Warehouse insurance, without qualified advice, could turn into a complex and mis-understood subject for any potential policy holder. This could apply to the goods depositary, the warehouse facilitators and possibly, the insurance provider.
The various aspects around which confusion may occur, could relate to the understating of the agreement between the warehouse and the depositor. It is sometimes assumed by the depositor, that on deposit, they are transferring all responsibility and risk for their goods. This assumption is not correct, as there is a Uniform Commercial Code that determines the nature of the duty and care that are imposed on the warehouse.
Accordingly, should a warehouse increase its liability factor, in excess of that specified by the “Code”, it would place in jeopardy its cover provided by any legal liability insurance in effect.
Various types of insurance can have an influence on a warehouse operation. Public warehouse insurance could be related by way of Common Law records to Sir William Blackstone who stated that “if he undertakes specially to keep the goods safely, he is bound to take care of them, as a prudent man would his own”. This phrase determined the law of bailment, the governing term for the relative liability of a warehouse.
The transfer of goods into the care of a warehouse, referred to as the Bailee, is made by the Bailor, without the intent to transfer their title to the Bailee. Possession is understood and agreed on a temporary basis and will revert back to the Bailor, or a designated representative, at the conclusion of the agreed term, or as otherwise agreed. The Bailee or warehouse, undertakes to keep custody and control of the goods placed in their care, while the Bailor retains the title to the goods.
Due to the title of the bailed goods remains with the Bailor, they retain the risk for loss or damage. The Bailee only has responsibility to the Bailor, for any loss or damage to the bailed goods, resultant from any negligence on their part. This is determined to be the limit of liability on the part of the warehouse.
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