CTB Carrier Selection & Risk Management 5 — Questions and Answers
Question 1: A broker is approached by a new carrier offering rates 30% below market for refrigerated freight. What is the most important risk red flag in this scenario?
- Extremely low rates may indicate the carrier lacks proper reefer equipment, insurance, or intends to engage in fraud (Correct answer)
- Low rates are a sign of operational efficiency and should be accepted immediately
- The carrier is likely a new entrant with no safety history, which poses minimal risk
- This is a standard competitive pricing tactic common in spot markets
Correct answer: Extremely low rates may indicate the carrier lacks proper reefer equipment, insurance, or intends to engage in fraud
Rates significantly below market often signal inadequate equipment, lapsed insurance, inexperienced drivers, or fraudulent intent — all serious risks for refrigerated/temperature-sensitive loads.
Question 2: Under the Carmack Amendment, a carrier's liability for cargo loss or damage is limited unless the shipper declared a higher value. Who bears the burden of proof to collect a claim?
- The shipper/claimant must prove the cargo was in good condition at origin and damaged at destination (Correct answer)
- The carrier must prove it was not negligent
- The broker must prove it selected a qualified carrier
- FMCSA arbitrates the claim without burden of proof requirements
Correct answer: The shipper/claimant must prove the cargo was in good condition at origin and damaged at destination
Under the Carmack Amendment, the claimant must establish a prima facie case by showing good condition at origin, damage at destination, and the amount of loss.
Question 3: A carrier's Certificate of Insurance shows cargo coverage of $100,000 with a $25,000 deductible. For a shipment valued at $110,000, what is the carrier's maximum net coverage after the deductible?
- $75,000 (Correct answer)
- $85,000
- $100,000
- $110,000
Correct answer: $75,000
The policy limit is $100,000, reduced by the $25,000 deductible, leaving a maximum net payout of $75,000 — $35,000 short of the full shipment value.
Question 4: What is the significance of a carrier's 'new entrant' status with FMCSA?
- New entrants are in an 18-month safety monitoring period with heightened audit risk and limited inspection history (Correct answer)
- New entrant carriers have already passed a safety audit and pose lower risk
- New entrant status grants a temporary exemption from HOS regulations
- FMCSA provides new entrants with a provisional satisfactory safety rating automatically
Correct answer: New entrants are in an 18-month safety monitoring period with heightened audit risk and limited inspection history
New entrant carriers operate under a mandatory 18-month monitoring period and must pass a safety audit within 12 months; their limited history makes risk assessment more difficult for brokers.
Question 5: Which action best demonstrates a broker's 'due diligence' standard of care when selecting carriers to minimize negligent selection claims?
- Maintaining a documented, consistent carrier vetting process that checks authority, safety ratings, and insurance before every load (Correct answer)
- Using only carriers with more than five years in operation
- Relying solely on load board reviews and carrier ratings posted by other brokers
- Obtaining a signed carrier agreement once and renewing it every five years
Correct answer: Maintaining a documented, consistent carrier vetting process that checks authority, safety ratings, and insurance before every load
Courts evaluate negligent selection claims by examining whether the broker followed a consistent, documented process — sporadic or undocumented vetting is insufficient as a defense.
Question 6: A shipper requests that the broker arrange cargo insurance on its behalf for a high-value electronics shipment. What licensing requirement applies to the broker in this situation?
- The broker must hold a property-casualty insurance producer license in the applicable state to sell or arrange insurance (Correct answer)
- No additional license is required since arranging insurance is part of standard brokerage services
- The broker only needs FMCSA authority to arrange cargo insurance
- The broker must obtain a surplus lines license from FMCSA
Correct answer: The broker must hold a property-casualty insurance producer license in the applicable state to sell or arrange insurance
Arranging or selling insurance constitutes an insurance transaction under state law, requiring the broker to be licensed as a property-casualty producer — a separate license from FMCSA broker authority.
Question 7: When a carrier is involved in a cargo theft incident, what is the broker's recommended immediate risk management step?
- Notify the shipper immediately, file a police report, and contact the carrier's cargo insurer to initiate a claim (Correct answer)
- Wait for the carrier to file the claim independently before contacting the shipper
- Write off the loss if it falls below the broker's contingent cargo deductible
- Contact FMCSA to suspend the carrier's authority before taking any other action
Correct answer: Notify the shipper immediately, file a police report, and contact the carrier's cargo insurer to initiate a claim
Immediate shipper notification preserves trust, a police report creates the evidentiary record for insurance purposes, and prompt insurer contact starts the claims clock and preserves subrogation rights.
CTB Carrier Selection & Risk Management 5
A broker is approached by a new carrier offering rates 30% below market for refrigerated freight.
What is the most important risk red flag in this scenario?