On May 14, 2026, the Supreme Court issued a unanimous decision in Montgomery v. Caribe Transport II, LLC, holding that federal law does not shield freight brokers from state-law negligent hiring claims when selecting motor carriers.
In practical terms, the ruling removes one of the freight brokerage industry’s most relied-upon legal defenses.
The Supreme Court’s decision in Montgomery v. Caribe Transport II has generated strong reactions across the market. Many are treating it as a disruption. From our perspective, it’s more accurately a clarification, one that brings existing exposure into sharper focus and raises the standard brokers will be held to.
For years, many brokers leaned on the Federal Aviation Administration Authorization Act (F4A) preemption as a defense against negligent selection claims. That defense is no longer a given.
What’s changed.
The Court affirmed that brokers can be held liable in state court for negligently selecting a motor carrier, and that F4A preemption is not a blanket defense in those cases.
Portions of the country have operated under this standard for years. What this decision does is remove inconsistency and apply a more uniform national expectation across all jurisdictions.
The real question is operational.
This ruling shifts the conversation away from legal positioning and squarely into operational accountability. At its core, the question is simple:
“Did your organization exercise ordinary care in selecting the carrier?”
This shifts the focus from legal positioning to operational discipline and documentation, both of which directly influence how a claim is defended and how insurance responds. It reflects an operating model expectation the market is increasingly enforcing, one that requires alignment across multiple areas of the business.
Ordinary care is the minimum defensible standard.
A well-documented and consistently applied carrier vetting process does more than reduce exposure. It creates the foundation your insurance program relies on when a claim occurs. Insurance cannot create a defense that your operations didn’t create. Key areas to validate:
This ruling doesn’t just change how brokers defend claims, it changes how brokers should think about their entire insurance program. Two concepts sit at the center of that conversation: how coverage is structured and how legal defense is handled when a claim arrives.
Freight Broker Liability & Contingent Auto Liability: know the difference
Freight Broker Liability (FBL)
The broader form, designed specifically for the exposures brokers face, including negligent selection of a motor carrier.
This is the coverage most directly implicated by Montgomery v. Caribe Transport II.
Contingent Auto Liability (CAL)
A component that sits within many FBL policies. Provides coverage for bodily injury or property damage arising from a carrier’s auto operations, but only when the carrier’s own liability coverage fails to respond or is insufficient.
A CAL-only policy may not respond to a negligent selection claim the way a broker expects. If your program is built around contingent auto coverage without a true FBL form, you may have a gap precisely where this ruling creates the most exposure.
Consider the following:
- Does my policy include a Freight Broker Liability form, or is it purely contingent auto?
- Does my FBL policy specifically cover negligent selection claims?
- What are my per-occurrence and aggregate limits, and do they reflect today’s litigation environment?
- Are there exclusions that could limit coverage in a state court negligent selection case?
Coverage for a judgment or settlement is only half the equation. How legal defense costs are handled within your policy is equally important, and often misunderstood.
Defense inside the limits.
Legal defense costs are paid from within your policy’s liability limit.
Every dollar spent defending the claim reduces the amount available to pay a judgment or settlement.
In a high-severity negligent selection case, defense costs alone can run into six figures before a verdict is reached
Defense outside the limits.
Legal defense costs are covered separately and do not erode your liability limit.
The insurer has a duty to defend the claim, and your full limit remains available for indemnity.
This structure provides significantly more protection in complex, multiyear litigation.
Montgomery opens the door to more negligent selection litigation in state courts across the country. These cases are not quick, they involve discovery, depositions, expert witnesses, and often extended timelines. A policy with defense inside the limits and modest per-occurrence coverage may look adequate on paper, and prove insufficient in practice.
Consider the following:
- Is legal defense inside or outside my policy limits?
- Does my insurer have a duty to defend, or only a duty to indemnify?
- Are my per-occurrence limits sized for both defense costs and a potential judgment?
- Who controls the selection of defense counsel, me or the insurer?
Coverage areas to review.
Montgomery creates a ripple effect across the entire insurance program, not just FBL and CAL:
Errors & Omissions (E&O)
Some negligent selection claims may be framed as a failure of professional judgment. Confirm whether your E&O policy responds to transportation-related professional liability claims and how it coordinates with your FBL coverage.
Umbrella / Excess Liability
Confirm your umbrella follows form over your FBL policy. A gap or exclusion in the underlying form can create an unexpected ceiling on recovery at exactly the wrong moment.
Carrier Contract Requirements
Your carrier agreements likely require minimum insurance limits. Those requirements are now part of your documented vetting standard. If a carrier didn’t meet your own contract
requirements, that inconsistency becomes a liability.
Shipper Agreement Review
Shippers are paying attention to this ruling too. Indemnification clauses and insurance requirements in shipper agreements may shift more risk toward brokers; know what you’ve already signed and what’s coming at renewal.
Yes/And: Our Take
The Risk Didn’t Just Appear. The Expectations Just Got Clearer.
Yes, Montgomery v. Caribe Transport II creates new legal exposure for freight brokers. And it also creates a clear opportunity to build a more defensible, better-aligned insurance program. This ruling exposes whether operations, documentation, and coverage structure were built for real claims or just cost efficiency.
At M3, we are actively reviewing freight broker programs against this standard. If your program has not been evaluated through this lens, it is worth pressure-testing. This is where structure matters more than spend. Connect with an M3 Client Executive to learn more.
