Shipper Liability and CSA: An Overview Tucker Consulting, Inc. Cherry Hill, NJ QualifiedCarriers

1. Shipper Liability and CSA:An OverviewTucker Consulting, Inc.Cherry Hill, NJwww.QualifiedCarriers.com

2. Benefits of World Class Carrier Qualification: reduced accidents and injuries, safer highways good corporate citizenship � in reality and in public image and community relations carriers who are good on compliance tend to be great on service improved compliance to Sarbanes-Oxley and other �transparency� requirements reduced exposure to liability

3. Shipper Liability Milestones 2004: Federal court finds freight brokers may be liable for conduct of motor carriers 2004: Insurance industry reduces auto liability protections available to freight brokers 2006: State supreme court finds shippers may be liable for conduct of motor carriers 2007: TIA drafts industry guideline for �due diligence� and �reasonable care� in carrier screening and selection 2009: Liability in single case reaches nearly $25M 2010: USDOT (FMCSA) launches CSA

4. Reducing Exposure to Legal Liability Vicarious Liability What is it? How does one avoid it? Negligent Hiring Liability What is it? How does one avoid it?

5. Understanding Torts Negligence is a Tort. What is a Tort? Basic Sources of Law: Codified (Statute/Regulation/Ordinance/Criminal Code) rights and duties defined by the State and enforced by the State (city, state and federal agencies, law enforcement) Contract rights and duties defined by private parties and enforced by the parties (litigation, arbitration, liquidated damages) Tort rights and duties defined by common law (court decisions), and enforced by the parties (filing suit)

6. Vicarious Liability Elements of Carrier Negligence: Duty (operate competently and safely) Breach (failure to do so) Injury (bodily harm, death, property damage) Causation (Carrier�s failure to operate safely caused injury) Vicarious Liability = within scope of agency � Carrier�s duty becomes Shipper�s duty; Carrier�s breach becomes Shipper�s breach Carrier�s negligence becomes Shipper�s negligence

7. Vicarious Liability v. Negligence

8. The Tort of Negligent Hiring Shipper�s Independent Duty � Defined Hire a Carrier who demonstrates competence to perform safely Conduct Due Diligence before selecting Carrier Exercise Reasonable Care in selecting Carrier Monitor Carrier to ensure Carrier remains competent to perform safely This duty is non-delegable

9. Due Diligence and Reasonable Care The most common RISKS for Shippers: No system to track and respond to carrier safety data No system to ensure carrier files are valid, current, legible, complete � and easy to find A standard of care (SOC), or standard operating procedures (SOPs), with no follow-up to verify that carriers are compliant No centralized carrier risk management --- the left hand doesn�t really know what the right hand does, but assumes the right hand has everything under control

10. Tools of Risk Management Data Management Established Risk Tolerance Thresholds Data Collection and Analysis Real Time Alerts when Thresholds are Reached Data-Driven Corrective Action and Decisions Document Management Collection (including re-collection of expired documents) Document Review and Verification Indexing Secure Storage and Retention

11. Tools of Risk Management:Managing Carrier Data Safety Evaluation Area (SEA) Scores Four (4) SEA Categories: Driver (DRSEA) Vehicle (VHSEA) Accident (ACSEA) Safety Management (SMSEA) SEAs published by FMCSA (except ACSEA) SEAs derived from state inspection data SEAs change month to month

12. Simple graph comparing four carriers� DRSEA July to June Anderson Van Lines Bestman Trans Cordozzo Company Truck and Tire Inc. SEA scores are accurate, as reflected in FMCSA publicly-available records; however, carrier names have been changed.

14. Carrier Self-Assessments Compliance with Shipper Expectations Compliance with Legal and Regulatory Standards Compliance with Industry Best Practices: Freight Handling and Storage Safety in Transit Equipment and Maintenance Security and Loss Prevention Personnel: Screening, Training, Management

15. Verification Audits Experienced, Knowledgeable Audit Inspectors Eyes-on Review of Carriers Policies Procedures Records Evidence of Training Evidence of Management Control Post-Audit Corrective Action

16. How to Succeed under CSA The current FMCSA regime How does it work? How does a Shipper protect itself? The coming CSA regime How will it work? How will a Shipper protect itself?

17. The Current FMCSA Regime Safety Ratings Satisfactory, Conditional, Unsatisfactory Ratings go stale (quickly), but remain for years Only about 1-2 % of motor carriers are ever rated SEA Scores Driver (DRSEA) Vehicle (VHSEA) Safety Management (SMSEA) Accident (ACSEA) � available only to CARRIERS

18. The Coming FMCSA Regime:CSA (2010) Comprehensive Safety Analysis � 2010 Now � Compliance, Safety and Accountability Behavior Analysis and Safety Improvement Categories

19. CSA : Seven BASIC Scores Unsafe Driving speeding, improper lane change, careless driving, etc. Fatigued Driving Hours of Service (HOS), operating while fatigued / ill, etc. Driver Fitness no valid CDL, endorsement, medical certificate, etc. Out of Service and Improper Loading/Cargo load securement & shifts, HazMat, and overweight Controlled Substances/Alcohol Vehicle Maintenance Crash Indicator

20. Impact of CSA  Safety Rating no longer determined by Compliance Review (CR), with a years-long shelf life Safety Determination (data-driven); may change month to month, depending on data, and will include all carriers (not 1 to 2%) Using a carrier with a Safety Determination of �Unfit� or �Marginal� � or a �high� BASIC score � could be extremely costly and damaging

21. Success under CSA A Solution for Shippers A defined process, consistently followed Tools to gather, analyze, and use carrier data online data-tracking tools carrier self assessments verification audits Data-driven corrective and preventive action Tools to gather, verify, and store carrier documents, e.g., authority, insurance, hazmat