BY: James Francis, Surety Claims Lead Specialist, Education, Avalon Risk Management
It’s not uncommon for claims to be filed against your property broker bond. Fortunately, the TIA Bond Program has an experienced team in place to handle these claims in accordance
with MAP-21 regulations. Here is a summary of the claims process, best practices to mitigate risks, claim trends and claims involving illegal double brokering. MAP-21 has been in effect since October 2013 and requires property brokers to be licensed with the Federal Motor Carrier Safety Administration (FMCSA) and establish proof of financial responsibility through a bond or trust fund agreement. A property broker can fulfill this requirement by obtaining a BMC-84 bond or BMC-85 trust fund agreement.
The TIA Bond Program
TIA offers the standard $75,000 bond to qualified property brokers and domestic freight forwarders, which satisfies the FMCSA MAP-21 requirement. In addition, TIA has a special
program exclusively for TIA members that offers bonds with limits of $100,000 or $250,000. Avalon Risk Management manages the underwriting process of the TIA Bond Program and handles all claims submitted according to MAP-21 regulations. The bond is in place to protect carriers against broker insolvency and a broker’s failure to pay freight charges owed to the carrier for services rendered. The bond covers unpaid freight charges but cannot cover lost or damaged goods or damage to third-party property. Under MAP-21 regulations, the surety must respond to the claim on or before the 30th day on which the notice is received.
What happens if a claim is filed against your bond?
We will notify you of the open claim if a claim is filed. You are allowed to pay the claim or provide a written dispute. If payment has been made or is pending, proof of payment will be
required. If there is a dispute over the invoice, the dispute should be supported with the agreed-upon terms of a rate confirmation or a broker-carrier agreement. Broker Insolvency
If claims are unresolved after 30 days, the surety must investigate the broker for suspected financial insolvency. Insolvent brokers are published for 60 days on our website, in accordance with 49 USC 13906, as amended by Map-21, Division C, Subtitle I, Section 32918.
Payment of Claims
According to the MAP-21 regulations, the surety may only pay a claim if one of three conditions are met:
(i) subject to the review by the surety provider, the broker consents to the payment:
(ii) in any case in which the broker does not respond to adequate notice to address the validity of the claim, the surety provider determines that the claim is valid; or
(iii) the claim is not resolved within a reasonable period of time following a reasonable attempt by the claimant to resolve the claim under clauses (i) and (ii), and the claim is
reduced to a judgment against the broker.
The surety must pay all valid claims received before or during the 60-day advertising period. After the advertising period, the surety will review all remaining valid claims received. Payment will be made in whole if the total number of claims is under the bond amount. However, if the total number of claims received exceeds the bond amount, the surety will issue payment on a pro-rata basis. If the surety issues payment from the bond, the broker is responsible for reimbursement to the surety for any claim payments.
Exclusions
There are instances where a claim may not be considered valid. There are three main exemptions found under 49 USC 14705:
• Claims must be submitted to the surety within 18 months of the shipment pickup date. If a claim is submitted to the surety beyond the 18-month statute of limitations, we cannot accept the claim.
• The bond cannot cover claims containing exempt commodities. If a shipment includes exempt commodities (i.e., produce, agricultural commodities, dairy, and poultry), the claim is exempt from coverage.
• If a shipment does not cross a state or federal line at any point during the shipment, it is exempt from coverage.
For a comprehensive list of commodities that are considered exempt, please visit the Composite Commodity List. Additionally, if the claimant does not have active carrier authority at the time of the shipment, the claim will not be considered valid. A motor carrier must be licensed with the FMCSA and have active motor carrier authority when the shipment occurs.
Lastly, if a claimant is not a motor carrier or shipper operating as a motor carrier, we cannot accept the claim. The bond language states that the bond is for the benefit of motor carriers
and shippers by way of motor carrier. If a claimant is not operating in the capacity of a motor carrier, they are not considered a valid party to the bond.
Best Practices
• Have clearly defined terms and conditions in any contract with carriers.
• Acknowledge receipt of the claim as soon as possible and forward it to the appropriate claims contact for a response.
• The surety only has 30 days to respond to a claim. If there is a dispute, provide information on the dispute as soon as possible so the surety can quickly work toward a resolution.
• To aid a disputed claim, provide the Broker-Carrier Agreement on file with the carrier and reference any agreement terms that support your dispute.
• Given that the surety only has 30 days to respond, the sooner you can provide information on your dispute, the sooner we can issue a decision and resolve the claim.
Claim Trends
An analysis of our claims data indicates an increasing number of claims received for the following reasons:
• A deduction was made against the carrier for late delivery or missed appointments.
• The carrier billed unapproved accessorial charges.
• A deduction was made against the carrier for noncompliance with tracking requirements.
• There is an unresolved damage claim against the carrier, and an offset has been placed against them.
Illegal & Fraudulent Double Brokering
With the ease of using online communication and online marketplaces to run its daily operations, businesses in the industry are at risk of falling victim to illegal double brokering. Claims involving double brokering and identity fraud issues are increasingly common. 3PLs should exercise extra caution when interacting with companies you do not have any existing business relationship with.
Whenever possible, we recommend security features such as utilizing multi-factor authentication (MFA) on user accounts and strong passwords should be used whenever possible to prevent becoming a victim to identity fraud. When a surety or provider receives double brokering and identity theft claims, they must still be reviewed and responded to according to MAP-21 claim requirements. Brokers who are subject to claims should provide proof of the fraud or double brokering regarding the claim(s) in question.
Indicators of double brokering or fraud may include evidence that another carrier picked up and delivered the shipment, contradictory GPS tracking information, inconsistent driver logs,
or pictures from your shipper or receiver showing a separate carrier presented themselves to the delivery location.
When a broker suspects fraud, they should provide details of inconsistencies and documentation to demonstrate that the shipment did not originate from an authorized representative of the company. In order to deny a claim, the surety must have a valid written dispute from the broker evidencing the fraudulent activity. Failure to provide such information, may result in payment by the surety, notification to the FMCSA and ultimately revocation of broker’s authority.
We recommend taking proactive steps to carefully vet a new carrier when onboarding them for their first shipment to prevent illegal double brokering. Your onboarding process should
thoroughly investigate new carriers to weed out illegitimate companies. We recommend searching the TIA Watchdog Report for new carriers to see if previous TIA members have reported any issues with a particular carrier. We also recommend requiring GPS tracking to be utilized for shipments. Some brokers ask their shippers and receivers to take pictures of the carrier that comes to the delivery appointment to ensure that the carrier that shows up matches the carrier that was contracted to pick up the shipment.
While taking precautionary steps will help mitigate some of the risks of double brokering, there is always a chance it will happen. If illegal double brokering occurs, we recommend reporting
the carrier on TIA Watchdog and filing a report to the FMCSA National Complaint Database.
New FMCSA Ruling
In January 2025, the FMCSA is implementing new regulations governing claims. The surety is now given strict timeframes to respond to claims and investigate the suspected inability to pay
or insolvency of a property broker. To prevent disruptions, it is it is urgent to review new claims submissions upon notification and provide a detailed written response to the claim as soon as
possible.
The new rule also requires trust providers to ensure that trusts are fully funded and available by January 16, 2026. Trust accounts must be fully funded in cash, US treasury or FDIC funded
letter of credit in the amount of a minimum of $75,000 for each licensed property broker/domestic forwarder on the trust. In other words, trusts need to have $75,000 x the number of property brokers/domestic forwarders, sums held in cash. Trust holders should review their existing policy to ensure compliance prior to the enforcement date of January 2026.
Having a bond through the TIA Bond Program allows you the peace of mind that claims are not automatically paid and are handled in accordance with MAP-21.
For more information on the application process, please visit the TIA Bond Program webpage. If you have any questions regarding claims against your bond or MAP-21 regulations, contact
the TIA claims department at (847) 235-6283 or via email at [email protected].