When you’re building a logistics network, particularly one that stitches to together a number of external players from your own organization, the issue liability will eventually come up, both for the shipping of goods as well as for the management and operation of the equipment doing the shipping and movement.
The problem with the liability risk is that once it becomes an issue, it’s often too late to do anything proactive, and you end up in a reactive cycle. This cycle is typically initiated in the form of a lawsuit and then everything from that point forward is defense and damage control. As a result, it’s key for a player in the logistics and shipping game to work on the proactive risk-mitigation side as much as possible. First, it’s a lot cheaper than fending off a lawsuit. Second, awareness often pushes people and operators to perform better. Third, protection gives you the confidence to operate strategically rather than fear, which holds back market growth and chasing opportunity.
Some key factors in trucking liability are:
- Coverage of goods in transit
- Coverage of equipment involved in the movement
- Coverage the facilities involved holding the goods temporarily, and
- Coverage of those involved in the functions of all the above
So how does a logistics operator, the company that is moving its goods through an external network, ensure all these elements are taken care of so that they are not held responsible for a mistake associated with their service product? This is where understanding and delineating risk responsibility is so important. If the risk responsibility is left ambiguous, everyone connected can be legally held responsible. So as a first step, it’s important for every part of the logistical relationship to define who has direct control responsibility of the goods’ movement and who has overall control and decision/making. If these elements belong to the third party, then the service contract for this part of the logistics relationship needs to define it clearly before the goods move.
Secondly, where the logistics operator does control the equipment or facility and the direction of its use, then insurance protection is a key safety net that needs to be put into place prior to operation. Commercial and industrial coverage is entirely available, and it can be built into the provision of truck loans and truck financing when designing the financial provision for a leased fleet or purchased fleet on loan. With modern logistics going heavily into the world of shared resources, the issue of risk is an absolute must to take care of before getting on the road. If not, all you’re doing is putting a big bullseye on the coat jacket of your company.