Cargo theft by fraud is a growing freight industry issue and has resulted in a massive increase in cargo loss claims in recent years.
Craig Leinauer, Director of Inland Marine claims at Travelers Insurance, says that strategic theft is an alarming new trend.
While straight theft (the physical taking of the truck and trailer or cargo from where it’s parked) remains the number one method for cargo theft, it’s strategic theft (the use of trickery or deception) that has seen the biggest increases (1455%) in the past two years.1 In that time span, strategic theft went from roughly 3 to 6 percent of all cargo theft to 33 percent.
Technology plays a large role in cargo theft, especially AI. “The tech is so sophisticated that there’s really a whole new set of tools that thieves have,” Leinauer said.
Thieves often impersonate legitimate trucking companies to trick their victims in a variety of ways. They sometimes change bills of lading, create fake documents and use phishing attacks to redirect cargo.
According to Leinauer, there are several sophisticated groups of organized thieves that are internationally based. “They have their own supply chains and elaborate freight laundering rings. Unfortunately, these schemes have put cargo theft at an all-time high,” he said.
Some of the damage comes in the form of not only lost freight, but the relationships and trust destroyed by these fraudulent schemes. Truck drivers, carriers, shippers, and brokers are all affected by these crimes, but with slightly different consequences and liabilities.
“As a truck driver, you’re liable for cargo you accept in good condition,” Leinauer said. “If the cargo doesn’t make it to delivery, you can be on the hook for the loss,” he said.
As a result, drivers must be vigilant to avoid losses and protect themselves with cargo insurance policies.
“There are some liability defenses that are available to you, but they only work if you don’t know that you’ve accepted cargo that was stolen,” Leinauer said. This is where shipping paperwork is important. “Drivers will often ignore discrepancies between bills of lading and load or rate confirmation paperwork, and if you overlook these kinds of red flags, then you could be out of luck trying to defend yourself,” he added. Any obvious discrepancy will be considered to put the trucker on notice that cargo was stolen.
Importantly, Cargo insurance policies generally require the trucker to have physically accepted cargo for coverage to apply.
“An imposter might use a trucker’s identity or DOT number to steal cargo, but the real driver has to have physically accepted the cargo to be liable and for his cargo insurance coverage to trigger,” Leinauer said.
Defenses to liability and cargo insurance coverage are critically important to carriers and drivers, but freight brokers have been increasingly held liable for strategic theft losses as well.
As brokers don’t handle freight, they were not historically considered to be liable for loss or damage to cargo. Recently, however, shippers have been requiring brokers to sign contracts and accept liability as though they were carrying the cargo.
“The broker can potentially end up on the hook for significant loss,” Leinauer said. “They’re often informed of the theft long after the fact, and they’re sometimes expected to pay for the full retail value of the stolen cargo without any recourse.”
When brokers are not informed of thefts until later, they’re unable to take steps to avoid further losses from occurring and can sometimes incur devastating liability as a result.
“I just saw a case where a broker was contractually liable for sixty separate stolen shipments, which added up to nearly five million dollars,” Leinauer said.
There are two main types of insurance that protect brokers from cargo loss: liability insurance and contingent cargo insurance.
“Liability insurance is particularly important to you as a broker if you’re going to assume any type of contractual liability for losses,” Leinauer said. “You really have to make sure your coverage limits are high enough, though, because a basic policy might not cover those losses of millions of dollars.”
Contingent cargo insurance covers the broker for cargo loss when the truck driver who is strictly liable fails to pay. However, these types of policies often exclude losses due to double brokering, acts by dishonest drivers or cargo that is released due to fraud.
“Brokers really have to be extra vigilant to avoid these kinds of schemes,” Leinauer said.
Best practices for avoiding these thefts depend on the sector.
“Truckers need to make sure the bill of lading matches the rate or load confirmation information at delivery and pick up, particularly the addresses,” Leinauer said. “Always confirm the addresses with the shipper. If anyone attempts to redirect a shipment, contact the shipper immediately to confirm that change.
“If you suspect your identity has been compromised, notify all freight brokers you do business with and confirm your correct contact information.”
Alternatively, Brokers should encourage Shippers to transmit signed bills of lading to the consignee as soon as the shipment is accepted by the trucker at pickup. This allows the consignee a chance to verify the information when the cargo arrives.
“Take time to review contracts, as you need to understand your liability exposure,” Leinauer said. “Make sure all parties to a contract agree to provide notice when a shipment is suspected to be subject to theft, or fraud,” he added.
“Vigilance and timely communication are critical to prevent these kinds of crimes, and the right policy is vital to protect your business from potential loss,” Leinauer said.
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1John Tabor, “Strategic Cargo Theft: What It Is, How It Started, and What You Can Do to Stop It,” Loss Prevention Media, December 2, 2024
