How to file on a broker’s surety bond

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Previously in this series: How to report — or threaten to report — bad brokers, take action for payment recourse

Three in four poll respondents report at least one incident of nonpayment and an effort at recourse. The most common action was filing a claim on the broker’s surety bond — detailed how-to follows. See poll in this prior story for more detailed results.Three in four poll respondents report at least one incident of nonpayment and an effort at recourse. The most common action was filing a claim on the broker’s surety bond — detailed how-to follows. See poll in this prior story for more detailed results.

Federal rules pertaining to broker surety filings haven’t changed much since years ago when Congress raised the minimum bond or trust amount from $10,000 to $75,000. That boost meant an added measure of financial security for owner-operators who have to resort to filing a claim with the surety provider after nonpayment, though for various reasons it’s far from a guarantee of full payment.

The most high-profile filing incidents involve brokerages in trouble, or crooks in business for the sole purpose of defrauding carriers before their sureties are cancelled and they disappear or, in rare cases, get caught and face the consequences.

If a broker is late on payment, odds are you’re not the only carrier that’s thinking about filing. If the broker’s bond limit doesn’t cover all debts, claims typically are paid on a “pro rata” basis as determined by the surety provider or, in some cases, a court — basically a percentage of what each carrier is owed. In the worst cases, that percentage can be quite small.

Getting your claim in early thus may not be particularly helpful in such cases, yet an initial claim also has been known to be that extra nudge that pushes a recalcitrant broker over the finish line to finally paying what it owes. In addition to the primary goal – getting paid – this also avoids the hassle and delays that come with seeing the filing process through to its end, with all the accompanying paperwork and collecting of load documentation. Here are the steps in filing:

Determine when it’s time to file. | Though the profusion of mobile technologies has made speedy payments possible, contracts can state any time for payment — 30, 60 or 90 days after delivery remain common. After a broker has not paid within the contracted time, and particularly if the broker is not responding to you, it makes sense to begin the process.

Determine if the load is covered by surety regulations. | Notable exceptions are intrastate loads (running point to point within a single state) and loads of exempt commodities (fresh produce and the like). Search “Administrative Rule 119” at FMCSA.DOT.gov for a full list of commodities and their exemption status to see the details of what’s not covered by bonding requirements.

This shows the notice of a 30-day pending insurance or bond/trust cancellation that FMCSA now applies to entity profiles on its Licensing & Insurance website. It’s accessible via the Safer.gov site after you locate an entity through the lookup there. If you see this notice on a broker’s profile, and the broker has existed less than a year or 18 months, it could be a red flag. You can contact a broker’s surety provider to find out whether the cancellation is due to a run-up in claims from carriers that haven’t been paid.This shows the notice of a 30-day pending insurance or bond/trust cancellation that FMCSA now applies to entity profiles on its Licensing & Insurance website. It’s accessible via the Safer.gov site after you locate an entity through the lookup there. If you see this notice on a broker’s profile, and the broker has existed less than a year or 18 months, it could be a red flag. You can contact a broker’s surety provider to find out whether the cancellation is due to a run-up in claims from carriers that haven’t been paid.

Find the broker’s surety provider.

  1. Click the “company snapshot” link at Safer.gov, then enter the broker’s DOT number, MC number or name and click “Search.”
  2. Use of a DOT or MC number, if correct, will take you directly to the broker’s basic information page. If you searched a name, you may be presented with a list of brokers from which to choose. Once you’ve located the correct one and are on the basic information page, in the box headed “Other information about this carrier,” click through the “Licensing and Insurance” link to FMCSA’s public Licensing and Insurance website. That’s where insurance/surety information and an authoritative history for any entity, among other data points, are available.
  3. Another search page will come up, with the DOT number field already populated. Click the box to prove you are not a robot, and click through to the broker’s Licensing and Insurance main page.
  4. When the broker you’re filing against comes up, click the “HTML” button to view licensing information on the web page or “Report” to download a pdf. On the pdf, the surety provider is listed under “Active/Pending Insurance.” If you’re viewing the HTML report, click the “Active/Pending Insurance” link for the surety provider’s information. It’s in this view that you’ll see a flag on any broker whose bond is within 30 days of either ending its active term or being cancelled for reasons of valid claims filed against it.

And about those brokers pending cancellation … Some view this relatively new red flag as a tool to prevent fraudulent activity by brokerage operators who would attempt to take advantage of the 30-day notice process required of surety providers before cancelling a surety for good. Congress in 2012 directed the Federal Motor Carrier Safety Administration to adopt a process to immediately suspend such brokers upon notification provided by the surety or trust fund provider. The agency took comments on the process in 2018, but no further action was taken.

For now, if you’re vetting a broker before taking a load and see “This entity has a pending insurance cancellation” on its Active/Pending Insurance page, hit the back button on your browser and click through the “Authority History” link at the bottom of the page. If the broker’s been in business for a short time, the pending cancellation could be considered a true red flag.

Of the more than 8,000 involuntary revocations of brokers between 2015 and January of this year, 14.5 months was the average time in business before being shut down. You can contact the broker’s surety provider to find out definitively whether the pending cancellation is a routine matter or due to a run-up in claims. If the latter, stay away.

  1. Have this information ready to file: Broker’s legal name and DOT/MC numbers, as well as your own and relevant contact information; amount owed to you; load date(s); commodity hauled.

Contact the surety provider. | You may need to do further searching to find contact information for the provider. Several test pulls of random broker licensing reports showed neither phone nor online points of contact for the listed surety provider. However, a Google search for company name and location, in most cases, will bring up the provider’s website and contact phone numbers.

Follow the provider’s claims process. | Some companies may send you to a web page to fill out a preliminary form. Other sureties, however, will handle this step via a telephone call. From there, documents may be mailed to you to fill out and return.

If luck’s on your side, you’ll get paid by the broker after notification of the claim from the provider. If not, follow the provider’s claims process to the end. Hope the bond or trust isn’t exhausted by similar claims if the broker’s business is failing or if it turns out the broker is a crook in the process of disappearing.

Find all of the stories in this series via the links below, from first to last: 

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