TT Talk - Assessing risk records
While operators do not plan to have incidents, the prudent will seek to apply sound pre-emptive advice to bolster the defence of any potential future claims.
Information is the lifeblood of business and when defending a claim made against your company, records of sound processes - from risk assessment through to implementation of procedures - will form part of the evidence in either defending the claim in its entirety or at least reducing the exposure, providing your business with greater certainty.
Whilst the examples provided here focus primarily on property risks, the principles considered are applicable to a variety of exposures through the supply chain. Whatever the nature of incident - flood, fire, injury or theft of/damage to cargo - being able to defend your position adequately will often depend on the availability of evidence you are able to provide.
The risk of flood in many locations, especially around port areas, remains a significant concern. Prudent operators conduct risk assessments and consider what their exposure would theoretically be in the event of a flood, thus allowing risk appetite and mitigation strategies to be established. There have been several localised incidents in recent years, for example where extraordinary volumes of rain fall over a short period has resulted in flash flooding, causing significant damage to warehouse facilities and the cargo stored therein.
Where the defence of the consequent claims is concerned, an operator may seek to rely on a 'force majeure' defence, as something outside of their control or foreseeability. However, reliance on defences of this nature will often require disclosure of extensive documentation concerning risk assessments and operational procedures (not always directly related to the subject loss).
Thorough risk assessments at the time of constructing a facility - or leasing it - will need to be available. This could include the sufficiency of flood defences or of drainage for the square footage of roof span or yard apron. The issue of drainage capacity must not be overlooked where a facility is extended thus increasing the relevant catchment area. It will commonly be necessary to evidence both existence of and compliance with standard operating procedures for things like moving stock away from danger in a timely manner or scheduled general maintenance activities, including records of clearing drain pipes.
The majority of warehouse keepers will have undertaken risk assessments, will have procedures in place and will undertake routine maintenance. The ability to defend or reduce the presented claim will be greatly enhanced where compelling documented supporting evidence can be provided.
Fire is another obvious warehousing risk. One cause of fires is high powered lighting. Whilst sufficient segregation from the cargo in racking will commonly be considered through the risk assessment process, the fact the bulbs can shatter when they expire or fail may not be. While high bay lighting units are usually supplied with safety cages, designed to catch debris from such a failure, such safety features are prone to be damaged by lifting equipment and may not be repaired or replaced assiduously. The consequences of extremely hot shards of glass falling from a lighting unit onto cargo stored in the racking below can be devastating.
Again, documentary evidence is critical. Details of routine maintenance procedures and evidence of bulbs being regularly checked and replaced where necessary may be extremely important to defending a claim. Having a robust defect reporting and escalation procedure will also assist in building defences against claims of negligence. The ability to demonstrate that reasonable steps were taken to avoid such an event will likely assist in reducing exposure.
It is not safe to assume that the landlord retains responsibility for maintenance and providing a facility fit for purpose. Such matters will usually be covered in the lease contract, so a warehouse lessee needs to be certain where obligations rest. In many instances, the ultimate responsibility is placed on the warehouse operator and not the landlord. Regardless, the operator should determine the correct use of the facility and manage any associated risks. Furthermore, operators need to consider the impact of any change of use of the facility, such as storage of more sensitive cargo. There may be a need to revisit risk assessments, document the findings and, where necessary, enter into dialogue with the landlord in an attempt to address the associated risk exposures.
Do not leave it to chance. If an incident does occur, the absence of evidence of action having been taken may prejudice any defence you would otherwise be able to rely upon.We are grateful to Ian Hyslop who has provided valuable contributions.
We hope that you have found the above interesting. If you would like further information, or have any comments, please email us, or take this opportunity to forward to any colleagues who you may feel would be interested.
We look forward to hearing from you.
Senior Loss Prevention Executive, TT Club
TT Talk - Edition 227 (Chinese) (452 KB)