Coverage 101 | The logistics of warehouse legal liability
Supply chain management. It’s the foundation of what you and your team do every day. Working in a warehouse means that you are part of an essential hub of the 21st century economy.
According to recent Canadian Industry Statistics, there are 4,635 employer and non-employer warehousing and storage businesses operating as of 2019. However, the size of employer organizations varies dramatically.
- “34.9% of them [are] considered micro, employing less than five employees;
- small establishments (5-99) accounted for 58.2%;
- medium-sized establishments (100-499) account for an additional 6.1%
- large employers, those with more than five hundred persons on payroll, account for 0.8%.”1
And regardless of size, each one of these warehouses is looking to the future. That is to say, they are looking for new ways to increase efficiencies, control costs and keep up with rising demand for precision delivery of goods.
Logistics Management magazine sees specific market challenges driving these demands. “Challenged by the demands of:
- e-commerce and omni-channel fulfillment,
- smaller orders,
- ever-shrinking delivery timeframes, and
- a persistent labor shortage,
operations are in perpetual need of tools that can help them tackle these and other ongoing productivity issues.”2
These are big challenges that warehouses of every size are working to solve. Certainly, speed and accuracy are what your clients and their end consumers expect. Therefore, this is why Canadian warehouses are looking to technology and other solutions to improve supply chain management.
We have deep relationships with more than 65 of Canada’s top insurance companies. That is to say, we’ve established a strong network of insurers that we work with every day.
We are proud to be consistently delivering more value and options to Canadian warehousing companies. We are always aligning new choices and products for our clients across Canada.
The future of warehousing is now
“A penny saved is a penny earned.” While it’s debatable that Benjamin Franklin actually spoke these words, what’s not debatable is how fundamental this quote is to successful businesses.
With soaring demand for products to get in the hands of consumers as soon as possible, warehouse distribution centre managers are constantly looking to streamline processes.
Thankfully, “technology is providing at least some relief. With automation, robotics, artificial intelligence (AI) and other advanced technologies making their way into the world’s distribution facilities, the warehouse management system (WMS) is one stalwart that’s long served as a cornerstone for most distribution operations.”3
More specifically, “The WMS does this by overseeing receiving, putaway, order picking, shipping, and inventory counts, among other activities. And because it collects valuable information along the way, WMS also provides actionable data analytics that companies can use for good decision-making.”4
And there’s more. According to Logistics Management, there are 6 key trends that are on the watchlist for North American warehouses.
- “Systems that use machine learning to sense and adapt.
- Systems that can interject last-minute orders.
- WMS vendors working with their OEMs to “democratize” automation.
- A big focus on WMS user interface.
- Better, faster return-to-inventory management.
- Expanded functionalities that make implementations easier.”5
And while each of these trends can help with more efficiently moving goods through a warehouse, warehouse owners and managers are also taking a close look at risk management.
This is because one of the most important policies for any warehouse business is warehouse legal liability coverage.
So…how does a warehouse legal liability policy help to manage risk?
Warehouses store property of others for a fee. This means that warehouses are exposing themselves to specific liability risks.
The goods that you are processing in your warehouse will inevitably vary in value. And when it comes to differentiating between what’s the most valuable products in a shipping container, the closing scene of Raiders of the Lost Ark springs to mind.
In other words, it is highly likely that incoming goods will be packaged so that warehouse clerks, associates, machine and forklift operators and others may be unaware of their value or identity. By accepting them for storage and safekeeping, your team members may become the unknowing guardian of property that is prone to theft, of hazardous combustibility or potentially contain contaminating elements.
This is why warehouse legal liability is so fundamentally important for any warehousing business in Canada.
As goods are shipped out and replaced, continually changing exposures are the norm for warehouses. Often the replacement goods present entirely different underwriting concerns.
One day’s modest exposure of canned goods and major appliances may shift the next when volatile petroleum products and high-value consumer electronics arrive. Ergo, this constant change of exposure not only makes it difficult to identify a particular cause of loss but equally difficult to establish either normal or maximum loss estimates.
Therefore this complicates the issue of what limit of liability is appropriate for the insured warehouse as well as the insurance company.
Thankfully, ALIGNED Insurance brokers understand the nuances of the warehousing industry. We also know the commercial insurance marketplace. In short, we know how to deliver a warehouse legal liability policy that is an ideal fit for the precise risks your warehouse operations face.
The cost of a policy | How the type of warehouse operations come into play
Canadian warehouses may be public, private, or bonded. To clarify, each type of warehouse will face different types of risks.
Firstly, public warehouse services are available to anyone who is willing to pay the charges and accept the warehouse’s usual terms of storage.
Secondly, private warehouses – which are controlled by department or chain stores, manufacturers or distributors – are handling and distributing their own goods directly to customers or other storage facilities.
In addition, bonded warehouses are storing goods pending payment by the owner of an import duty. These facilities are jointly controlled by the warehouse and customs authorities. More specifically, owners and importers are storing goods at bonded warehouses without paying the entire duty or tax at once, and are paying only as the goods are withdrawn.
In short, warehouse legal liability policies cover the legal liability of an insured as a warehouse or bailee. Physical loss or damage to customers’ property at specified locations can be covered. As well, this coverage is subject to designated limits.
Most importantly, it’s important to know that there is a broad spectrum of legal liability policies for warehousing operations and many are limited to only cover specific risks.
Alternatively, other policies can cover a much broader range of risks for which the warehouse may be liable. However, some coverages that are almost always excluded in a warehouse liability insurance policy.
- inherent vice
- loss or damage from insects, moths and/or vermin
- extremes of temperature
- ordinary wear and tear
- marring or scratching
- war risks and dishonest acts
As well other exclusions may apply. For example:
- mysterious disappearance
- loss of weight
- unexplained loss or shortage disclosed on taking inventory,
- breakdown of any refrigerating machinery or equipment
- wear & tear
- riots, etc.
The most frequent relationship between warehouse and storer is that of a bailee-bailor. Above all, the most major risk – and source of claim severity – to goods in storage remains loss due to fire.
More often than not, warehouse customers, whether householders or merchants, have their own insurance. Nevertheless, a warehouse should insure the possible legal liability. This is because, upon payment of loss by the owner’s insurer, a claim may be made by the latter against the warehouse in pursuit of rights of subrogation.
To sum up, if you need a warehouse legal liability policy…
Get your logistics covered with us!
- How do I get insurance for a warehouse in Canada?
- How wholesale and distribution insurance protects your business
- Postal codes and commercial building insurance: what to know when getting a quote
- Insurance for property in transit and storage: understanding stock throughput
In short, getting a warehouse liability policy that specifically aligns with the risks your business faces isn’t optional.
We know who you do business with always matters. We also know it’s important to work with brokers who have relationships with top insurance companies in Canada. As a business owner, you don’t have time to canvas the market and work directly with multiple insurance companies to find the best coverages.
So working with brokers who have strong relationships with more than 65 top insurance companies in Canada simply makes good business sense.