Transportation Intermediaries Association Guaranteed Payment Program.
In an effort to provide pertinent information to our clients, we developed this list of frequently asked questions (FAQs) on the Transportation Intermediaries Association (TIA) Guaranteed Payment Program(GPP), offered exclusively through Avalon Risk Management. These FAQ’s are a quick reference guide only. For further information and details please use the contact information at the end of this document.
TIA members are dedicated to the highest level of ethics and adopt strict best practices by adhering to the Platinum Performance Program (P3). Avalon Risk Management, Inc. supports that commitment by partnering with TIA to offer the GPP.
Q: What is the GPP?
A: The GPP is a program that offers a competitive advantage to transportation brokers by providing a guarantee of freight payment to carriers, shippers and other third-party logistics providers in excess of the $10,000 bond required by the Federal Motor Carrier Safety Administration (FMCSA) to conduct business. This bond is not intended to pay cargo claims.
Q: Why is this excess coverage important?
A: Consider the below claim situation where a licensed property broker defaulted on payments to multiple carriers resulting in claims from both the shipping and trucking community:A property broker is forced to close his business because of mismanaged funds. Within several months, almost 300 claims were filed against the property broker’s $10,000 FMCSA bond. The claims totaled $1.3 million and were paid on a pro-rata distribution basis. Claimants waited almost nine months before receiving a payment of only pennies on the dollar. Property brokers that maintain a larger bond amount demonstrate stronger financial backing and a commitment to the shipping and carrier community. Already, the credit agency that provides ratings to the three largest freight boards provides a higher rating to GPP bond holders
Q: Who is eligible for participation in the GPP?
A: Participants must be a TIA member and join the TIA Platinum Performance Program (P3) – a contractual best practices agreement for transportation companies who want to achieve a superior level of customer service and performance. The P3 ads a higher level of trust to the TIA Guaranteed Payment Program broker/forwarder-motor carrier relationship, and the GPP enhances the relationship even further. Applicants must also obtain the required $10,000 financial guarantee from AMTEX, a division of TIA Services Corporation. A GPP application must be completed, along with a signed indemnity agreement. A financial and insurance review will be conducted to determine a company’s qualifications for the options of the $15,000 or $90,000 additional bond limit.
Q: Who underwrites the GPP?
A: The GPP provides total excess bond coverage of $100,000 or $25,000 to federally licensed property brokers with the FMCSA. The amount of the excess bond is underwritten through Lincoln General Insurance Company, Avalon Risk Management’s sister company. Lincoln and Avalon are both subsidiaries of Kingsway Financial Services, publicly traded on the New York and Toronto Stock Exchanges, under ticker symbol “KFS” with a combined equity exceeding $1.2 billion.
Q: How do brokers apply for the GPP?
A: Each company must deposit $10,000 in cash or partial Letter of Credit in the AMTEX program and complete an Avalon Risk Management Application and Indemnity Agreement. TIA Services will execute a trust fund agreement and evidence of the $10,000 minimum requirement with the U.S. Department of Transportation. All information will be coordinated through TIA Services.
Avalon Risk Management will issue a separate bond secured by Lincoln General Insurance Company in the amount of either $15,000 or $90,000 based on underwriting qualifications.
Q: How is the GPP bond underwritten?
A: A company’s financial strength and their exposure to business risks are considered in the underwriting process. Underwriters look for tangible net worth coupled with sustainable cash flow. Risk is assessed based on an applicant’s business risk, size and how well this risk is mitigated through the use of insurance.
Q: How long will the process take?
A: The application process should take less than thirty days provided that a complete application kit is provided at the onset. TIA Services will act as liaison to ensure support throughout.
Q: How is proof of coverage for the GPP excess bond provided?
A: The broker will receive an Acord™ 25 Certificate of Liability Insurance that will provide the bond number, effective date and amount of the bond. The broker will also receive a Certificate of Participation from Avalon Risk Management containing similar information as proof of the higher bond amount.
As recommended by the TIA and legal counsel, there will be no listing of shippers or carriers as a certificate holder, additional insured and/or loss payee on the Acord Certificate. The property broker’s authority does not require this, nor is it legally or commercially required on the mandatory $10,000 bond required to be on file with the FMCSA.
A surety bond is not insurance and represents a legal contract between the property broker, surety and FMCSA. The bond demonstrates a surety’s willingness to provide a financial guarantee on behalf of the property broker as well as the property broker’s ability to qualify for the bond.
Q: How are claims handled?
A: AMTEX will adjust and mitigate all claims less than $10,000. Once the $10,000 bond is exhausted, claimants will file their claims against the Lincoln General excess coverage directly with Avalon Risk Management. The GPP offers excess coverage up to $15,000 or$90,000 in the aggregate only after the $10,000 AMTEX guarantee is exhausted providing total limit of either $25,000 or $100,000.
Claims will be handled on a pro-rata basis based on the date received. Claims will not be accepted after the claim cut-off date – 90 days from the date of invoice or delivery, whichever is earlier – and in no event later than 90 days from the date the bond is terminated. The GPP is not designed to pay cargo claims or claims for intrastate moves or exempt commodities under Title 19.
For additional information regarding the GPP Excess Bond Program, please contact Nancy O’Liddy at TIA Services or visit the Web sites listed below. Nancy can be reached at 703-299-5711 or at
www.avalonrisk.com www.tianet.org www.p3program.com