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Home delivery is moving faster than ever. A trend sweeping both e‐commerce and traditional retailers alike goes beyond the simple dropshipping of purchases, adding extra‐value services like set up, assembly and installation with delivery. For third‐party logistics companies (3PL) that are the delivery connection for these businesses, these so‐called white‐glove delivery services represent a new opportunity and unique risks for which they may not be insured – especially if they use sub‐contractors to deliver the services.
Before entering the customer’s home, 3PLs bear the risk of the agent not delivering the item safely. Accidents and stolen goods can all occur while in transit. And with today’s rising insurance premiums as a result of nuclear verdicts, it’s important to have the right auto insurance coverage in place.
On top of the contracted carrier’s personal policy, 3PLs should have a contingent auto liability insurance policy. Specifically, our team recommends a hired and non‐owned auto insurance policy (HNOA) to cover third party claims triggered by auto-related accidents involving contracted carriers. This policy can act as an excess to protect the 3PL should the contracted carrier’s policy become exhausted in the event of a major accident, or potentially even represent the 3PL on a first-dollar basis should there be a lapse in coverage from the contracted carrier.
In addition, a 3PL needs to have contingent cargo insurance, which can cover third party goods in transit in the event the product gets damaged or stolen while inside of the delivery agent’s vehicle. While not all cargo policies are alike, an insurance broker can help find the best one to fit the 3PL’s business model.
After crossing the threshold of a home and setting up the product, the need for General Liability (GL) insurance to protect the 3PL should anything go wrong after installation is important. For example, if a washer and dryer is installed and soon after develops a leak, GL insurance can help cover any remediation costs, such as drying out the home to prevent mold and repairing any cosmetic damage. If the 3PL is sued or if the contracted carrier doesn’t have the type of coverage they said they did to cover the damages, the GL insurance of the 3PL can kick in.
Excess Liability, otherwise known as an umbrella policy, is designed to sit on top of a 3PL’s auto and general liability policies and respond when these policies have hit their limits. If there’s a significant claim, such as an auto accident with multiple fatalities or a faulty installation that causes serious injury, these could result in multi‐million‐dollar settlements. Having an extra layer of defense on top of the 3PL and contracted carrier’s policies can protect the 3PL from any excessive costs in the event of severe accidents.
Work-Related Injury Exposures
Given the handling of large appliances or furniture, the opportunity for work-related injuries to occur to the contracted carrier should be of concern. Occupational work injury coverage or workers’ compensation should be a primary coverage carried by the 3PL and their contracted carriers. That being said, this area of coverage is often times one of the most complex and involved policies to construct, which is largely controlled by the structure of the 3PL’s business. Having an experienced insurance broker who understands the ins and outs of the various coverage options afforded to the 3PL can pay dividends in the long run.
In addition to the right coverage, it’s important for 3PLs to always be on top of compliance to ensure contracted carriers have up‐to‐date insurance certificates. While there are things beyond your control – such as a carrier presenting a faulty certificate – it is in your control to help ensure these carriers don’t have damaging exclusions on their policies. For example, if the carrier has a loading/unloading exclusion on their auto policy, their auto insurer won’t cover any exposure from an accident that occurs while the carrier is moving the product out of the truck and into the home.
It’s also prudent to have an insurance broker who understands the nuances of this business and the unique exposures 3PLs have with white‐glove delivery to ensure all risk is effectively covered. Don’t get trapped in a costly corner with improper coverage or exclusions. Drop us a line, our experienced team is here to help.
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Email me directly at bpaulozzi@risk‐strategies.com.