Bailee liability insurance is a policy that protects you from liability when goods under your care/control are damaged or lost.
If your business handles goods that belong to someone else, then you are liable if those goods become damaged while they are in your care, custody or control. For example, let’s say you run a logistics company that delivers goods for clients. While your vehicle is transporting these goods, some of the goods topple over, and break. Your client will now hold you liable to compensate them for this damage. Such incidents could happen very easily, and fairly frequently. If you don’t have insurance in place, the cost to compensate your clients can be very high.
A common question we receive from clients is whether their Public Liability insurance policy will cover damaged goods. The answer is, unfortunately, a resounding no. It’s crucial to note that most Public Liability policies will specifically exclude coverage for “property under care, custody or control”. This clause basically excludes coverage for someone else’s property that you are responsible for. This is why it’s critical to have a Bailee Liability Insurance policy, so that you won’t have to pay for any damaged or lost items out of your own pocket.
What does Bailee Liability Insurance pay for?
Bailee liability insurance pays for:
- Cost to replace damaged/lost goods
- Lawyer’s fees if you get sued for damaged/lost goods
- Damages for lawsuits related to damaged/lost goods
For instance, let’s say you’re delivering your clients goods in Singapore. On your journey to the shipping address, your delivery van gets into an accident, causing your client’s goods to break. These damaged goods are rejected by the recipient, and because you damaged them, your client is now demanding compensation from you. A bailees liability policy will pay for the cost of replacing these damaged goods.
Another example would be if you ran a warehouse/storage company. While the goods stacking the goods in your warehouse, some of your workers carelessly dropped them, causing damage. Your client arrives at the warehouse, sees the damaged products, and demands you pay for the damage. Bailees liability insurance will cover the costs of replacing these products.
Who needs Bailee Liability Insurance?
As long as your business stores or delivers goods that belong to other people, then Bailee Liability insurance is critical for you.
Businesses that typically carry bailees liability coverage are:
Important tips and tricks for Bailee Liability Insurance
1. Negotiate exclusions carefully:
There are some important exclusions or conditions that are commonly found in Bailee Liability insurance policies. These terms and conditions vary from insurer to insurer, and on the specific policy in question. However, you’ll want to take note of these conditions in general so you don’t get caught off guard.
|Inadequate packing||Excludes coverage if you did not use sufficient packing material (e.g. air cushions, foam wrap, boxes, etc.)||Pack your goods properly so that your insurer will not have a reason to deny your claim|
|Glass and artwork||Excludes coverage for glass, china, and artworks (e.g. paintings)||Ask your insurance broker to include coverage for these goods into your policy|
|Animals||Excludes coverage for animals, e.g. pets and livestock||Ask your insurance broker to include coverage for animals into your policy|
|Employee theft||Excludes coverage for employee theft of goods||Covered under Fidelity Guarantee Insurance (an affordable policy that covers employee theft/fraud).|
2. Make sure to combine your bailees liability with public liability insurance:
If you’re operating a logistics company, it’s absolutely crucial that you have not only bailee liability insurance, but also public liability insurance. If you’re delivering goods, your delivery drivers could easily cause damage to other people or property while working. For instance, they could hit someone with their delivery truck, or they could damage walls/break furniture while moving heavy goods around.
For warehouse operators, if you have external visitors coming in (e.g. clients or external delivery personnel), then you can be held liable for any injuries to these visitors while they’re on your property. If heavy goods fall on them in your warehouse, or if they slip and fall, you will have to pay their medical fees and potentially even have to defend yourself in a lawsuit.
Public liability insurance will protect you from these risks. The majority of logistics companies will combine both bailee liability insurance with public liability insurance.
3. Consider adding fidelity guarantee insurance if you’re afraid of employees stealing your clients’ goods:
As mentioned in the table above, bailees liability insurance will not cover loss of client goods due to employees stealing them. This risk is actually covered by a fidelity guarantee policy. Premiums for fidelity guarantee insurance are affordable (starting from $100/year). If you’re handling precious goods, or you’re worried that employees might pilfer items, then it’s strongly recommended to add on a fidelity guarantee policy.
Where to buy Bailees Liability Insurance?
Provide is the best place to get bailees liability insurance. Our digital model creates lower overheads, so we pass every dollar saved back to you. When you use Provide, you’ll save up to 25% on your premiums immediately!