Five months after Montgomery: what Q3 earnings reveal about the real cost of broker liability

Montgomery is no longer a forecast

After months of speculation following the Supreme Court’s 9-0 ruling that freight brokers can be sued for negligently selecting the carriers they dispatch in Montgomery v. Caribe Transport II on May 14, new third-quarter earnings give the first real look at what is happening.

Two of the largest publicly traded brokers reported strong quarters overall, but their stocks still fell roughly 11% and 18% in a single day. The reason was one line item: insurance and claims (FreightWaves). 

Strong volumes, better pricing and higher revenue per load were overshadowed by claims.

What Q3 numbers show: volatility, not just cost

Recent third-quarter results reveal that the industry’s biggest hurdle isn’t steady cost increases, but unpredictable volatility. From reserve shocks and sudden SG&A spikes to lingering litigation fallout, earnings reports underscore how difficult it has become to forecast risk.

Reserve adjustments: One broker booked $13 million in adverse claims-reserve adjustments plus $8 million on two prior-year claims, missing consensus EPS by 24 cents (FreightWaves). Management announced it will no longer provide reserve guidance after two Q2 claims surfaced in federal jurisdictions where broker protections under the Federal Aviation Administration Authorization Act (FAAAA) of 1994 of  no longer apply.

Guidance resets: The other broker reported that SG&A expenses surged 29.7%—driven largely by higher claims costs—prompting the company to raise its full-year SG&A outlook to $585-590M. Despite the jump, management noted that year-to-date insurance and claims remain below its internal benchmark of ~50 basis points of gross revenue. (FreightWaves).

Litigation backdrop: A Dallas judge affirmed the $604 million Lipe v. Lupus Superior judgment against a major broker, in a case alleging negligent carrier selection in a fatal-crash case (Logistics Management).

Analysts are now watching for 2027 insurance renewal results, which one of these brokers expects to disclose mid to late December.

Premiums versus claims: scale and safety records are being rewarded

For the largest brokers, claims are moving faster than premiums, and the difference matters. In our May post, we estimated that a large pure-play broker could face $8 million to $45 million in added annual premiums. Renewals since then show that range depends heavily on size and safety record.

One large broker reported that its June broker-liability renewal came in only 3% higher, with its auto-liability tower unchanged (FreightWaves). Some mid-market brokers have reported liability premium increases in the double and triple digits, especially on excess coverage that was cheap before the ruling (Transport Topics).

The lesson is not that the cost is overstated. Rather, insurers and juries are pricing in how well a broker can document its carrier selection. The operators with disciplined, searchable records are paying less and defending better.

This is not only a broker problem

While Montgomery’s direct legal liability falls on brokers, the ripple effects extend across the entire freight network, impacting asset carriers, intermodal operators, and port logistics providers alike.

Carriers: Executives at large truckload carriers note that the ruling will likely tighten truckload capacity as shippers enforce stricter standards and insurance costs climb (Trucking Dive). Carriers will face heavier documentation demands, higher insurance minimums, and stricter indemnity language, all while trying to absorb their own rising claims costs.

Intermodal and Port Logistics: Providers arranging drayage or multi-leg moves through third-party carriers should consult counsel to evaluate their liability exposure under the ruling. Even in favorable jurisdictions, shippers will likely demand the same rigorous vetting evidence, and multi-party billing structures make compiling that audit trail significantly harder.

A Tight Market: Market dynamics are already shifting; one major broker reported that truck revenue per load surged 25% year over year in the third quarter, alongside a 3% bump in volume (FreightWaves). Current pricing conditions heavily favor operators that can introduce new surcharges and accessorial fees cleanly.

Four moves to make before 2027 renewals

A revenue and documentation model that holds up under claim volatility is critical. These four capabilities matter most as you enter year-end contract and bid season.

1. Carrier risk-tiered pricing. Price dispatches by carrier vetting status, with a compliance premium for carriers outside your top safety tier. This only works if the billing system can apply tiers across thousands of contracts without manual renegotiation.
2. Documented compliance and insurance surcharges. Tie pass-through charges to specific, auditable cost drivers such as vetting programs, claims experience and coverage changes, not just premium increases. Document them with enough detail to explain to a shipper, and deploy them mid-term across your existing book.
3. Bulk contract amendments. Indemnification, carrier-selection and insurance-requirement language will be reopened at renewal. Updating it contract by contract is too slow and too error-prone.
4. Load-level, audit-ready records. If a claim arises, you may need to show which carrier was dispatched, when, at what rate, and what its vetting status was at that moment. Searchable, timestamped records support both your insurer conversations and your defense. Confirm with counsel what your records should contain.

The window is the next eight weeks

Insurance renewals are due to wrap up by the end of December. Operators with risk-tiered pricing, documented surcharges and amended contracts will negotiate from a stronger position than those still working from spreadsheets.

RecVue helps transportation and logistics companies manage contract amendments at scale, deploy new pricing and surcharges, and produce load-level billing records. If you are working through what Montgomery means for your 2027 billing, we welcome the conversation.

This post is for general information and is not legal or insurance advice. Consult qualified counsel about your specific contracts and coverage.