Any business with employees needs Workers’ Compensation Insurance. A standard policy for businesses is used to cover your own employees. It is a state requirement regardless of the industry you are in.
However, you may have shippers asking for your worker’s compensation insurance for the shipment of their freight. The truck drivers are not your employees so why would they ask this of a broker?
Can a broker be liable for a non-employee truck driver?
Surprisingly, third-parties have been found liable in several court cases. Bottom line is that it comes down to how a state or the court defines a statutory employer. Is it a contractor/subcontractor relationship? Typically, brokers do not tell the drivers how to do their job, but some courts believe that they should and hold them liable for it.
The best way to protect yourself is to prepare ahead of time. Before moving any freight, get the carrier’s Workers’ Compensation certificate on file and verify this information often. It is also best to add a statement in your contract with the carriers. Require that they will have valid workers comp insurance or provide a waiver of coverage. Include in your contract a statement that the carrier is an independent contractor and not an employee.
Keep in mind though, that many states do not require Workers Comp insurance for single owner businesses. In transportation, this means that an Owner-Operator is very likely to NOT be insured. If something happens to that driver, it is likely the law will look at the broker to pay for any medical injuries. If your carrier cannot provide proof of their insurance then you need to make sure you have a written statement on file stating that they are not subject in their state to workers comp law and have elected not to purchase it.
To brokers in the past, Workers’ Compensation insurance hasn’t been a high priority to watch for. However, it is extremely critical that third-parties watch out for this. What they have been able to ignore in the past is now a lawsuit waiting to happen. Make sure you get all the certificates from your carriers to show their coverage. It’s a good idea to check with an insurance agent that is familiar with transportation law to check into your own Workers’ Compensation policy.
This is #5 in our Series on Starting a Transporation Brokerage Business. Leave a comment or question below.