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Outdated Moving and Storage Contracts Can Ruin Your Day

Monday, February 13, 2012
Outdated Moving and Storage Contracts Can Ruin Your Day

Can you imagine receiving a call from your warehouse manager on an early weekend morning informing you there is a foot of water in your packed warehouse? Could it get any worse? What if your insurance provider followed up this wonderful news with a claim denial? Now, that’s the start of a very bad day!

The Issue

For customer’s goods in the care, custody, and control of the moving company, the contract terms and conditions of the bill of lading and warehouse receipt will specifically address the legal liability/responsibility owed to the customer. These contracts will include conditions that restrict the moving company’s liability. These conditions support that the contract is based on the legal liability or negligence of the moving company.

Carrier Legal (Cargo) and Warehouseman’s Legal Liability insurance policies that respond to the moving and storage company’s legal liability are designed to provide coverage based on the liability assumed in the bill of lading or warehouse receipt. Insurance companies base their claim payments and denials on the legal liability conditions provided in these particular contracts.

The need for contract review

While the bill of lading and warehouse receipt are designed to limit the liability of the moving company to a “legal liability” basis, these contracts should be carefully reviewed for proper intent. Contracts that contain old, outdated tariff wording can restrict coverage that would normally be considered within the “legal liability” framework of today’s insurance policies.

While we would not expect to be responsible for “acts of God” such as a flood or a major fire loss due to a lightning strike, broad exclusions such as “fire” and “water” can still be found in contracts today. These broad open-ended definitions in your contracts could lead to claim denial.

A few examples

  1. An arc caused by a poorly maintained electrical panel creates a major fire in a warehouse. As a result, there is significant damage to many customers’ goods that are in storage. Will the insurance policy respond and pay based on the moving company’s liability? While this is a clear case of negligence on the part of the moving company, if the contract contains a broad “fire” exclusion, the insurance company will have a basis for the denial.
  2. In our earlier water damage case, if the flooding was a result of inadequate maintenance of the sprinkler riser, would you expect coverage for this event? Again, having a broad “water” exclusion in the contract could be a basis for the denial by the insurance company.

In summary

While the intent of the bill of lading and warehouse receipt is to reinforce the basis of “legal liability” or “negligence” on the part of the moving company, it is extremely important to review these contracts for outdated conditions that could lead to a surprise claim denial. A simple review of the contracts can go a long way in avoiding that “bad day scenario.”

We would be happy to explore this topic with you at length and, or review one of your contracts to demonstrate this in action – make sure to contact our Moving & Storage Practice Leaders, Curt Emery or Tony Hopkins

Material posted on this website is for informational purposes only and does not constitute a legal opinion or medical advice. Contact your legal representative or medical professional for information specific to your legal or medical needs.

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