling, he said.