Know your limits: liability within transport and logistics companies

Posted on: December 17th, 2015

Potential liability, and the transfer of that liability, are key considerations for transport providers and warehouse operators.

If liability is not considered prior to storing or transporting goods on behalf of another party then you, as the warehouse operator or the transport provider, could find yourself at risk of a claim for damages in the event that something were to happen to the goods whilst they were in your care.

It is open to parties to agree what they like between themselves as to who will insure the goods and when liability will transfer from one party to another, for example, upon collection, upon delivery, or on a certain date.

In the case of warehouse operators and transport providers, who are unlikely to have a direct interest in the goods in their care (unless exercising a lien in the event of non-payment by the goods’ owners), the key consideration is to ensure that the contracting parties obtain the appropriate cover for loss and damage to the goods and that there is no uninsured period.

Warehouse operators and transport providers are unable to contract out of their need to insure against their potential liability in the event that they were to breach their obligations, so it is important to ensure that adequate insurance is in place where necessary.

There are several standard terms and conditions used in the transport and logistics industry, for example the conditions of contract of the UK Warehousing Association (“the UKWA”). The UKWA conditions of contract contain extensive clauses relating to insurance and liability, requiring the customer to self-insure or arrange for insurance and carefully limiting the warehouse operator’s liability in the event that something happens to the goods.

If you, as a warehouse operator or transport provider, decide to accept an element of liability during the transportation or storage of goods, you need to take care to ensure that you are fully aware of the extent, and possible costs of, that liability. You should also consider imposing a cap for the maximum liability you would be prepared to potentially meet in respect of each item.

In the event that something occurs resulting in loss to a party, their route for recourse against you would be to issue a court claim for negligence and/or breach of contract (depending on the facts of the case). Court proceedings can be an expensive, stressful and time consuming process, with no guarantee of success.

The best way to avoid falling into the territory of a dispute is to agree clear terms at the outset of a relationship and to ensure that each party is fully aware of the extent of its liability, putting in place adequate insurance where necessary.