How Supreme Court Ruling Is Reshaping Final Mile Risk Management

Kevin Carpenter: Ladies and gentlemen, welcome back to On Air with Airfreight.com. This is a podcast where we talk to interesting people within and adjacent to the expedited logistics space. I'm your humble host, Kevin Carpenter. I'm joined today by Bryan Ice. Bryan is a certified insurance counselor and one of the people behind B3, which is a specialized insurance and risk management program built for final mile, same day, courier and customized delivery. Bryan, thanks for taking the time to talk to me.

Bryan Ice: Yeah, no problem. Glad to be here.

Kevin Carpenter: Before we go too far in — B3, that's kind of an interesting setup that you have there, and there's a unique story behind it. Want to give us a little recap of how you got here?

Bryan Ice: Yeah. So there was originally B2 — myself and Bryan Jungelberg. We joined my father's firm, Candreis and Krieger, right out of college. Well, it goes even further back. But we joined our firm together. The three of us actually go back to middle school, high school, played high school football together, and somehow ended up playing sports in college. Not together — one, Bryan Pelazzi, played football, Bryan Jungelberg played soccer, I played baseball.

Kevin Carpenter: Same college? Okay.

Bryan Ice: Then the two of us, Bryan Jungelberg and I, ended up coming out and working for my father right away in the transportation logistics industry. He had a courier specialty at the time, and a program that's kind of evolved. And then, I don't know, four or five years later we sucked in Bryan Pelazzi from his father's business, which was a calendar business, selling calendars and franchises. And we pulled him out of that, and B3 was born from there. And the three of us now not only have the school history but now live on the same street, which is a little weird. But here we are.

Kevin Carpenter: Yeah, you guys are like thick as thieves, it sounds like. You guys ever get sick of each other?

Bryan Ice: Yeah, I mean, yes and no. But you play sports that long together, you just deal with it. It's locker room talk — this guy's slacking, this guy's going on too many vacations, or what have you. But at the same time, it's great, because one can fill in for another. It's fantastic from that perspective. We're very socialistic in how we operate, and we all have our hands in each other's accounts.

Kevin Carpenter: Okay. And within B3, are you guys all specialized toward different areas of the business?

Bryan Ice: All three of our backgrounds — we cut our teeth really in the courier final mile space. But as that industry has evolved into larger, bulkier things — Bryan Pelazzi does a little more in that crossing the threshold, white glove delivery, than the other two of us. But we've been heavily involved in larger truck fleets and freight brokering, freight forwarding, and then still maintaining the final mile and courier and expedite like we've always done. And as we were acquired by Brown and Brown this last August, we're really pushing and developing a full-fledged transportation practice encompassing all lines.

Kevin Carpenter: Okay. So I thought I understood going in, and now what you've said makes me question it. So you guys do insurance, right? That's what you do. You sell insurance.

Bryan Ice: So yeah, we're an insurance broker working for Brown and Brown, which is a publicly traded company. Previous to that we were Risk Strategies. Previous to that we were Brightstone Insurance. That's how I got to know some of the folks in the expediting world, and Dan. But that was two, three companies ago. So as of August of last year, we were acquired by publicly traded Brown and Brown. So now we kind of lead the transportation division, which has different segments within that — trucking, and then a segue or sidebar into freight brokering, freight forwarding — and then some of that same day delivery stuff still remains in my wheelhouse, if you will.

Kevin Carpenter: Got it. And for anyone listening who isn't in this part of the industry — when we say final mile, we're usually talking about the last leg of the delivery journey. Getting the freight from the warehouse or the DC, the distribution center, the airport, the terminal, the store, whatever local hub, to the actual end customer. Fair to say?

Bryan Ice: Yeah, pretty much anything same day delivery usually falls into that realm.

Kevin Carpenter: So okay, but just to make sure I'm clear — you guys don't actually run trucks. You service carriers in this space, and you make sure that their risk management is up to par, basically.

Bryan Ice: That's correct. We have the placement of the insurance, and sometimes we've got safety and loss control people that work with the transportation safety and loss control and the DOT compliance and things of that nature. We help with analytics in terms of monitoring loss experience, that kind of stuff.

Kevin Carpenter: Yeah, and it's about volume, that side of the business. Which — while we are quite niche at airfreight.com, we do larger, more toward the regulated side of shipping. We're a freight broker. We only use vetted, highly vetted motor carriers.

Bryan Ice: Which is obviously important with recent rulings.

Kevin Carpenter: Yeah. At airfreight.com we use highly vetted motor carriers. That's exclusive. That's all we use. That's our standard. That's not necessarily the case for a final mile company, is that right?

Bryan Ice: That's correct. Now again, with the recent Supreme Court ruling, that is starting to become a little bit more of a questioned area — how are we vetting our drivers and that kind of nature? Because again, that is very important for the freight brokerage world: vetting motor carriers. And unfortunately it's not collecting a certificate of insurance and moving on. It's digging into the CAB report, having a written process, and that kind of thing. But in the final mile space and the courier space, that question's starting to be asked for the first time ever, really. How are you monitoring your drivers? How is the onboarding, the vetting process? In fact, currently I'm working on a technological aspect that's going to help with that, in terms of ranking and grading drivers. Is it the perfect scenario? No. But again, at the end of the day, there's nothing that's really been done to do that. And I'm almost looking at it like an eBay methodology — we've got a five-star driver, or a platinum driver, or whatever. That's going to help with that. Because at the end of the day, in the courier world, for example, you're collecting a certificate of insurance that's more than likely personal auto insurance, not even commercial — which nine times out of ten is going to deny a commercial auto delivery-for-hire scenario, because there is an exclusion under those policies. And then running an MVR. That's it. And they do that once a year. And there's not a whole lot of vetting. So I think as this decision continues to evolve, that's going to work its way down the food chain in a more granular way. And let's protect the general public. Let's actually understand what's on the road delivering these packages, right? So I think it's going to continue to evolve as there are more lawsuits against motor carriers in all aspects.

Kevin Carpenter: Right. And for those at home — we're referring to, and if you're in freight you've heard about this, but we're talking about Montgomery versus Caribe Transport II. The Supreme Court ruled nine to nothing that federal law does not shield freight brokers from state lawsuits claiming they negligently hired dangerous motor carriers. That's kind of the official language of it. Long story short, for many years brokers claimed — I forget what it was, the Carmack, or something like that. There was—

Bryan Ice: F4A, the preemption. They utilized that from a defense standpoint, basically, and that kind of shielded them.

Kevin Carpenter: Yeah — from being included in these big lawsuits where something bad happened.

Bryan Ice: So they were basically excluded from the negligent hiring aspect, which is now not the case, right? Now, at the end of the day, are they fully in trouble for this? No. I mean, if they're doing the right processes, I think they'll be fine. I think the problem in the insurance world is, because of the unknown and the uncertainty and no official standard per se, there's going to be a lot of lawsuits, and it's going to go state by state.

Kevin Carpenter: So at the end of the day, the outcomes of those lawsuits are what's going to determine SOPs for everybody going forward, right?

Bryan Ice: Right. A hundred percent. Now, again, how long is that going to take? This is going to take years, probably, to develop a full standard. And at the end of the day, the insurance carriers that we all work with are going to say, all right, well, we're going to have to charge more, because we're going to have to defend these cases until a standard is actually reached. And again, it could be state by state, for all we know.

Kevin Carpenter: Yeah. That's been our philosophy — whatever we were doing before, we're going to do more now. That's been our approach to this. And our vetting, our standards for carriers that could be approved into our network, were already extremely strict. And the reason for that is because we're talking about niche product offerings. Well, our niche is critical freight. And if someone calls us and they're calling us about a shipment that's not the most important shipment of their day or their month or maybe their career, they're not our customer. So because of that, we don't have a tremendous volume of customers, and therefore we don't have to scrounge the bottom of the barrel for carriers. We have a significant enough network that we can cover anything nationwide, pick up within probably a couple hours from go, going on a dedicated truck wherever it needs to go, with a top tier carrier. And so it's good to stay in a niche. It's good to find your lane and stay in it. And we're very good at that. I do wonder how final mile — that's something that has evolved rapidly over the last, what would you say, 10 or 20 years?

Bryan Ice: COVID sped it up very quickly, right?

Kevin Carpenter: It was already starting to, though. The concept of, I can order something on Amazon and have it the same day, or order something from Walmart and have it same day — that was already starting to be in the forefront of our minds, and then COVID hit. It was quite convenient, wasn't it?

Bryan Ice: COVID just took it to a different level. I still barely leave the house at this point for very simple necessities.

Kevin Carpenter: Right, you work from home.

Bryan Ice: Yeah, I mean, other than to take my children to their various sporting activities, I don't leave the house very much anymore. And again, that's all because of where final mile has gone, and the easy way to just push a button to order what you need. It's very simple. But there come a lot of challenges, because you're getting a quality of driver that isn't the best.

Kevin Carpenter: Well yeah, and that's because not only do they want to push the button and get it that same day, but they also don't want to pay ten times what they're paying for the product. And if they call airfreight.com, that's what they're going to get. They're going to get a fairly high minimum charge. We're not doing any pickup or delivery for under — shoot, I don't want to throw us under the bus here — but for under six hundred and fifty bucks. Go ahead.

Bryan Ice: Right. Well, you might have a different generation perspective on that coming up though. When I look at my kids who order Uber Eats, DoorDash on a regular basis — they don't quite understand that they can go to Chipotle for, you know, fifteen bucks, where now they're paying forty. They don't know the difference. So you might be better off in the future with that.

Kevin Carpenter: Right, it's all factored into the cost. However, you do have these companies that are scrambling to figure out how to get stuff delivered fast and really, really cheap.

Bryan Ice: Yes. And I think those companies are going to flounder at some point. If the margins are thin to begin with, how are you going to continue to pay quality drivers, keep up with proper compliance, keep up with the proper driver vetting processes? At some point something's got to falter, right?

Kevin Carpenter: Yeah. And that's actually one of the questions I had for you. When you started working with courier and final mile companies — and it sounds like you've been in the space most of your career — what did the traditional insurance companies misunderstand about that space?

Bryan Ice: Yeah, that's a good question, because it is a misunderstood industry. And that's quite frankly how my father got into it and created this program thirty five plus years ago — the underwriters and the insurance world didn't quite understand this industry, because it's not as black and white as over the road trucking, right? We always joke, when you're on a call with a courier company, it's: we'll haul anything for anyone as long as we're going to make some revenue from it. So I think that was the biggest misnomer — they'll haul anything. Didn't matter what it was. And so being kind of a smorgasbord of what's being hauled, I think that was the biggest concern with insurance providers — dialing in and trying to figure out what's actually being hauled. So the products that have been created have been made to be more of a broader coverage perspective, to encompass that. But if you saw our insurance application, it's thirty-five pages. It's very detailed. And that's part of the reason this program's been around for as long as it has, is because we do get down into the nitty gritty.

Kevin Carpenter: And that allows the insurance underwriters to be way more confident issuing policies to these companies.

Bryan Ice: Correct. That's right.

Kevin Carpenter: Got it. So you guys are basically a broker of insurance, but you're taking it a step further. You're actually designing a program. You're not just going to the insurance carriers and throwing normal applications at them and hoping for the best. Sounds like you guys are taking some serious initiative here.

Bryan Ice: Yeah, that's correct. Yes, we can do that to an extent, but I'd say 90% of what we do is more specialized to our program. The company that we go to as a program manager and wholesale operation is now called Arrowhead Intermediaries. It used to be 180 Intermediaries. They've been our program manager this entire time. So they know the industry just like we do. The carrier has changed over the years — every, I don't know, five to six years it has. But it's been the same underwriting team we've used since day one. So they really understand this niche, and they help to allow the carrier to understand it, and the reinsurance carriers to understand what we actually do. And we have a track record. At the end of the day, we have a lot of data to back up what we do, how we price things, and it's really helpful.

Kevin Carpenter: Yeah, that's interesting. So that being said, you are asking some in-depth questions of the transportation companies that you're working with. What are some of the things that your customers specialize in hauling, final mile?

Bryan Ice: A lot of auto parts, pharmaceuticals, deli, furniture, mattresses, agricultural parts, industrial supplies, everything in between.

Kevin Carpenter: And it's usually within a metro area, right? Do you have customers that have offices scattered around the country, or are they mostly regional companies?

Bryan Ice: Yeah, we've got a lot of large companies, smaller companies, everything in between. We probably insure, I don't know, twenty five hundred across the country. And it could be a couple of vehicles and a mom and pop kind of deal, or it could be a fleet of several thousand. We've got different networks. We work with gig economy type operations — working with a couple right now that are doing food distribution and grocery distribution, that kind of thing.

Kevin Carpenter: That's where the scale really kicks in, right?

Bryan Ice: Yeah, you've got these app-based operations. So you've got to really dig into what the actual exposure is, because they could have a network of 30,000 drivers, but their annual sales are 40 million or whatever. And so you really have to dial in, because you've got a different generation of workforce. The workforce is different than we've ever experienced. And again, I think it was also pushed along by COVID. You have individuals that will work for a new pair of shoes — they earn that money, they buy their shoes, and then you might not see them for another month or two, until they need the next thing. So you're dealing with a different type of workforce in some cases than a traditional one.

Kevin Carpenter: Yeah, the gig economy is definitely a new thing. But it's real. It's where we've transitioned, I would say. Okay, so what would you say is — when you're explaining to people what you do, what's the most interesting part about it?

Bryan Ice: It's always changing. It seems to be ever evolving. Different things are thrown at us on a regular basis. It kind of keeps us on our toes. But because of the background of having our own program, we can move quick.

Kevin Carpenter: Right. You get to hone in on the changes that are happening as they happen, rather than trying to write the book from scratch like probably some of your competitors.

Bryan Ice: Correct. Even this recent Supreme Court ruling — it's interesting, because it was back in probably February or March where we were just trying to get out in front of it. And I was talking to some of the top law firms, Scopelitis, for example. And their expectation of this ruling was not actually supposed to happen until this week. It was supposed to be seven to one, and lo and behold it kind of flew out of nowhere. I'm like, we've got to react, right? So that's why you saw a bombardment of insurance people and legal people and transportation people trying to get out in front of it. Because it's a big deal. This is probably the biggest decision this industry's seen in quite a long time.

Kevin Carpenter: I would agree with you there. I would definitely agree. And hey man, thank you very much for taking the time and having a, I would say, very interesting conversation. Before I let you go, we run our guests through something we like to call the On Air Gauntlet. This is just going to be three, hopefully, softball questions. I just want you to give the first answer that comes to mind. And a couple of them are custom for you because of where you're from. So first question: what's the best Polish dish?

Bryan Ice: Polish? I don't know — like sauerkraut?

Kevin Carpenter: Come on, come on, you're close to Parma.

Bryan Ice: Is that sauerkraut? Is that the Polish dish? I don't know.

Kevin Carpenter: Sauerkraut works. That might be German actually. I'll take pierogies.

Bryan Ice: There you go. You're right. My wife would be disappointed if I didn't answer that. You're right.

Kevin Carpenter: That was the correct answer there. All right, next question. Best Ohio State University Buckeyes football coach of all time.

Bryan Ice: Yeah, I've got a couple pictures behind me, and I was actually at the 2002 national championship. I'm going to go with Tressel.

Kevin Carpenter: Tressel. I had a feeling. And last question, Bryan. Aside from your professional accomplishments, what do you want people to remember about you?

Bryan Ice: I would say being a good father and husband.

Kevin Carpenter: Correct. All right. Hey Bryan, thank you very much for joining us. Thank you again for being on air with airfreight.com.

Bryan Ice: Appreciate it, guys.