Dec 10,2022 | 9 min read

Liability Risks of Logistics Service Providers with Special Focus on Carriers Legal Liability

Logistics Service Providers (LSP) are subject to a variety of risks, including liability risks resulting from their business activities, such as organizing shipments and offering shippers, freight carriers, and other associated entities advice on transportation and services related to transportation.


It is not only limited to the activities aforementioned but also includes a wide range of assembly activities in context to the logistics service, services from the supply chain, quality control, financial services and customer service etc.


However, in order to pro-actively participate in protecting the company from the liability risks, there must be a clear differentiation between activities that are not related to logistics to purely logistics and transportation. Given the speed at which the Indian logistics business is expanding and maturing, a few issues of the logistics industries in other nations are also incorporated as many of the practices of developed markets become spread and absorbed in developing economies at a rapid rate.


Like any other company, logistics must strive to maintain a healthy balance sheet and must take necessary precautions to safeguard itself before a loss happens. The best risk management techniques can lower the risk of the liability. However, one can lower their risk by staying away from service options that may be outside of their comfort zones and range of capabilities and the last resort to reduce or eliminate risk can be through deftly crafted contracts and convince clients and other stakeholders to safeguard their interests through suitable insurance plans and self-insurance for their remaining risks.


Coverage under Insurance Policy: A small logistics service provider would want insurance to cover him for the particular services he offers. However, in order to protect themselves from all the services they offer to their clients, large logistics companies would require a patchwork of policies. One such insurance policy that the logistics supplier takes is Carrier Legal Liability Policy. A small logistics service provider would want insurance to cover him for the particular services he offers. However, in order to protect themselves from all the services they offer to their clients, large logistics companies would require a patchwork of policies. 


Legal Liability of the Carrier:


The Carrier's Legal Liability (CLL) safeguards the Logistics Service Provider in numerous cases. Typically, CLL policies pay the whole amount of which the insured will formally become responsible for paying damages for physical harm or things that are damaged or destroyed, goods while travelling, including both when loading and unloading, and while temporarily keeping automobiles on or off the usual course of travel. The liability coverage begins when the cargo is loaded into the vehicle and remains in effect until either the cargo is discharged at the discharge point or seven days have passed since the vehicle first arrived in the destination town, whichever comes first. 


What is generally covered under the Carrier Legal Liability Policies?


The CLL policy generally covers the liabilities of the LSP( Logistics Service Provider), which occur due to:

(a) Direct fire-related harm to cargo; explosion or mishap with the transporting vehicle

(b) Carrier's cargo liability

(c) Cargo recovery, shipping, and cost of emergency storage

(d) Pecuniary harm caused by lost freight due to damage to part of the cargo.

(e) Expenses related to the litigation, such as legal fees etc. opposed to the claimants

(f) Average Adjusters' fees

(f) Breakage brought on by improper handling

(h) Water or flood damage or harm by additional cargo.


What is not covered under the Carrier Legal Liability Policies?


Traditionally, CLL plans do not cover the following:

(a) Liability under any other contracts not covered under the Carriers Act of 1865

(b) Responsibility for damage to property owned by the insured, his employees, or that is under his control;

(c) Inherent vice, deterioration, wear and tear, spontaneous combustion, or decay of perishable goods; 

(d) Consequential loss resulting from loss or damage to goods;

(e) Any effects of riots, strikes, war, or ionizing radiation; and 

(f) Refusal by any Government, Government Agency, or other competent authority to issue a necessary permit

(g)Any loss, destruction, damage, or consequential loss to property caused directly or indirectly by, contributing to, or resulting from ionizing radiations, radioactivity contamination from any nuclear fuel, or nuclear waste from the combustion of nuclear fuel

(h) Any illicit, illegal, or smuggled goods.

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