In the September-October 2024 issue of PARCEL, we took a look at the legal and financial risks faced by parcel shippers. Some of these are old risks that have existed for many years. However, as a result of the explosion of criminal activity in the supply chain, new risks have substantially increased in just the last few years. In this installment of PARCEL Counsel, we will take a look at how to insure against these new risks.

Fraud and Deceit Insurance

When contracting with motor carriers and brokers, shippers will usually require the carrier or the broker to have cargo liability insurance. However, these policies will usually specifically exclude the new risks, such as identify theft, double brokering scams, fraud, and so on. Other policies might not specifically exclude these risks but may use language that won’t allow coverage to trigger if the loss is due to double brokering, fictitious pick-ups, and so on.

For instance, a policy might use language such as “coverage for losses to cargo in the due course of transit…” but fictitious pick-ups never travel in the intended course of transit. Or, the policy language might say that it covers “loss to cargo that the broker tendered to an authorized motor carrier.” However, if it was intercepted by a fraudulent actor, the broker probably didn’t tender it to them.

Generally speaking, there aren’t policies available for just fraud and deceit. Rather, such coverage can be included as part of a motor carrier’s cargo liability policy or a broker’s contingent cargo liability policy. Thus, a shipper would need to specify that the required cargo liability policies would also include coverage for losses due to “dishonest acts of carriers and third parties” in their contracts.

Alternatively, rather than relying upon the transportation provider’s insurance to protect a shipper, a shipper can protect itself by acquiring its own shipper’s interest cargo insurance specifically including coverage for theft due to dishonest acts of carriers and third parties.

Crime Insurance

Traditional commercial crime insurance policies are designed to protect a business from its own dishonest employees or other bad actors that steal funds, steal or destroy company property, forge documents, and other similar activities that cause financial harm to the business. While larger motor carriers may carry this type of insurance, it is my sense that smaller motor carriers generally do not. Accordingly, a shipper would have to make a specific request for crime insurance when contracting with a motor carrier.

Similarly, brokers seldom carry crime insurance. However, a broker’s employee could be part of the criminal activity and, accordingly, a shipper could protect itself by requiring that the broker obtain crime insurance coverage.

Not all crime insurance policies cover the same risks. Accordingly, a transportation provider’s crime insurance should specifically provide coverage for “physical loss or damage to cargo as a result of criminal, fraudulent, or dishonest acts of employees.” Such crime insurance can be obtained through an individual, stand-alone policy, or as part of a motor carrier’s cargo liability policy or a broker’s contingent cargo liability policy.

To conclude, I would like to credit Lisa Vranich at Avalon Risk Management Insurance Agency LLC for her assistance in my research for this column. All for now!

Brent Wm. Primus, J.D., is the CEO of Primus Law Office, P.A. and the Senior Editor of transportlawtexts, inc. Previous columns, including those of William J. Augello, may be found in the “Content Library” on PARCELindustry.com. Your questions are welcome at brent@primuslawoffice.com.

This article originally appeared in the January/February, 2025 issue of PARCEL.