It’s something nobody likes to think about: liability, or the prospect of something going wrong.
One of the scenarios that will scare nearly anyone is when your product has arrived and added to your 3PL’s warehouse for storage. Then you (or an agent) discover that you have damaged products. It’s especially problematic when nobody notices until the customer opens their order and discovers the damage and wants to return it. One damaged item may not be an issue. But hundreds, thousands, or more damaged items can mean significant lost revenue, and possibly no way to recoup the losses.
So, who’s responsible?
Liability for Damage And Responsibility
As a rule, a 3PL provider is responsible for the people who work at their warehouse facility, as well as equipment and the facility itself. Should their warehouse experience storm damage, or have a breakdown in equipment, it’s the provider’s responsibility to repair it. The 3PL company is also responsible if it makes mistakes, such as:
- Incorrectly handling and/or a product that results in damage to the product
- Shipping the wrong product to customers
In the case of product, the 3PL is holding the product for the customer, and is required to take care of them. But if the 3PL is responsible for the damage, its liability insurance usually covers a portion of the damage. The customer’s insurance will cover the bulk of the cost of replacement.
Customers can acquire product replacement insurance on their goods by requesting a rider on their policy to cover what’s being stored in a 3PL warehouse, listing the facility in the rider.
Note that incidents commonly called “acts of God,” such as weather, earthquakes, etc., are events that are outside of the control of the company, are not the responsibility of the 3PL provider. Damages are covered according to their liability insurance. The rest is the responsibility of the customer and their insurance coverage.
Types Of Insurance
A 3PL provider must have insurance to protect against losses. Three of the types that protect your goods include:
- Warehouse Legal Liability, which covers your product if it’s damaged within the 3PL warehouse and they are responsible. The 3PL is required to offer reasonable care while they store your product.
- Business Interruptions, which covers things like natural disasters and other events that prevent the 3PL company from conducting business. This insurance doesn’t cover products stored in the warehouse, however, only the costs of doing business while the company was not working.
- Transportation, covering the safe transport of goods and pays in the event of negligence by the shipper and/or 3PL provider.
As a customer, you may also be interested in adding insurance that can cover your products in these types of scenarios.
When negotiating your contract with a 3PL, remember that it will serve as the basis for your relationship with the company. That’s why it’s important to include every conceivable calamity that’s possible while your product is stored in their warehouse. All possibilities should be included in your contract, and the responsibilities of each party.
While there are standards applied to 3PL contracts, nearly anything is negotiable.
3PL Worldwide Takes Care Of Your Products
We understand that your products are the lifeblood of your business. That’s why we do everything we can to ensure that they’re safe and ready to be shipped to your customers.
As a Southern California based 3PL (third party logistics) company, we can help with all of your supply chain and logistics needs, from start to finish. If you’re ready to begin with 3PL, or have questions about getting started, contact us today at (877) 444-0002 or use our online contact form.