UK court case could kill off 3PL industry

A new legal precedent means that small mistakes in the complicated high-end manufacturing supply chain can send third-party logistics operators to the wall – through no fault of their own.
The UK-based International Freighting Weekly has reported on a frightening prospect for shippers and shoppers alike. In a worrying development for international trade, a British High Court ruling has found a freight company liable for the theft of products that had been delivered to its warehouse in error by a client, with its insurance policy being declared void due to the clerical error.
It all started when GBP 345,000 (AUD 700,000) worth of Bluetooth mobile phone devices which were meant to have been flown to Hong Kong, were mistakenly delivered to Uniserve’s local warehousing facility in Manchester. While the goods were at the warehouse, a robbery occurred and the devices disappeared into the criminal underworld.
Uniserve, which would have charged just $6 for moving and storing a pallet of that size, relied upon its limited liability insurance to cover any damage or theft of products. However, because the goods had been delivered by mistake – regardless of the fact that the mistake was not Uniserve’s – the insurance company voided its policy. Uniserve now faces a total bill – including legal costs – of nearly $4 million.
On May 11, Judge Mackie QC ruled at the high court that, as the goods had been delivered in error, no limited liability insurance contract could apply.
Iain Liddell, CEO at Uniserve told IFW that: “This is going to change the way everything is done through the whole transport chain. Under this new regime, not only will moving a pallet become extremely expensive, but we will have to have far more information about what we handle for other people.
“We would have charged $6 for moving that pallet,” explains Liddell. “The increased insurance liability alone would bring costs up to $4,700. Can you imagine that effect on a $2,000 shipping cost? This isn’t pie in the sky. It’s now case law. Unlimited liability claims can be made and insurers can revisit six years of claims to establish if an error has been made, and then demand full payment from anyone in the supply chain who can be held responsible.”
Gavin van Marle, editor of IFW agrees. “We are now in a situation where freight service providers operating under limited liability terms and conditions may find themselves uninsured and with unlimited liability in the event of a supply chain error – even if it is caused by a third party or the principal. It puts freight operators in a terrible situation: at best they will have to develop a system of paperwork and checks that will cost a fortune to administer. At worst, they face unlimited liability if an error is made, even when it is not their fault.”
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