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NC Court of Appeals Finds Freight Broker Liable for Driver's Workers' Comp Claim

    Client Alerts
  • April 03, 2015

Motor freight brokers hold federal licenses that allow them to locate suitable transportation services for their shipper clients. Brokers never actually handle or transport the freight, but act as an intermediary to pair shippers’ needs with available motor carriage capacity. Last week, the North Carolina Court of Appeals concluded that a freight broker is liable when its selected carrier failed to provide workers’ compensation insurance coverage to an injured driver.

Workers’ compensation laws typically require employers to provide insurance coverage for their employees. Like many states, North Carolina law contains an additional requirement for motor carriers that hire owner-operators to transport freight. If the owner-operator does not provide his or her own coverage, the motor carrier must cover them under its workers’ comp policy.

In Atiapo v. Goree Logistics, Inc., a freight broker contracted with an interstate motor carrier to handle transportation needs for its shipper customer. One of that carrier’s employee drivers was injured during the shipment, and initially filed a workers’ comp claim against the carrier. The motor carrier had fewer than three employees, and therefore is not subject to workers’ compensation jurisdiction. The plaintiff then amended his compliant to sue the freight broker, contending that in relation to the broker, he was a contractor under North Carolina law, making the broker liable for coverage.

The Court of Appeals agreed, holding the broker liable for the injured driver’s medical expenses under the same provision applicable to owner-operators. In its opinion, the court found that under the state workers’ compensation statute, a freight broker is a contractor that hires freight services. Because the contracting carrier did not provide coverage, the broker is liable to the employee driver. The Court of Appeals concluded that the broker had enough control over the carrier’s performance of its transportation operations to fall within this definition. The court also rejected the broker’s claim that federal law preempted state workers’ comp statutes on this point.

This opinion may have misunderstood the usual role of a freight broker in the shipping process. Brokers that simply match loads with available carriage space typically do not set standards or conditions for such shipments. This case involved a broker matching a single shipper with a single carrier for repeat business. The Court of Appeals’ reasoning may not apply to situations where brokers use multiple carriers, often on a single use basis. Regardless, freight brokers that do business in North Carolina should be aware of this development, and should amend their broker-carrier agreements and work practices to make certain that their selected carriers carry valid workers’ compensation insurance coverage.