Warehouse Insurance Companies

Warehouse insurance is a collection of commercial insurance policies that protect 3PLs, freight forwarders, and other businesses operating a warehouse, fulfillment center, distribution center, or similar facility.

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Warehouse insurance is sometimes used interchangeably with a specific type of coverage, warehouse legal liability insurance. However, warehouse legal liability insurance will not provide sufficient coverage by itself and additional coverage will be required for any business running a warehouse facility.

What is warehouse legal liability insurance?

Warehouse legal liability insurance, sometimes referred to as just warehouse liability, covers a third party’s property that is under the care of the warehouse.

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Warehouse legal liability is a type of inland marine insurance.

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What does warehouse legal liability cover?

Warehouse legal liability is designed to protect against the loss or damage to inventory owned by third parties.

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Most policies will only cover negligence when handling or storing property and will not cover Acts of God or force majeure events.

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Situations that warehouse legal liability will typically cover include:

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• Careless handling or storage
• Negligent climate control
• Insufficiently maintained facilities (such as a leaky roof, etc)
• Mechanical breakdowns of refrigeration or temperature-controlled environments
• Employee caused events (starting a fire from a lit cigarette, etc)
• Lost or stolen inventory

What does warehouse legal liability not cover?

Warehouse legal liability does not typically cover events outside the control of the warehouse operators, such as Acts of God or force majeure events. These can include hurricanes, floods, tornadoes, earthquakes, employee dishonesty, and war or civil unrest.

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How is inventory valued?

While this can vary based on the contract, inventory is typically valued at a fixed value per pound of inventory. For example, if the warehouse is liable for $0.75 per pound of inventory and 10 pounds of inventory is lost, the warehouse is only responsible for $7.50 in damages.

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Most contracts value inventory between $0.15 and $3.00 per pound.

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When this is insufficient for high-value inventory, “landed cost” policies are also available that reflect the manufacturing, transportation, and warehousing costs. These policies will have higher premiums since they provide additional coverage.

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Additional Coverage Options

While most policies will only cover the cost of the lost or damaged inventory, many insurance providers will offer extended coverage that can include:

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• Legal Defense Costs
• Employee Dishonesty
• Earned Warehouse Charges

Warehouse Legal Liability vs General Liability Insurance

General liability covers bodily and property damage claims against a business. For example, if a third party slips at the warehouse, the medical bills and any legal expenses would be covered by a general liability policy.

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Warehouse legal liability on the other hand covers property owned by a third party while it is in control of the business.

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Since general liability insurance also covers third-party property, it may seem redundant to purchase a warehouse legal liability policy. However, since warehouses handle third-party property as a primary business function, general liability is insufficient and a separate policy is required.

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Further Reading

For individuals looking for greater insight into how warehouse legal liability insurance works and what underwriters consider when creating a policy, the Inland Marine Underwriters Association’s Underwriting Overview can be a great resource.