TT Talk - In defence of a storm claim
The traditional assertion that storm events are unexpected and their consequence unavoidable may no longer be simple to establish. The fact that more rain fell on a particular day than any other in recorded history is no guarantee of defence if a claimant can demonstrate deficiencies in your operational risk assessment or inadequacies in the steps you took in advance of the weather event.
Where large exposures are involved, claimants will typically go into forensic detail questioning the operator's advance notice, previous similar events that should have been taken into account, industry best practice principles in the storage of cargo, thoroughness of maintenance records, attention to risk assessments undertaken and the effectiveness of emergency plans.
Information is the lifeblood of business and when defending a claim made against you, records of sound processes - from risk assessment through to implementation of procedures - will form part of the evidence in defending the claim, either 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.
Where the defence of the resultant 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 surface 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 gutters, fall pipes and drains.
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.
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 such 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 any 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.
Apart from the evidential burden that may be necessary in order to establish an effective 'force majeure' defence, you need to be familiar with the operation of your own conditions, as well as the impact of any applicable legislation and any special terms that have been agreed between you and your customers. No party will necessarily be comfortable with the consequences of a storm event, but enhanced clarity and certainty will go a long way to retaining good business relationships in the long term.
TT Talk 237 Chinese Translation (341 KB)
You may also be interested in:
Whilst many storm events globally are considered geographically seasonal - such as the hurricane and typhoon seasons typical in the Tropics - the entire supply chain industry globally must take adequate steps to prepare for isolated severe weather events.
Terrorism has become a sensitive topic and one that is increasingly demanding attention of the global supply chain. The threat is real and all stakeholders need to consider how to prepare.