Montgomery v. Caribe Transport: The Insurance Industry Needs to Pay Attention

A Landmark Ruling Ends Broker Preemption

On May 14th, the Supreme Court unanimously ruled in Montgomery v. Caribe Transport II that freight brokers can be held liable under state negligent hiring law for the carriers they select. The federal preemption shield brokers have relied on for years — in many jurisdictions — is gone.

Before this ruling, brokers in many jurisdictions faced no meaningful liability exposure for carrier selection decisions. That legal reality shaped how the insurance market responded. Brokers carried contingent auto liability — a product designed to respond when an underlying motor carrier’s primary auto coverage fails or lapses. It’s a narrow trigger, and it’s priced accordingly. This ruling has clearly increased liability exposure for freight brokers, however, and the brokerage industry is rightly disappointed by it.

But in practice, something had drifted. Brokers play a role in vetting and selecting safe motor carriers that are adequately insured. Holding them responsible for that role will be good for the industry in the long term – putting more focus on selecting safe motor carriers will benefit the brokers that are already doing it right. It will reduce competition from hasty brokers that are not exercising the diligence necessary to arrange freight movement without endangering the public. Perhaps most importantly, it stands to make our roads safer as the scrutiny on safety records will increase universally.

Contingent Liability Pricing Must Catch Up

Contingent liability pricing will necessarily shift as it now will need to reflect considerably more negligent hiring exposure. That means underwriters need to evaluate broker carrier selection practices, vetting protocols, and the quality of their carrier networks — not just whether underlying primary coverage exists. This obviously creates an additional insurance expense for brokers. Because the change in exposure is universal, however, freight rates are likely to right-size quickly to offset the cost.

Uniformity Across Jurisdictions

What Montgomery provides, regardless of where you stand on the merits, is clarity. For the first time, freight broker liability for negligent carrier selection operates under a consistent standard across all jurisdictions. That uniformity matters enormously for the insurance market.

For freight brokers, contingent coverage must now contemplate two distinct exposure layers: the traditional contingent scenario where underlying coverage lapses or otherwise fails, and an excess scenario where the broker is found liable for negligent hiring and primary limits are exhausted by a catastrophic loss. The latter exposure reads more like excess, and that’s a broader mandate than the contingent auto product was previously designed to carry.

Market Stability — and a Path Forward for Diligent Brokers

But the alternative — a market where contingent exposure varied unpredictably by jurisdiction, where underwriters couldn’t consistently assess what they were writing — wasn’t stable. It was just opaque. Montgomery removes that opacity. With consistent exposure comes consistent underwriting, and with consistent underwriting comes pricing that freight brokers can plan around. In the long run, the freight brokers that can demonstrate consistent and rigorous carrier vetting and selection will see the most competitive insurance pricing and enjoy lower costs. If that can help those same freight brokers win more market share, then our highways will be populated by safer operators, and everyone wins.