Supreme Court Clarifies FAAAA in Montgomery v. Caribe
The interplay between federal preemption doctrine and state tort law has long generated significant litigation in the transportation sector. The Federal Aviation Administration Authorization Act of 1994 (“FAAAA”), codified in relevant part at 49 U.S.C. §14501(c)(1), broadly preempts state laws “related to a price, route, or service” of motor carriers, brokers, and freight forwarders engaged in interstate commerce. For nearly three decades, freight brokers invoked this provision as a threshold defense to state tort claims premised upon negligent carrier selection, arguing that these claims constitute impermissible state regulation of a federally governed service.
On May 14, 2026, the United States Supreme Court unanimously resolved a longstanding circuit conflict on this question. In Montgomery v. Caribe Transport II, LLC, the Court held that negligent hiring claims asserted against freight brokers arising from interstate transportation arrangements are not preempted by the FAAAA. Writing for a unanimous Court, Justice Barrett concluded that such claims fall within the statute’s express safety exception, which preserves state authority over motor vehicle safety notwithstanding the Act’s broad preemptive scope. The decision carries profound implications for freight brokers, motor carriers, shippers, third-party logistics providers, and the insurers that serve each segment of the supply chain.
Read our previous insights on the case before the decision was handed down.
The Supreme Court’s Ruling
The majority opinion focused on the FAAAA’s “safety exception” contained in 49 U.S.C. §14501(c)(2)(A), which provides that the statute’s preemption provisions “shall not restrict the safety regulatory authority of a State with respect to motor vehicles.”
Relying upon City of Columbus v. Ours Garage & Wrecker Service, Inc., 536 U.S. 424 (2002), the Court explained that Congress intended the safety exception to preserve traditional state police powers concerning motor vehicle safety, even while broadly preempting economic regulation of motor carriers. Accordingly, the Court held that negligent hiring claims involving unsafe motor carriers fall squarely within the safety exception and therefore survive federal preemption.
Justice Kavanaugh concurred in the judgment and wrote separately to address the merits of the decision. His concurrence is particularly significant as it addresses the substantive content of the broker’s duty of care. Justice Kavanaugh emphasized that the Court’s holding does not subject brokers to strict liability or transform them into insurers of every shipment they arrange. The standard remains one of reasonable care. A broker that conducts meaningful, documented due diligence and selects a carrier in good standing with a satisfactory safety record should be well-positioned to defend against negligent hiring claims on the merits. The concurrence thus offers a doctrinal anchor for framing the reasonableness inquiry at trial and in summary judgment practice.
Notably, the Court’s opinion is expressly limited to claims arising from interstate transportation arrangements governed by 49 U.S.C. §14501(c). A separate and structurally distinct preemption provision, §14501(b), governs certain intrastate transportation services and does not contain a safety exception. The majority acknowledged this asymmetry and explicitly declined to opine on whether negligent hiring claims arising from purely intrastate broker arrangements remain subject to FAAAA preemption. As a result, negligent hiring claims involving solely intrastate transportation may still face preemption arguments. Therefore, the distinction between interstate and intrastate carriage will frequently be dispositive going forward.
Impacts of the Montgomery Decision
The most immediate and concrete consequence of the Court’s ruling is the elimination of FAAAA preemption as a mechanism for early case resolution in interstate broker negligent hiring matters. Cases will proceed to extensive discovery. The foreseeable effects include:
- Increased volume of negligent hiring litigation against brokers in interstate transportation matters;
- Substantially broader and more resource-intensive discovery;
- Greater frequency of indemnity demands and additional insured coverage disputes among brokers, shippers, and motor carriers;
- Elevated litigation costs across all segments of the industry; and
- Increased regulatory and compliance scrutiny of broker documentation and recordkeeping practices.
Freight Brokers and Shippers
Freight brokers and shippers should immediately review and strengthen their carrier selection and documentation procedures. Recommended risk management measures include:
- Systematic verification of carrier operating authority and FMCSA registration status prior to each engagement;
- Documented review of carrier safety ratings, inspection history, and enforcement actions through official FMCSA data sources;
- Confirmation and retention of evidence demonstrating adequate and current cargo and liability insurance coverage;
- Maintenance of contemporaneous written records memorializing each element of the vetting process and the basis for the selection decision; and
- Implementation of document retention protocols sufficient to preserve safety documentation in a format suitable for litigation hold compliance.
Motor Carriers and Owner-Operators
Motor carriers and owner-operators should anticipate that the expanded liability exposure now facing brokers will generate downstream contractual pressure. Brokers seeking to mitigate their negligent hiring exposure will increasingly demand broad indemnification provisions and additional insured status under carrier liability policies. Carriers should review existing brokerage agreements to evaluate the scope of indemnity obligations already assumed and work with coverage counsel to ensure that contractual commitments are aligned with, and supported by, the actual terms of their insurance programs.
Insurers for Motor Carriers and Owner-Operators
Insurers providing liability coverage to motor carriers should evaluate the potential impact of the Montgomery decision on their tender and defense obligations. As brokers and shippers face expanded liability exposure and seek contractual risk transfer through additional insured status and indemnity demands, the volume and complexity of defense and indemnity obligations under motor carrier policies may increase substantially. Where a broker and a motor carrier are co-defendants with potentially divergent interests, separate counsel may be required, which will increase defense costs and coordination demands.
Insurers for Brokers and Shippers
Insurers for freight brokers and shippers should reassess reserves on pending files that had previously been valued on the assumption of a successful preemption defense. Cases that were projected to resolve at the pleading stage must now be evaluated against a full merits-based litigation trajectory. Insurers should additionally:
- Require production of evidence of additional insured status and confirm the existence of endorsements;
- Review the contractual indemnity provisions in broker-carrier and broker-shipper agreements to assess the enforceability and scope of risk transfer;
- Evaluate whether existing broker professional liability and general liability policy forms are structured to respond to the expanded litigation environment created by Montgomery; and
- Engage with insureds regarding the adequacy of their carrier screening documentation, recognizing that the ability to demonstrate reasonable vetting practices will be the principal variable in determining case defensibility and settlement value.
Key Takeaways
Montgomery v. Caribe Transport II represents a watershed moment in the law governing freight broker liability. By holding that state-law negligent hiring claims against brokers survive FAAAA preemption in the interstate transportation context, the Court has eliminated what was, in many jurisdictions, a reliable avenue for early case resolution.
However, this decision does not eliminate viable defenses. Rather, the decision redirects litigation toward a comprehensive merits inquiry into the adequacy of broker due diligence practices. Brokers, shippers, carriers, and insurers that implement sound documentation practices and strong compliance protocols will remain well-positioned to defend broker liability claims.
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