Five Things You Should Know About the Differences Between a Freight Broker and Surface Freight Forwarder

U.S. law recognizes three different types of regulated entities that may be involved in interstate truck transportation: motor carriers, brokers, and surface freight forwarders. (49 USC § 13102).

The differences between motor carriers and the two intermediary entities are clear. Motor carriers actually provide transportation using trucks and equipment. Intermediaries do not own or operate trucks and instead arrange for transportation via independent third-party motor carriers. Less clear are the differences between surface freight forwarders and brokers, which are both engaged in the same activity of arranging transportation by using third-party motor carriers. The differences, though subtle, can have significant legal implications on 3PL’s and shippers.

[For purposes of this article, I also refer to surface freight forwarders as “freight forwarders” or simply “forwarders.” Surface freight forwarders should not be confused with companies that arrange international air or ocean shipping, which are commonly also called “freight forwarders.” Surface freight forwarders do not necessarily have any involvement in arranging air or ocean shipments.]

1. Determining if a particular company operates as a broker or forwarder will depend on a number of factors, including whether the company holds themselves out to the public as providing transportation, physically handles the cargo before or after shipment, or assumes responsibility for the cargo. The definitions of a broker and freight forwarder are in 49 USC § 13102:

(2) Broker: The term “broker” means a person, other than a motor carrier or an employee or agent of a motor carrier, that as a principal or agent sells, offers for sale, negotiates for, or holds itself out by solicitation, advertisement, or otherwise as selling, providing, or arranging for, transportation by motor carrier for compensation.

(8) Freight Forwarder: The term “freight forwarder” means a person holding itself out to the general public (other than as a pipeline, rail, motor, or water carrier) to provide transportation of property for compensation and in the ordinary course of its business: (a) assembles and consolidates, or provides for assembling and consolidating, shipments and performs or provides for break-bulk and distribution operations of the shipments; (b) assumes responsibility for the transportation from the place of receipt to the place of destination; and (c) uses for any part of the transportation a carrier subject to jurisdiction under this subtitle.

While both brokers and freight forwarders arrange for transportation to be provided by third-party motor carriers, freight forwarders provide additional services by physically assembling or consolidating shipments and/or providing distribution operations for shipments. Freight forwarders also hold themselves out to the public as providing transportation (rather than merely arranging) and “assume responsibility for the transportation,” usually by issuance of a bill of lading identifying the forwarder as the “carrier.” Brokers are generally discouraged from “issuing” bills of lading identifying themselves as the performing carrier. Also, brokers traditionally do not accept liability for cargo loss or damage. These practices do occur but are often discouraged, because doing so blurs the line between whether a 3PL is operating as broker or freight forwarder /carrier.

A notice issued by the Federal Motor Carrier Safety Administration (“FMCSA”) in 2006 provides some additional clarity on how the agency distinguishes between the two intermediaries, focusing on how forwarders physically handle cargo at origin and/or destination, issue bills of lading, and assume liability for cargo claims:

Brokers generally do not handle the freight and do not assume legal liability for cargo loss and damage . . . Freight forwarders assemble small shipments into larger shipments, tender them to motor carriers and ensure that the larger shipment is disassembled into smaller shipments upon delivery. Freight forwarders may take physical possession of the shipment in carrying out these functions. Freight forwarders issue bills of lading and assume liability for cargo loss and damage. (Registration of Brokers and Freight Forwarders of Non-Household Goods, Notice of Determination).

2. The U.S. Department of Transportation (“DOT”) requires brokers and forwarders to obtain operating authority through the FMCSA. The actual registration requirements for brokers and forwarders are substantially the same. The company must:

Submit an application to the FMCSA (an OP-1 for brokers and OP-1(FF) for freight forwarders);
Obtain and file with the FMCSA a surety bond or trust fund agreement in the amount of $75,000;
Designate a process agent in every state in which it conducts business or maintains an office by filing a BOC-3 with the FMCSA; and
Obtain the required insurance, if any (brokers and non-household goods freight forwarders are not required to obtain cargo or other insurance).

While there may be compelling reasons to separate broker and forwarder operations into two separate legal entities, a single entity can hold multiple authorities. If a single legal entity has both broker and forwarder authority, only one $75,000 bond or trust fund is required (though two filings need to be made to the FMCSA).

There can be penalties for operating without the proper authority. A broker or forwarder that knowingly provides interstate brokerage or forwarding services without FMCSA authority is subject to a civil penalty of up to $10,000 per violation (49 U.S.C. 14916(c)). The statute also provides for a private cause of action, and the individual officers, directors, and principals of the non-registered company are jointly and severally liable along with the offending corporate entity. Note that there are some limited exceptions to the registration requirement for non-vessel operating common carriers (NVOCC’s), ocean freight forwarders, indirect air carriers (IAC’s), and customs brokers. (Registration and Financial Security Requirements for Brokers of Property and Freight Forwarders).

3. A company’s operations may warrant the company having both forwarder and broker operating authority. In practice, a logistics company’s operations (and therefore the type of authority required) can vary depending on the specific services provided to each of its shipper-customers. Indeed, this can even change on a shipment-by-shipment basis if the company provides a multitude of services to the shipper.

Take the case of a 3PL that provides brokerage services in addition to operating cross-docking, transloading, or warehousing facilities. Assume the 3PL primarily provides traditional brokerage services to the shipper, but no warehousing services. However, when occasionally requested by the customer, the 3PL uses one of their cross-docking facilities to bring in the customer’s freight and build outbound shipments, which the broker then arranges with contracted motor carriers. A case could be made that, by physically handling cargo to build loads for which it then arranges transportation, the 3PL is engaged in freight forwarding activity for those particular cross-docked shipments. This is especially the case if the broker issues a bill of lading for the outbound shipment.

As the above example illustrates, a 3PL may actually be acting in two different capacities for the same customer – as a broker when it only arranges shipments, but also as a forwarder when physically handling the shipments it arranges. The consequences of this can be considerable, as discussed below. When making a determination of whether a 3PL was acting as a broker or forwarder, courts will look to how the company holds itself out to the world and its relationship to the shipper, rather than merely relying on how the company labels itself. (See Lumbermens Mut. Cas. Co. v. GES Exposition Services, Inc., 303 F.Supp.2d 920 (N.D.Ill. 2003)).

To avoid civil penalties and other legal implications, a 3PL should obtain the proper authority(ies) for all the services it provides. Logistics companies are also required to provide written notice to each customer specifying the authority under which the transportation services will occur. (49 USC § 13901). This is best done in a written contract with the shipper. Companies should check with legal counsel before deciding which authority to obtain and whether to separate multiple authorities into different legal entities.

4. The Carmack Amendment applies to freight forwarders but not brokers. One of the most common risks that brokers and forwarders face is loss or damage to the transported cargo. On this subject, the difference between forwarders and brokers is critical.

The Carmack Amendment is the federal statute that makes “carriers” liable for the actual loss or damage to cargo moving in interstate commerce. (49 USC 14706). Under Carmack, “carrier” is defined as “a motor carrier, a water carrier, and a freight forwarder.” (49 USC § 13102(3)) (emphasis added). Therefore, Carmack applies to carriers and freight forwarders, but not brokers.

Carmack essentially creates a strict liability regime for cargo loss and damage, subject to a few uncommon exceptions. The plaintiff does not need to prove negligence. If the loss or damage occurred during transportation, the forwarder or motor carrier will be liable. Carmack allows for recovery of “the actual loss or injury to the property.” Case law differs as to whether “actual loss” means the replacement cost or market value of the goods. Punitive, special, and consequential damages are generally not recoverable under Carmack.

A common misconception is that brokers are not liable for cargo loss or damage since Carmack does not apply to brokers. This is not the whole story. While brokers are not liable under Carmack for cargo loss or damage, a claimant may still assert state or common law claims against a broker under any number of potentially applicable theories, including tort and breach of contract. However, since these state law claims typically require the plaintiff to prove wrongdoing by the broker, recovery is more difficult than under Carmack. In addition, some jurisdictions have held that Carmack, 49 U.S.C. § 14501, or both, preempt state law claims against a broker for cargo loss or damage in interstate commerce. (See, e.g., Ameriswiss Technology, LLC v. Midway Line of Illinois, Inc.; Chatelaine, Inc., v. Twin Modal, Inc.; and Frey v. Bekins Van Lines, Inc.).

Because proving a claim under Carmack is generally easier than succeeding on a state law claim, and because some state law claims may be preempted by federal law, shippers can be incentivized to argue that a broker was actually acting as a forwarder or motor carrier on the shipment giving rise to the cargo claim. (See AIOI Insurance Co. v. Timely Integrated, Inc.). If the broker was engaged in forwarder activity (such as issuing bills of lading or physically handling cargo), the broker may unknowingly have subjected itself to an argument for Carmack liability. For unwary 3PL’s this can be an especially precarious position. Due in part to the misconception that brokers are not liable for cargo claims, many brokers operate without applicable contractual terms. If there is no contract between the shipper and 3PL limiting cargo claims, and Carmack is deemed applicable, the 3PL will be strictly liable for the full actual loss to the cargo. On the other hand, unsuspecting shippers could be left holding the bag for a claim by wrongly assuming that all transportation entities are subject to the same carrier liability standards, which is not the case.

Of course, the best way for shippers and 3PL’s to manage this uncertainty is to have a written contract clearly defining the services being provided, the liability standards for cargo claims, an applicable cap and other limitations, and a cargo valuation clause.

5. Freight forwarders are more likely to engage in activity that increases their exposure to third-party tort claims. The seminal case of Schramm v. Foster from 2004 found that freight brokers could be liable for third-party tort claims caused by the underlying motor carrier. Since Schramm, a number of other courts have followed suit. Plaintiffs generally put forward two legal theories under which brokers can be liable for third-party injuries caused by a motor carrier: vicarious liability and negligence. Under the vicarious liability theory, a plaintiff will assert either that the broker exerted so much control over the carrier, or that the broker was acting so similarly to a carrier, that the broker should be held liable for the acts of the actual carrier. Under negligence, plaintiffs argue that the broker did not exercise reasonable care when selecting the carrier, and that the hired carrier was unsafe or unfit.

An analysis of the numerous factors courts consider under either theory is beyond the scope of this article. However, some are relevant to a discussion of the differences between a freight forwarder and broker. Under the vicarious liability theory, plaintiffs will point to facts that show a 3PL was actually acting as a motor carrier despite only being an intermediary. Examples include:

Signing a contract in which the 3PL is identified as a carrier or the transportation provider;
Signing a contract that places typical motor carrier obligations on the 3PL (such as requirements that the 3PL must provide or maintain equipment, supply drivers, or ensure safety and hours of service compliance);
A bill of lading designating the 3PL as the “carrier”; and
The 3PL identifying its hired motor carriers as subcontractors, agents, or some relationship other than as independent contractors.

3PL’s are typically advised to avoid the above activity to reduce the risk of vicarious liability. However, forwarders often engage in one or more of these factors in the ordinary course of business, and often do not realistically have the option to avoid doing so because of how forwarders contract, operate, and market themselves. Forwarders represent themselves as providing transportation and sign corresponding contracts, issue bills of lading as carriers, and their hired motor carriers are more likely to be deemed subcontractors or agents.* This makes it all the more important for forwarders to take other risk mitigation steps, like a strong motor carrier vetting program and obtaining broker liability / contingent auto insurance. While brokers are certainly susceptible to these risks as well, avoidance can be a bit easier because of differing industry standards.

[*This may especially be the case where the forwarder is also engaged in international air or ocean forwarding as an IAC or NVOCC, respectively. As between the 3PL and shipper, IAC’s and NVOCC’s are principal carriers as a matter of law, and also represent themselves and act as carriers in every way except for actually operating transportation equipment.]

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This article focuses on the implications that can arise from the legal distinction between U.S. trucking brokers and forwarders. While the differences may seem technical or administrative in nature, there are very real potential consequences to shippers and 3PL’s that may hinge on the distinction. Readers should not confuse this discussion of surface freight forwarders with freight forwarders that are engaged in international air forwarding as Indirect Air Carriers (IAC’s) or ocean forwarding as a Non-Vessel Operating Common Carriers (NVOCC’s). International forwarding is governed by separate laws, regulations, and standards that have little overlap with surface freight forwarding in the U.S.

If you have any comments or questions about this post, please feel free to reach out to me at keith@logisticslaw.net.

Keith Waters May 31, 2022

Five Things You Should Know About Warehouse Legal Liability Insurance

The growth in e-commerce that has occurred in the U.S. over the past decade has only been compounded due to the COVID-19 pandemic. Companies are increasingly looking to add new warehouses and distribution centers throughout the country to have the capability of delivering goods to their customers within 1-2 days, one of the many consequences of the Amazon Effect. To shorten delivery times and optimize their supply chains, many companies increasingly rely on outsourced third-party warehouse providers, commonly referred to as third-party logistics providers or “3PL’s.” Outsourcing warehouse operations to a 3PL is often a new endeavor not only for the company’s supply chain team, but also for their business, legal, and risk management leaders. Warehousing agreements can be long and complex, and often contain terms that are not common in other procurement or vendor contracts that the company may be used to. One such critical issue is the warehouse’s liability for loss or damage to goods that occurs while the goods are in storage and the corresponding insurance to cover such a loss. This insurance is known as warehouse legal liability (“WLL”) insurance. In this article I will cover five of the most important things you need to know about WLL insurance, whether you are the customer or warehouse operator.

[Throughout this article I will use “warehouse” and “warehouse operator” interchangeably to refer to a third-party logistics company operating one or more warehouses for a customer.]

1. A warehouse operator’s liability for loss or damage to stored goods is determined based on a negligence standard. The Uniform Commercial Code (the “UCC”), a version of which all U.S. states have adopted, provides that a warehouse is only liable for loss or damage to goods that is “caused by its failure to exercise care with regard to the goods that a reasonably careful person would exercise under similar circumstances. However, unless otherwise agreed, the warehouse is not liable for damages that could not have been avoided by the exercise of that care.” (See UCC 7-204(a)). Further, a warehouse can limit its liability for loss or damage via contract: “Damages may be limited by a term in the warehouse receipt or storage agreement limiting the amount of liability in case of loss or damage beyond which the warehouse is not liable.” (See UCC 7-204(b)).

Most sophisticated warehouse operators require signed warehouse services agreements, or at the very least have standard terms and conditions referenced on a warehouse receipt that is issued to a customer. A standard warehouse contract incorporates the UCC liability standard and has one or more limitations on the warehouse operator’s liability for lost or damaged goods. Therefore, as a practical matter a warehouse operator’s liability will usually be determined per the terms of an applicable contract that closely mirrors the standards set out in the UCC.

Crucially, under this liability standard warehouse operators are not liable for loss or damage to goods caused by events beyond their control, such as floods, windstorms, earthquakes, and other similar “force majeure” events. Companies storing their goods with a third-party warehouse operator should not mistakenly expect that the warehouse will be legally responsible for any and all loss or damage to those goods while in storage. Instead, the warehouse operator will generally only be responsible for losses caused by its negligence in operating the warehouse. For example, if a California wildfire destroys a warehouse, including the $50 million dollars of customer’s inventory stored inside, the warehouse is generally not responsible for such a loss. On the other hand, a warehouse may very well be liable for inventory loss caused by a fire that spreads throughout the warehouse due to the operator’s poor maintenance of its sprinkler system.

This can be confusing for customers who may be more familiar with the liability standards imposed on transportation carriers, which are typically more akin to strict liability. Under the Carmack Amendment for example, a motor carrier is presumed liable for any loss or damage that occurs while the goods are in its custody unless it can prove that one of a few limited exceptions applies. This is not the case for warehouse operators.

The issue is complicated further if a warehouse operator provides services to a customer that comprises both storage and transportation services. For example, assume that a 3PL provides transportation and cross-docking services to a particular customer. The 3PL transports the goods to a warehouse, unloads the goods into the facility, re-loads those goods into a different outbound trailer, and then transports the goods to their final destination. If some of the goods are lost or damaged while sitting in the warehouse, did that damage occur while the goods were “in transit” or “in storage”? At first it may seem obvious that the damage occurred “in storage” since it happened within the warehouse. However, what if the cargo had not yet reached the final destination specified on the bill of lading and was only sitting in the warehouse for an hour – is that still storage? Maybe the storage was simply “incidental to” the transportation and for the 3PL’s convenience, and therefore, legally speaking, the goods were always in transit. The answers to these questions are beyond the scope of this article and should be discussed with the company’s insurance broker and legal counsel. However, these distinctions do have practical implications – liability standards for carriers (strict liability) differ from those of a warehouse (negligence), the transportation contract terms may differ from the warehouse contract terms, and the cargo and WLL policies may respond to a claim differently.

2. WLL insurance is not the same thing as property insurance. Now that we understand the legal standards placed on warehouse operators by law and under most contracts, let’s look at what WLL insurance actually covers. Just as many companies mistakenly believe that warehouse operators are liable for any losses occurring during storage, many also assume that WLL insurance is the same type of coverage as standard “all risks” property insurance. This is incorrect.

Property insurance is first party coverage, meaning the insurance covers damage to property that the insured company owns. Moreover, property insurance typically covers a range of causes, including losses caused by natural catastrophic events. On the other hand, WLL insurance is third party liability coverage, so the insurance only covers the insured’s legal liability for damage to property owned by others. WLL insurance does not cover the customer’s goods, it covers the warehouse’s liability for the goods. Now you can see the critical links between the first two points: (i) WLL insurance only covers the warehouse operator’s legal liability for goods, (ii) the warehouse operator’s legal liability for goods is determined by the warehouse contract, and (iii) the warehouse contract almost always contains a negligence standard and monetary cap on the operator’s liability. Therefore, the terms of warehouse contract are key in determining the extent of WLL coverage for any specific claim.

This leads to difficult and sometimes surprising claims situations for both the warehouse operator and customer. If the warehouse is not legally liable for a loss, as determined by the contract, or its liability is limited to less than the total actual loss, this can leave the customer (and/or the customer’s insurer) holding the bag for any gap. The warehouse is then in the unenviable position of choosing to either pay for the claim out of pocket or abide by the contractual terms (putting the customer relationship at risk). Indeed, if the customer and warehouse operator are on good business terms, then the warehouse operator may face a somewhat paradoxical position of wanting to be determined legally liable for a claim in order to trigger coverage and payment to its customer, while in the background its insurer is attempting to defend the warehouse from liability.

Since a warehouse operator’s liability is limited via contract, it is important that customers have their own “all risks” property insurance on the full value of its goods to cover losses that are outside the scope of the warehouse’s legal liability. Some customers try to insist on their warehouse operators providing such coverage, and a few warehouses may reluctantly agree if there is a significant business justification. However, I would caution customers that such an agreement may not actually be in its best interest.

First, I think it is a dangerous risk management philosophy for a customer to forgo property insurance in exchange for requiring the warehouse operator to carry the coverage instead. Too many things can go wrong, leaving the customer uninsured with millions of dollars of inventory at risk.

Secondly, even if the customer and warehouse structured the policy such that the customer is an actual named insured on the warehouse’s policy (which would give the customer more control over maintaining the coverage), then any claim payout the customer receives under that policy likely would have to be disclosed on the customer’s future loss run report, even though the warehouse was the primary named insured on the policy. The customer could not avoid a claim on its property affecting its future property loss runs. If the customer is especially concerned about higher future premium costs due to a loss, it could try to address these costs in the contract in other ways, perhaps through a liquidated damages provision that is triggered if the warehouse causes a loss above a certain threshold.

Finally, the warehouse operator will almost certainly charge the customer for having to obtain insurance that is broader than its standard coverage, perhaps even at a markup, whether this cost is an explicit line item or “baked in” to the warehouse’s rates in other ways. So the customer ends up paying for the insurance anyways, possibly even more than if it had acquired the insurance on its own. On this issue, the juice is not worth the squeeze in my opinion, and customers are better off having their own property coverage for any loss outside of the warehouse’s scope of liability.

3. Contractual minimum limits of insurance are not the same as a cap on liability. Warehouse services agreements often have two different provisions that the “uninitiated” may believe limits the warehouse operator’s liability for loss or damage to goods. First, contracts usually contain an insurance provision that sets forth the types and limits of insurance that the warehouse is required to maintain during the term of the contract. Second, most contracts also contain a limitation on the warehouse’s liability for loss or damage to goods to a capped monetary amount.* These two clauses are not the same thing. Many people, especially non-attorneys, mistakenly think that putting a minimum WLL insurance limit in a warehouse contract (or a cargo liability insurance limit in a transportation contract) necessarily limits the warehouse’s legal liability to that insurance limit. This is not true unless the limitation of liability clause in the contract is explicitly linked to the WLL insurance provision. Standing alone, an insurance provision only dictates how much insurance the warehouse must have – it does not limit the warehouse’s actual liability. Absent language to the contrary, the amount of the warehouse’s liability is always determined by the limitation of liability provision in the contract (if there is one), regardless of what the insurance provision states.**

Let’s look at a few examples.

Example A. Assume a contract requires the warehouse to have a minimum of $1,000,000 in WLL insurance, but the contract contains no language limiting the warehouse’s liability to the WLL minimum limit or any other amount. If the warehouse operator later damages $5,000,000 of its customer’s goods, the warehouse is legally liable for the full $5,000,000, despite only being required to have $1,000,000 in WLL insurance.

Example B. Assume a contract requires a $10,000,000 minimum WLL limit, but the contract also contains a limitation of liability clause limiting the warehouse’s liability to $2,000,000 per occurrence. A claim occurs and the total loss is $8,000,000. In this scenario, the warehouse is only contractually liable for $2,000,000, and so the WLL insurance will only cover up to that $2,000,000 contractual liability, even if the warehouse actually had a WLL policy with limits of $10,000,000 or more. The $10,000,000 minimum insurance requirement was simply a statement about how much insurance the warehouse was required to have; it says nothing about the warehouse’s actual liability to the customer for this particular claim. The customer’s own property insurance should step in to cover the remaining $6,000,000 gap.

Therefore, on the warehouse operator’s side it is important to always “thread the needle” between the insurance clause and limitations clause if the intent is to limit the warehouse’s liability to the amount of required WLL insurance. On the customer side, it is important to understand the interplay between these two provisions and not mistakenly think it is protected by a WLL insurance limit that is superseded by a limitation of liability clause located elsewhere in the contract. The amount of the monetary cap on the operator’s liability for lost or damaged goods is often a heavily-negotiated point.

[*For simplicity I refer to the limit of liability as a simple monetary cap. In reality, the warehouse contract may contain multiple provisions having the effect of limiting the warehouse’s liability, including a per unit or per pound limit and a valuation clause limiting the warehouse’s liability to manufactured cost rather than retail value or some higher valuation.]

[**Of course, “always” does not actually mean always. There are cases of courts “creating” a limitation of liability where one does not explicitly exist in the contract, by referring to contractual insurance limit requirements contained elsewhere in a contract. This has occurred in the context of transportation claims and possibly other scenarios. While this is not at all the majority rule, customers who do not want to be surprised by a limitation they did not agree to should work with their legal counsel to insert language into the insurance provision of the contract stating that the insurance limits are not intended to limit the service provider’s liability assumed elsewhere in the contract.]

4. The customer should not be an “Additional Insured” on the warehouse’s WLL policy. Customers often ask that the warehouse operator add the customer as an Additional Insured (“AI”) to one or more of the warehouse’s insurance policies, including the WLL policy. Customers should not request to be added as an AI to the WLL policy, and warehousemen should not agree to such a request. Being an AI on an insurance policy essentially makes the AI company an insured under the policy, subject to the terms and conditions on the AI endorsement. However, as we have seen, the WLL policy only responds to a claim when an insured is legally liable to a third party; it is not first party coverage for property owned by an insured. If a customer and the warehousemen are both insureds under the WLL policy, then who is the third party to whom they are legally liable in order to trigger coverage? Not only is the customer being an AI on the WLL policy not necessary for the coverage to work as intended, doing so can actually complicate the claims process and preclude coverage.

[Under the same rationale, shippers should also not ask to be an AI on their broker’s or carrier’s cargo liability insurance policy.]

5. Understand and follow the WLL insurer’s underwriting requirements. The WLL insurer will often place certain requirements on the insured that the warehouse must comply with during the policy period in order to maintain coverage. These could include:

Providing a monthly, quarterly, or annual statement of value as to the amount of inventory stored at each warehouse facility.
Reporting customer contracts for pre-approval or within a specified period of time after being signed.
Obtaining approval of material deviations from the warehouse operator’s standard contractual terms.
Allowing risk engineer assessments at randomized warehouse locations so that the insurer can assess and provide recommendations to mitigate the warehouse operator’s risk of a loss.

Perhaps most important, when an insurer first underwrites WLL coverage for a new insured, the insurer often requires the insured to submit its standard warehouse services contract template and its existing customer contracts. This allows the insurer to assess the warehouse operator’s contractual exposure. Upon issuing WLL coverage, insurers also typically set some “ground rules” that the insured must follow when contracting with new customers going forward. It is imperative that the warehouse understand and follow these contract requirements, since failure to do so could result in the insurer limiting or outright denying coverage on a future claim.

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I hope that you find this first post useful. As is necessary with articles like this, the information is generalized and does not cover every possible scenario. Exceptions and nuance will always exist. However, the key takeaways still stand. WLL insurance covers a warehouse operator’s legal liability, which is determined by the warehouse contract, the terms of which will usually only place liability on the warehouse operator if it acted unreasonably. The warehouse’s liability will be capped as per the contract’s limitation of liability provision, and customers should ensure that they have property insurance on their goods to fill the gaps from losses that are outside the scope of the warehouse’s legal liability. The above discussion is specifically regarding warehouse operations in the United States. Other jurisdictions impose different legal standards on warehouse operators, and the standard insurance coverage may also differ.

If you have any comments or questions about this post, or recommendations for future topics, please feel free to reach out to me at keith@logisticslaw.net.

Keith Waters

December 30, 2021