February 2006 | Commentary | Risks and Rewards

Keep Your Business Out of Harm's Way

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Q: I am a logistics provider. In addition to a policy that protects me from cargo damage claims, I have a general liability policy that covers bodily injury and property damage claims. I know I could face a claim if someone trips and falls while visiting my office, but I rarely have visitors, and my warehouse is strictly off-limits to guests. Is this injury and property damage policy just a "sleep easy" cover, or something I truly need?

A: Bodily injury and property damage are not subjects shippers and logistics operators view as significant operating risks, but incidents involving both have serious and sometimes catastrophic consequences.

One consolidator, for example, faced a claim for the loss of an aircraft and the death of several bystanders in Miami a few years ago. The operator consolidated a shipment of heavy canisters into unit load devices that were loaded onto a cargo plane.

Allegedly, the canisters were stowed improperly, and as a result, they broke loose as the aircraft lifted off the runway.

This apparently caused the aircraft to become unstable, and it crashed on a major thoroughfare. As a result of the accident, several pedestrians were killed and a shopping center was damaged.

Less dramatic property damage claims can still result in substantial costs for logistics operators. In one case, a vessel carrying hazardous cargo incurred damage. The shipper had correctly declared the hazardous cargo to an operator, but the operator did not properly declare the cargo to the steamship line.

The carrier filed a suit against the operator, and was awarded repair and clean-up costs by the court. The operator not only paid the judgment of the court, but also incurred substantial defense costs in the process.

Sometimes, an innocent mistake stowing cargo can result in significant bodily injury. In one claim, a top-heavy cargo container in a warehouse toppled over, hitting a nearby vehicle as the driver made a turn. When the container fell against the vehicle, the occupant's arm, which was resting outside the driver's side window, was severed.

When Cargo Breaks Loose

In another case, a consolidator improperly stowed heavy equipment inside a shipping container. While the ship was at sea, the cargo broke loose and came to rest on the container doors. When the doors were opened at destination, the cargo fell over, injuring the worker who opened the unit. The consolidator faced multiple claims for damages caused by the cargo.

Given the right circumstances, even a secure facility can attract a significant liability.

One operator, for example, had a rail spur entering its facility. Though the facility had perimeter fencing, several young boys scaled the fence and were playing on the rail cars. A security guard caught them, and as he waved them off the rail cars, the train lurched forward causing one of the boys to fall between the cars. He suffered severe injuries including an amputated leg.

Fortunately, accidents such as these do not occur frequently. But they do happen. These, and other similar claims, are valuable reminders of the need for adequate protection against bodily injury and property damage claims.

A mistake made inside your premises can result in consequences beyond your gates. Your policy should therefore protect you anywhere in the country if you trade nationwide, and anywhere in the world if you trade globally.

Finally, supplement your insurance with an active loss-prevention program. Review your operation periodically, and make sure you take appropriate measures to prevent occurrences such as these from happening.

In these cases, an ounce of prevention truly is worth a pound of cure.

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