Warehouse Legal Liability (WLL) - What it Means to You
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Even if you’re not in the business of storing goods for others, it’s still very important to understand what Warehouse Legal Liability (WLL) coverage is and what it means to you. As a manufacturer, you may be utilizing a public warehouse for the storage of your own property when space is limited in your primary facilities. If there’s a loss to your property at this location, are you covered by their WLL policy? If so, for how much?
There are many reasons why a WLL policy is limited compared to a standard commercial property policy, but there are two primary areas you’ll want to keep in mind: Covered perils (causes of loss) and valuation of property.
In regards to a loss, a WLL policy doesn’t have the broader special form coverage for perils that a standard property policy would have (i.e. there are more exclusions). Additionally, coverage could be limited by the warehouse contract and/or Section 7-204(1) of the Uniform Commercial Code as follows: “A warehouseman is liable for loss or injury to the goods caused by its failure to exercise such care in regard to them as a reasonable careful man would exercise under like circumstances, but unless otherwise agreed he is not liability for damages which could not have been avoided by the exercise of such care.”
Valuation of Property
Regarding the valuation of your property, while your property policy most likely provides coverage on a Replacement Cost basis, WLL coverage is limited by the details of the warehouse agreement/receipt/contract in place. For example, a warehouse receipt/contract may limit coverage for your property to $0.75 per pound of goods stored. Also, it’s important to note that if there’s no warehouse receipt or contract in place, their WLL policy will not respond at all.
So what does all of this mean to you? If you’re utilizing the services of a warehousing operation for the storage of any of your property, be aware that any insurance coverage provided by the warehouse could be very limited. Therefore, you should consider scheduling this location onto your property policy or looking at your property off-premises (or locations you elect not to describe) limits available to you on your property policy. This will ensure broader and more adequate coverage for you in the event there’s a loss to your property. And, as always, remember to discuss these items with your professional insurance agent or ‘A’ Team member.
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