1. Confidential and proprietary information of Tucker Consulting, Inc. Shipper Liability and CSA: An Overview Tucker Consulting, Inc. Cherry Hill, NJ www.QualifiedCarriers.com

2. Confidential and proprietary information of Tucker Consulting, Inc. 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. Confidential and proprietary information of Tucker Consulting, Inc. 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. Confidential and proprietary information of Tucker Consulting, Inc. 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. Confidential and proprietary information of Tucker Consulting, Inc. 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. Confidential and proprietary information of Tucker Consulting, Inc. 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. Confidential and proprietary information of Tucker Consulting, Inc. Shipper’s Independent Tort Liability This is not Vicarious Liability. Principal, Agent, Scope of Agency, are irrelevant here. Recall, negligence is a tort. Recall, negligence = Duty + Breach + Injury + Causation Shipper’s …  Duty = Reasonable Care/Due Diligence in Selecting Competent Carriers  Breach = Failure to be “Reasonable” and “Diligent”  Injury = Bodily Harm, Death, Property Damage caused by Carrier Tort of Negligent Hiring: Shipper is liable for breaching (i.e., failing to meet) Shipper’s own independent duty under the common law to select a “competent” carrier Vicarious Liability v. Negligence

8. Confidential and proprietary information of Tucker Consulting, Inc. 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. Confidential and proprietary information of Tucker Consulting, Inc. 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. Confidential and proprietary information of Tucker Consulting, Inc. 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. Confidential and proprietary information of Tucker Consulting, Inc. 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. Confidential and proprietary information of Tucker Consulting, Inc. 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. Tools of Risk Management: Managing Carrier Data

13. Confidential and proprietary information of Tucker Consulting, Inc.

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 Tools of Risk Management

15. Confidential and proprietary information of Tucker Consulting, Inc. 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 Tools of Risk Management

16. Confidential and proprietary information of Tucker Consulting, Inc. 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. Confidential and proprietary information of Tucker Consulting, Inc. 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. Confidential and proprietary information of Tucker Consulting, Inc. The Coming FMCSA Regime: CSA (2010) Comprehensive Safety Analysis – 2010 Now … Compliance, Safety and Accountability Behavior Analysis and Safety Improvement Categories

19. Confidential and proprietary information of Tucker Consulting, Inc. 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. Confidential and proprietary information of Tucker Consulting, Inc. 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. Confidential and proprietary information of Tucker Consulting, Inc. 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

22. Thank You. Please visit: www. QualifiedCarriers.com Tucker Consulting, Inc. Cherry Hill, NJ Thank You. Please visit: www. QualifiedCarriers.com Tucker Consulting, Inc. Cherry Hill, NJ