At tech/AI confab, C.H. Robinson tackles insurance and liability

Lupus Superior is based in Texas which is why the case was heard in that state.

Formal request is in

Attorneys for the plaintiffs last week filed their formal request to the court for entry of the judgment. It noted that the jury had found 45% of the blame assigned to Gonzalez, 45% to Lupus Superior and 23% to C.H. Robinson. 

But the filing also noted that C.H. Robinson is vicariously liable for that portion of the blame assigned to Gonzalez, who is deceased. The jury also had found that C.H. Robinson was effectively Gonzalez’ employee, a ruling that if it stands on appeal could have far-reaching impact on trucking litigation.

In the discussion about the landscape for C.H. Robinson and brokers in general, with the Lipe nuclear verdict and the Supreme Court decision in Montgomery vs. Caribe Transport II in the background, 

C.H. Robinson CFO Damon Lee reiterated comments that Bozeman and other company officials have made recently: we’re in good shape.

Lee said C.H. Robinson had an opportunity to settle the Lipe case but chose not to do so. “We feel like we will prevail on appeal,” he said. Lee added that 98% of “all our cases either get dismissed or settled. We don’t think that trend is going to be disrupted post-Montgomery and post-Lipe.”

Bozeman said the number of lawsuits C.H. Robinson (NASDAQ: CHRW) is fighting at any given time is in “the lower side of the tens” which he contrasted with “hundreds of millions of shipments.”

No insurance premium crisis expected

On questioning from Citigroup’s Ariel Rosa about investor concerns about C.H. Robinson’s future, in particular about how much it might need to spend on insurance post-Montgomery and post-Lipa, Lee said he was optimistic about what insurance companies will do when they provide “their verdict” on the company’s 2027 premiums, which are now being negotiated.  

C.H. Robinson expects insurance costs are going to increase by “a very manageable number,” he said, “and the majority of it will get passed through freight rates anyway. Ultimately the consumer will bear the majority of that cost.”

Insurance costs plus claims are “immaterial” at C.H. Robinson, Lee said. They are less than 50 bps of gross revenue and auto liability insurance is only about 25 bps of that, he added. “Even if we did see a material increase in inflation on insurance, it’s not going to have a material increase on our earnings,” Lee said. “So we feel really good about where we’re at.”

Stock has been impacted

C.H. Robinson stock has taken a pounding, particularly after the Lipe nuclear verdict. 

Its hit a 52-week high of $210.33 on July 22. The Lipa verdict came down two days later. C.H. Robinson’s stock price then bottomed out at $141.63 before closing Tuesday at just over $150, up more than 2% on a day when the S&P 500 fell almost 0.6%.

Just before the conference began, Citi upgraded its rating on C.H. Robinson’s stock to buy from neutral. 

In its commentary on the move, Citi said it expects that the final judgment from Judge Jones “could be less severe than the initial jury verdict.” Citi also said it expects “potential regulatory intervention also driving a more balanced solution,” a reference to industry statements that post-Montgomery, the brokerage industry needs guidelines on what constitutes a “safe harbor” set of guidelines on what a 3PL needs to perform in hiring a carrier in a process that protects it from liability in case of a wreck.

Bozeman was more specific, saying C.H. Robinson was “working with FMCSA to get a standard through the Department of Transportation.” He added that he will be visiting Washington next week to lobby for more clear rules.

Oh yeah, Montgomery too

Bozeman also downplayed the impact of the Supreme Court’s Montgomery decision. While C.H. Robinson was out of the case as a named defendant when it went to the Supreme Court, it had been an original defendant and it led the effort before the nine justices. 

The unanimous Montgomery ruling precluded brokers from using the Federal Aviation Administration Authorization Act as a firewall against being found liable or negligent in a case involving a carrier hired by the 3PL. 

“That’s just one defense that’s now off,” Bozeman said. “We’ve had to deal with well over 30 states that didn’t have that anyway.”

C.H. Robinson’s presence at a tech conference was backed up by Rosa’s review of what technology, specifically AI, had wrought at the 3PL: gross profit per employee up 60%, headcount down about 30% and shipments per employee increasing at a double-digit rate.

Arun Rajan, C.H. Robinson’s chief strategy and innovation officer, said the first two or three years of his five-year tenure at the company saw the company use “traditional software engineering approaches” to produce its internal technology tools. The problem with that approach, he said, is that “a lot of projects wouldn’t make the ROI bar because there’s a lot of software engineering effort.” 

That gets magnified in the brokerage business, Rajan added, because it’s an industry that “is plagued by nuances that are specific to customers and to carriers. We sit in the middle.”

But projects that a few years ago would not have made that “ROI bar” now can do so because of AI. 

Coding tools in AI, Rajan said, are “massively better.” A team of 500 software engineers at the company “punch like there are 2,000 to 3,000 of them as they start to use coding tools.”

Beyond that, agentic AI tools are able to “capture the collective knowledge of the company,” with the agentic AI tools built on top of large language models (LLMs). 

“This has created this massive acceleration in our productivity in the last couple of years,.” he said.

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