After discussing a mixed second quarter financial performance but predicting better times ahead, management of 3PL giant RXO centered its earnings call on a different strength: its insurance coverage and the way it vets carriers before letting them into its network, according to FreightWaves. With the brokerage industry absorbing the twin shocks of Montgomery vs. Caribe II and a recent C.H. Robinson nuclear verdict, the ability of a 3PL to withstand a significant litigation hit has become a pressing future challenge, and RXO's message to analysts was consistent: the company is in solid shape to face a new, likely more litigious and possibly more expensive environment. The call was RXO's first earnings report since the Montgomery case came down with a unanimous decision in May.
RXO's vetting rules: conditional ratings barred, 90-day authority required
CFO Jamie Harris, in his prepared remarks, said RXO's vetting standards are "some of the strictest in the industry," according to FreightWaves. Carriers with a Conditional rating from the Federal Motor Carrier Safety Administration (FMCSA) are not allowed in the RXO network, Harris said.
In a 2024 blog article, Kathy Close of J.J. Keller & Associates described a Conditional rating as meaning:
Inadequate safety management controls are in place. You cannot ensure compliance with the safety fitness standard. You have deficient areas that FMCSA expects the carrier to resolve. However, you can continue to operate.
Harris also said a carrier must have active authority from FMCSA for at least 90 days "before they even have an opportunity to serve a customer," according to FreightWaves.
Insurance spend: $15 million to $20 million as a base
Harris provided specifics on RXO's coverage during the call, reporting that the company's annual insurance spend is between $15 million and $20 million, which he described as the base number to use in forecasting future expenditures, according to FreightWaves.
You've got to take that into account because we are in the top percentage in the amount of insurance power that we have. As we look forward to next year, I think we'll have the exact same experience that we've had in prior years, which is our vetting process and our safety record is at the top of the list of things that insurance providers look for.
Harris said RXO has been in communication with its insurers, and expressed confidence that insurers will be even more focused on carrier vetting processes and controls as well as safety outcomes. "We believe that our best-in-class process and safety record will continue to be of significant benefit when we renew our policies at the end of the year," he said, as reported by FreightWaves.
According to Harris, RXO's view is that a large number of brokers, both large and small, are "underinsured." They will be the ones hit with the largest increases as the new legal landscape for brokers post-Montgomery begins to show up in premium increases.
| RXO Vetting and Insurance Metric | Detail |
|---|---|
| Annual insurance spend | $15 million – $20 million |
| FMCSA Conditional rating | Barred from RXO network |
| Minimum FMCSA authority age | 90 days before serving a customer |
| Vetting system | Proprietary AI-powered carrier evaluation |
| Real-time identity check | FMCSA identity verification |
AI-powered carrier evaluation
Jared Weisfeld, chief strategy officer at RXO, said AI tools are part of the company's vetting process. RXO has developed a "proprietary AI-powered system that evaluates carrier reliability and history," Weisfeld said, according to FreightWaves. "This system includes real-time identity verification with the FMCSA," he added.
What it means for brokers and shippers
FreightWaves reported that RXO's pitch comes as the entire brokerage industry reassesses litigation exposure. The C.H. Robinson verdict, which unlike past cases involved a crash with a carrier rated Satisfactory by the federal government, broadens the risk picture. RXO's disciplined vetting and substantial insurance program are intended to shield the company — and by extension the shippers using its network — from similar hits.
For other brokers, the message is more cautionary: those running leaner insurance programs are likely to face the steepest premium increases. Shippers should expect tighter carrier qualification standards across the market as insurers respond to the post-Montgomery environment, and RXO's rules — no conditional ratings, 90-day authority requirements, and AI-backed identity checks — may become a template for the rest of the industry.
Watch list
- Year-end policy renewals: RXO expects its insurance renewal process at the end of the year to benefit from its safety record and vetting process, according to Harris.
- Premium increases for underinsured brokers: Harris predicted the largest increases will land on brokers that are "underinsured," as the post-Montgomery legal landscape affects pricing.
- Insurer scrutiny of vetting: Harris said insurers will be "even more focused" on carrier vetting processes and controls, which could push stricter standards across the brokerage industry.
- More litigation fallout: The Montgomery and C.H. Robinson cases continue to shape the industry's risk environment, and RXO's next earnings reports will show whether its posture pays off.
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