Goods-in-transit – are you liable for consequential losses?

Transporting goods by road come with risks. Damage or loss of goods can create a sticky situation for the hauler and other parties involved.

This is why most haulers take out commercial insurance on goods-in-transit to protect them against damages. But even with commercial insurance, there’s still the chance of being liable for consequential losses.

While business fleet insurance companies like Rideshur have devised innovative ways to deal with consequential losses, it’s still a grey area for many haulers. Read on to find out if you’re liable for consequential losses and how to protect yourself. 

What are consequential losses? 

A consequential loss is an unfavourable impact on a business caused by the damage or loss of business equipment or properties. Haulers usually get insurance to cover losses in the case of damage to goods-in-transit. However, the insurance doesn’t compensate the business owner for the income lost due to their inability to use the equipment or property damage.

These indirect losses that arise from business equipment damage are considered consequential losses. Since they are secondary losses, a separate insurance policy will be required to cover them.

Are you liable for consequential losses?

Technically, you’re liable for consequential losses. When you agree to transport a company’s goods, you do so with assurances that their goods will be safely transported. When damage or loss occurs in transit, you’re liable for losses due to your inability to fulfil the contract of carriage, which required you to deliver the goods safely.

This can, of course, be covered with goods-in-transit insurance. However, the customer may also suffer consequential losses and can successfully argue that these losses could have been reasonably foreseen when you agreed to transport the goods safely.

Imagine that you agree to transport two operational machines for a customer for better understanding. If the machines are damaged while in transit, you’re undoubtedly liable for damages. However, it might take some time for the machines to be replaced.

During this period, the business suffers a loss of profits due to their inability to use the machines. While this may be an indirect impact of the damages suffered in transit, it’s still damages suffered due to your inability to meet the contract of carriage. Hence, you’re liable for consequential losses to goods-in-transit. 

How to protect yourself against consequential losses

As has been established, a customer can successfully argue that you’re liable for consequential losses. However, there are a few ways to protect yourself. Here are two major ways to protect yourself against secondary losses.

1) Exclusion clauses

When drafting a contract of carriage, you can protect yourself from consequential losses by adding an exclusion clause. This clause ensures you won’t be liable for consequential losses in case of damage to goods-in-transit. While there may be objections to this clause, it allows you to open a dialogue with the customer to find a reasonable solution. 

2) Get insurance coverage

While exclusion clauses can help, they’re not 100% foolproof. The best way to protect yourself is to get insurance coverage for inconsequential losses. 

Consequential losses can be a bit tricky. That is why it’s important to understand the extend of your liabilities and take action to adequately fully protect yourself against them.