Managing Freight Liability

Facilitating the movement of or transporting others’ property has many inherent risks, particularly if the property is extremely valuable and it is being moved across international boundaries. Unexpected problems and issues can pop up when shipping and forwarding cargo across great distances.

The constantly fluctuating nature of freight contracts further affects those in the transport industry. Contracts can change with each new client, presenting new risks to be managed and new gaps in cover to be plugged. As the owner or manager of a business in the transport and logistics industry, addressing and combating your vast liability helps shrink your exposure and ensure a profitable future.

Common Gaps in Cover

Because contracts can change with each client or shipment, liability risks are variable. Most freight liability policies are bespoke and try to encompass the entirety of a business’ risks.

When constructing your bespoke policy, look for any of the following gaps in your freight liability policy:

  • Liability outside the scope of standard trading conditions: Businesses in the freight and logistics industry will typically use established trading conditions as a baseline for writing contracts and determining liability, such as freight forwarders using the British International Freight Association (BIFA) conditions. However, additional liability may exist outside the bounds of a standard industry contract. For example, if a freight forwarder is also providing warehousing during the shipment, he or she should consider using conditions from the United Kingdom Warehousing Association to figure out additional liability. Determine whether your business’ liability extends beyond the limits of standard conditions and whether your insurer can cover this liability.
  • Liability accepted under bespoke customer contracts: Depending on the contract terms with your customers, you may be unnecessarily accepting large portions of liability. Read contracts carefully before signing and know your obligations. Crafting a bespoke policy can help eliminate surprises in your customer relationships, but it can also create damaging trading conditions that are buried in your contract terms. Make sure all parties involved know their obligations under the agreed-on contract.
  • Errors and omissions, including breach of duty: Coordinating and transporting customers’ shipments requires possessing and providing detailed knowledge on complicated issues such as customs and shipping regulations. Secure cover that includes errors or omissions and any breach of duty. This can protect your business in situations involving shipments delivered to the wrong location or incorrect advice that causes your customers financial loss, clerical errors and more. Without proper cover, your business could be liable for hefty liability claims.

Common Covers

You should also secure additional common covers as part of your bespoke policy, including the following:

  • Employers’ liability is required if you have employees.
  • Public liability protects against claims arising from injury or damage to third parties.
  • Products liability indemnifies your business if you incur expenses related to damage or injury which arises from supplying products or goods.
  • Pollution liability provides protection if you pollute water, the land or the atmosphere.

Managing Freight Risks

Because your business is liable for shipments of third-party goods, diligent risk management is central for managing your liability. A sturdy, bespoke freight liability policy is ineffective unless paired with a concerted risk management effort.

You can never completely eradicate your risks and liability, but you can drastically reduce them. Adopt the tips enumerated below as part of your existing risk management strategy:

  • Explain your business’ trading conditions to your customers before they sign a contract.
  • Obtain written instructions from your customers to encourage transparency and good recordkeeping.
  • Establish clear procedures for issuing and releasing documents.
  • Manage any subcontractors with clearly worded contracts.
  • Follow stringent procedures to ensure cargo security.
  • Adhere to guidelines and regulations for handling dangerous goods.
  • Comply with insurer processes for submitting an insurance claim.

Freight liability policies can differ greatly. Seek out specialised advice to help fashion a bespoke policy to cover your business’ unique risks. Trust the insurance professionals at Direct Insurance Corporate Risks to craft a policy for your business that helps ensure you can keep delivering cargo dependably for years to come.

Unoccupied Property Insurance

Owning an unoccupied building can pose serious liabilities because unoccupied buildings are more susceptible to vandalism, undetected repairs, fire and other losses. If you own unoccupied property, it is advisable to purchase Unoccupied Property Insurance, also known as Unoccupied Building Insurance to protect against risks.

Risks

  • Fire
  • Lightning damage
  • Explosion
  • Windstorm or hail damage
  • Smoke damage
  • Theft and attempted theft
  • Riot or civil commotion damage
  • Escape of water
  • Subsidence
  • Vandalism (no one is present to deter vandals)
  • Malicious mischief on the property and general property destruction

Insurance Solutions

Under most policies, Unoccupied Property Insurance can provide protection if your building goes unoccupied for thirty days, but bespoke arrangements can be made. You may also be able to choose the length of cover (3, 6, 9 or 12 months) to ensure that you are only paying for what you need. It also protects against liabilities in the event someone is injured on your property and claims damages. It may also be a viable option if the property is in the process of being sold or if it is under construction and is uninhabitable.

Depending on your policy, there may be certain conditions that must be met in order for a claim to be covered, such as specific lock requirements and security devices fitted throughout the property. Direct Insurance Corporate Risks will make sure that you know all limitations and requirements of your Unoccupied Property Insurance policy.

In addition to purchasing cover for an unoccupied building, take the following actions:

  • Regularly inspect the property for damage or threats of damage
  • Make sure you have window locks and 5-lever mortise deadlocks to secure the property
  • Install alarm systems that are triggered by intruders, fires or floods
  • Remove all valuables
  • Switch off utilities

We understand that unfavourable incidents can occur, but Unoccupied Property Insurance can provide necessary protection. Contact us today at 01277 844 360 for more details.

Public/Products Liability Insurance

The only way to effectively protect the assets of your business is to carry adequate insurance cover. Liability insurance protects your business from damages caused by bodily injury or property damage for which your business is found to be legally liable.

What Does Public/Products Liability Insurance Cover?

A comprehensive public and product liability policy provides cover for claims of bodily injury or other physical injury, personal injury, advertising injury and property damage as a result of your products, premises, or operations. As a safeguard against liability, the policies allow you to continue your normal operations while dealing with real or fraudulent claims of negligence or wrongdoing. Liability policies also provide cover for the cost to defend and settle claims. Following are some other things that typical liability policies may cover:

  • Personal and Advertising Injury – Protects against offences made by you or your staff during the course of business, such as libel, slander, disparagement or copyright infringement in advertisements.
  • Defence Costs – Provides cover for legal expenses for liability claims brought against your business, regardless of who is at fault.
  • Medical Expenses – Provides cover for medical expenses if someone is injured on your premises or by your products.
  • Premises and Operations Liability – Provides cover for bodily injury and property damage sustained by others on your premises or in conjunction with your business operations.
  • Products Liability – Provides cover for bodily injury and property damage sustained by others as a result of your products. 

How Much Cover Does Your Business Need?

The amount of cover that your business needs depends on three factors: perceived risk, where you operate your business and the type of products you manufacture.

Perceived Risk – Consider the amount of risk associated with your business operations and functions. For instance, if you manufacture heavy machinery, you would generally need more cover than another organisation that manufactures stuffed animals.

Type of Product Manufactured – If you manufacture a dangerous product, you may want to carry higher limits of liability. 

Other Ways to Protect Your Business

  • Establish a high standard for product quality control at your organisation.
  • Keep all company records up to date and accurate.
  • Train your employees thoroughly and properly.
  • Ask Direct Insurance Corporate Risks for safety and compliance information.

Typical Exclusions and Limitations

  • There will typically be an excess requirement for each claim. The excesses will vary depending on the policy and covers sought.
  • Injury to your own employees or to your own property is not covered under Public/Products liability insurance. Make sure you have Employers’ Liability insurance and adequate Property insurance.
  • War, terrorism or nuclear risks are typically not covered.

Direct Insurance Corporate Risks understands that your business needs to be protected, and we are here to help! Please contact us today at 01277 844 360 to learn more about our risk management and insurance solutions.

Directors’ & Officers’ Liability Insurance

In today’s business climate of corporate transparency and accountability, an organisation’s officers and directors face a myriad of employment-related exposures. Claims can come from many sources, employees, regulators, shareholders, creditors, customers, etc. Ever-changing regulations, increased employee awareness of employment rights as well as the rise of shareholder activism means directors are more frequently at risk, translating to rising claims and escalating settlement costs.

In the wake of recent unprecedented corporate scandals, clearly the trend of corporate accountability applies to large corporations. But smaller privately held companies, including not-for-profits, are not exempt from litigation arising out of the management decisions of their boards. They, too, are at risk.

Regardless of your company’s size, the legal cost to defend a director is substantial, as are the potential penalties that can be personally incurred. Due to liability risks, protecting boardroom talent can be a challenge. To help ensure both your officers’ as well as company’s well-being, a directors’ and officers’ liability insurance (D&O) policy is part of a comprehensive risk financing strategy.

D&O Fills the Cover Gap

Unlike liability policies that provide cover for claims arising from property damage and bodily injury, a D&O policy specifically provides cover for a ‘wrongful act’, such as an actual or alleged error, omission, misleading statement, neglect or breach of duty.

For example, a manufacturer told one of its suppliers to increase inventory because they were expecting a large increase in production. As predicted, demand for the manufacturer’s product grew but the manufacturer increased its inventory with another supplier instead. The original supplier successfully sued the manufacturer, alleging they suffered damages as a result of having relied on the manufacturer’s promise.

A D&O policy provides defence costs and indemnity cover to the entity listed on the policy declarations, which may include:

  • cover for individual directors and officers;
  • reimbursement to the organisation for a contractual obligation to indemnify directors and officers that serve on the board; and
  • protection for the organisation or entity itself.

Indemnification provisions are typically included in the charter/bylaws of a company. While an important risk component, small to medium-sized enterprises or not-for-profit organisations often do not have the financial resources to fund the indemnity provisions, making the bylaws hollow. A D&O policy can provide an extra blanket of security in the event of a covered loss.

A ‘fraud’ exclusion is typically included in a D&O policy, which eliminates cover for losses due to dishonest or fraudulent acts or omission or wilful violations of any statute, rule or law.  D&O cover can be tailored to your needs but be aware that D&O insurers are not consistent with their policy forms. This fact, plus the complexity of D&O claims, requires the insurer to have market commitment and deep expertise as well as the financial resources to handle potential claims.

There are also additional forms of cover to adequately protect directors and officers, including:

  • entity cover;
  • payment priority for insured persons;
  • severability of the insured as well as severability of the application;
  • cover over time, meaning cover responds to past, present and future directors and officers;
  • pay on behalf clause; and
  • duty to defend clause

Consideration for Not-for-Profits

Many not-for-profit organisations with directors and officers often report some difficulty in affording the cost of D&O insurance. To minimise the costs, brokers should recommend choosing only those policy provisions considered most critical. For example, a volunteer-run not for profit without paid staff may skip employment practices cover until it hires staff. To defray the cost of premiums, some not-for-profit organisations consider charging board members a portion of the policy cost.

We’re Here to Help

Whether you are a not-for-profit, privately held or a public company, it is likely that your business can benefit from a D&O policy. Since there is no such thing as a ‘standard’ policy, a professional broker is invaluable when purchasing D&O cover. We understand your organisation and can knowledgeably help design policy language to meet your needs. Contact Direct Insurance Corporate Risks at 01277 844 360 today to learn more about the appropriate protection for your company against potential directors’ and officers’ liability.