Logistics Insurance Fraud

A look into Logistics Insurance Fraud and Claims.

Insurance is supposed to protect you… until it doesn’t.This month on Fraud Girl Fridays, we hit two sides of the same messy coin — the legal and the insurance angles that determine whether your company actually gets paid when things go wrong and go into logistics insurance fraud. What happens when that piece of paper is fake, the coverage is void, or the claim is denied on a technicality?

Two recent Fraud Girl Fridays guests say that’s happening more often than anyone wants to admit and that the only real defense is better contracts, stronger policies, and a healthy dose of skepticism.

The Legal View: Read the Policy Before You Need It

Transportation attorney Bryan J. Nelson, Esq., MBA partner at Taylor Nelson Slattery Bernard PL has seen countless brokers and carriers blindsided when insurance companies refuse to pay on cargo losses.

“Insurance isn’t in the business of paying claims,” Nelson said. “They’re in the business of making money. The more exclusions in your policy, the better their margins.”

Nelson, says the first mistake most brokers make is assuming the policy will cover automatically. Instead, he urges them to read the fine print and train the people managing carrier setups to understand what their own coverage actually allows.

“You negotiate rates every day,” Nelson said. “Why stop negotiating when it’s your claim on the line?”

He explained that brokers often face denied claims because of “voluntary parting” exclusions. Like when freight is willingly released to a fraudulent party or because the carrier hired turned out to be fake. Those aren’t covered under most cargo or auto liability policies.

“Fraud by another party doesn’t qualify as an accident,” Nelson said. “Under Carmack, the carrier has to prove it was free from negligence, and fraud isn’t one of the five exceptions. If you hired the wrong carrier, you could still be on the hook.”

He advises verifying blind shipments directly with the shipper, documenting every carrier-selection step, and aligning broker-carrier agreements with insurance coverage terms. When claims are denied, he says brokers should never simply accept the first “no.”

Another major takeaway: don’t be afraid to add a little muscle when it’s time to push back.

“Once a law firm sends the letter, the conversation changes,” Nelson said. “Suddenly the insurer takes you seriously.”

It might cost you a bit to have an attorney step in BUT that small investment can be the difference between a negotiated payout and eating the entire cost of a denied cargo claim.

The Insurance View: The COI Is Only as Good as What’s Behind It

If Nelson deals with what happens after the loss, Jamie Cannon, CIC SVP of Logistics Services at Reliance Partners, spends her time trying to stop those losses before they start.

A certified insurance counselor and transportation veteran, Cannon says fake or manipulated COIs have exploded in the past few years and not all fraud is easy to spot. Dive into the complexities of Logistics Insurance Fraud with insights from industry experts. Learn how to protect against Logistics Insurance Fraud.

“People can build a perfect-looking fake in under ten minutes,” Cannon said. “But even the slickest ones usually give themselves away.”

Her red flags include producer lines listing the insurance carrier instead of the agency, missing contact information, mismatched fonts, non-standard policy periods, or free-email addresses like Gmail or Yahoo listed for the agent or producer.

She also warns brokers to watch for cargo sections that don’t list the truck’s VIN or driver —especially on “scheduled auto” policies and to cross-check the insurer’s legitimacy with the state Department of Insurance.

“If it’s not excluded, it’s included,” Cannon said. “But you have to know the exclusions before you book the load.”

She explained the differences between contingent cargo (coverage that applies only if the carrier’s insurance denies), primary cargo (which steps in when the broker accepts liability), and shipper’s-interest (which protects the shipper first). The challenge, she said, is that these layers only work if the shipper contract with a broker, broker carrier agreement all match.

“Too many brokers have shipper-carrier contracts instead of shipper-broker ones,” she said. “When a claim hits, that small wording difference decides who pays.”

The SOP Every Brokerage Should Have

The pair’s advice aligns with Fraud Girl Fridays’ newest resource: a Certificate of Insurance Verification SOP, developed in partnership with Reliance Partners. The document outlines how to authenticate COIs, confirm policy details, and record exceptions — all essential if a broker ever ends up in court defending a claim decision.

“Having an SOP isn’t just about compliance,” Cannon said. “It’s your proof that you did your due diligence.”

The Bigger Picture

In an era where AI can forge documents and fraudsters pose as carriers overnight, both Nelson and Cannon agree that diligence, not JUST technology, is the ultimate defense. “Brokers are spending tens of thousands on vetting software,” Nelson said. “But if no one reads the contracts or policies, the tech doesn’t matter.” Cannon put it more bluntly: “The COI might look fine until you’re staring at a six-figure claim that’s not covered.”

For brokers, the message is clear: Verify every certificate, understand every exclusion, and never assume a policy will pay because the paper says it will.

Resource Spotlight: The COI SOP

The SOP every brokerage should have! Fraud Girl Fridays’ newest resource: a Certificate of Insurance Verification SOP, This SOP will help you avoid logistics insurance fraud. Brought to you by Reliance Partners. The document outlines how to authenticate COIs, confirm policy details, and record exceptions, all essential if a broker ever ends up in court defending a claim decision.

“Having an SOP isn’t just about compliance,” Cannon said. “It’s your proof that you did your due diligence.”

This SOP is designed for freight broker and 3PL insureds to ensure Certificates of Insurance (COIs) are properly obtained, reviewed, and maintained. Following these procedures will help reduce the risk of uncovered claims, fraud, and contractual disputes.

1. Requesting COIs

- Require COIs from all contracted motor carriers before tendering any load. - Ensure COIs are current (not expired) and issued directly from the insurance agent or carrier.

2. Reviewing COIs for Adequacy

When reviewing COIs, confirm the following: • Adequate limits of liability per your contractual requirements. • 'Any Auto' coverage for Auto Liability, or VIN-specific listing for scheduled policies. • Driver coverage is included (no named driver exclusions that would exclude the operating driver). • Cargo coverage with no exclusions for your primary commodities. • No restrictive endorsements that void coverage for certain commodities, geographies, or causes of loss.

3. Fraud Prevention & Authenticity Verification

- Verify COIs directly with the issuing insurance agency or carrier. - Use carrier vetting tools or databases to ensure the motor carrier’s policy is active. - Cross-check policy numbers, effective dates, and limits. - Keep records of all verification communications.

4. Broker-Carrier Agreement (BCA) Requirements

- Clearly limit broker liability to the extent allowed by law. - Require carriers to maintain specified coverage limits and types. - Require carriers to name broker as an additional insured and provide a waiver of subrogation. - Require timely notice of policy changes or cancellations.

5. Shipper Contract Review

- Have all shipper contracts reviewed by your insurance team and legal counsel. - Avoid assuming motor carrier liability unless coverage is confirmed. - Understand that agreeing to expanded liability may void coverage.

6. Cargo Program Recommendations

- Consider primary cargo policies without restrictive exclusions. - If not contractually liable, ensure contingent/relationship cargo coverage is in place.

- For high-value or high-risk loads, utilize a shipper’s interest policy to protect the shipment and avoid loss history impact.

7. Documentation & Recordkeeping

- Maintain a centralized file of all COIs, verification notes, and contracts. - Update files annually or upon receipt of revised COIs. - Keep proof of all due diligence steps to defend against coverage disputes.

8. Work with a Transportation Insurance Specialist

- Partner with an agent who specializes in freight broker/3PL risks. - Review policies annually and upon major contract changes.

Disclaimer: This SOP is provided for informational purposes only and does not constitute legal advice. Always consult with legal counsel and your insurance provider to ensure compliance with applicable laws and contract requirements.

This process is brought to you by Reliance Partners on to how avoid logistics insurance fraud.