How to file on a broker's bond
The Federal Motor Carrier Safety Administration (FMCSA) requires that all approved Freight Brokers maintain a certain type of insurance policy known as a Broker Bond or BMC-84. The broker bond is a surety bond also known as a performance bond, which brokers are required to maintain which guarantees that they will perform their obligations and pay for the services rendered by the subcontracted carriers that they hire. The concept is the same when being awarded a large government contract. The government wants to ensure that all subcontracted parties will be paid for their services, so they require the Prime contract holders to hold some form of insurance policy in place that protects the subcontracted parties below them. When you hear about situations where carriers want to file on a bond, they are essentially filing an insurance claim against the broker saying that they’re not fulfilling their contractual obligations.
Filing on a bond is actually a very easy process but before going that route, make sure you fully understand the legitimacy of your claim and don’t waste anyone’s time prior to making that decision. Keep in mind, that the bonding companies are just like insurance companies, so they will make sure they perform their due diligence prior to issuing a payment so make sure your case is rock solid.
The first step you need to perform before filing on the bond is to know your broker/carrier obligations. Every time you setup with a broker, they require you to fill out a broker/carrier packet. This agreement is a contract that should explain your rights, duties, and obligations. The broker/carrier agreement specifies payment terms and might be the reason the broker hides behind issuing a legitimate payment. If the broker/carrier agreement protects the broker and leaves a reason for the broker not to pay you, then chances are you won’t be successful when filing on the bond.
An example of this is when there are damages and claims. Most broker/carrier agreements have a clause allowing the broker to withhold payment if there are damages or shortages. If damages were present and the paperwork (BOL or POD) indicates this, then the broker has a legitimate case on withholding payment. Another example is that these agreements all have a back-solicitation clause. If you contact the broker’s customer for payment, then you might be in violation of your agreement. Read through your broker packet prior to filing on the bond and see if you still have a case with the bonding company.
After you’ve read through the agreements, the paperwork looks good, there were no issues on the load, and you’re still not getting paid, then moving forward with a bond filing should be performed. The filing process is very easy and also can be a strategic way to get paid on time when the broker tries to draw their payments out. Brokers hate it when their bond gets filed on because the bonding company contacts them immediately and asks them why they’re not paying. The bonding company, just like an insurance company, can adjust the broker’s annual premium each year if they deem that company to be riskier. So, when a broker gets their bond filed on, they need to resolve the situation quickly because they don’t want any negative claims that will increase their insurance premiums in the future.
To file on the bond, make sure you have all the following documents ready:
- Cover Letter explaining the entire situation and why you believe you should be getting paid and what your corrective actions have been to try and resolve the issues yourself
- Broker/Carrier Agreement
- Invoice submitted to the broker and the dates it was sent
- Rate Confirmation
- BOLs and PODs
- Emails, text messages, and any communication supporting the facts stated in your cover letter
Keep in mind that the bonding company will poke holes in your story and the broker will try to avoid payment as much as possible. If you truly have a legitimate claim, make sure your situation is concrete. Another piece of advice is to know the broker you’re going up against. If your filing on the Bond/Trust for a publicly traded company, you might not be successful. Also, be prepared to get black listed from that broker in the future because they are not going to want to load you so don’t just use this method to file on a broker bond if the load is 35 days old. Know the time and place and don’t take advantage of the system.
OperFi understands the bond filing process and we believe it’s important to help our clients know their rights and what to do in every situation to protect their company. Give us a call if you are running to a specific situation that you need some guidance on and our reps will gladly help you to reclaim what is rightfully yours.
Contact OperFi today to get a free consult and learn how to earn more profits for your trucking company. OperFi is changing the way Trucking Entrepreneurs interact with their factoring companies. Transportation factoring and Freight Factoring shouldn’t force you to be another number. Give us a call and experience the OperFi difference and see why our carriers plan their business with OperFi service.