Wednesday, April 1, 2020

Transport Insurance Specialist Advises on Procedures During the Virus Outbreak

Mutual Insurer says Communication is the Key to Combat Contract Disputes
Shipping News Feature

UK – WORLDWIDE – Everybody in the field of logistics realises the importance of their industry to society at this terrible time. Over the coming weeks there will be considerable uncertainty for stakeholders through the entire transport industry as the global economy slows, governments prioritise specific supplies, consumer spending decreases and personnel shortages become more prevalent. However, the need for the supply chain of essentials, foodstuffs, pharmaceuticals and medical equipment, to remain robust and efficient will be more critical than ever.

Independent provider of mutual insurance and related risk management services to the international transport and logistics industry, the TT Club always brings an industry driven, common sense analysis on these occasions and now the insurer is building a dedicated web page of available materials relevant to the Covid-19 outbreak in order to share good practice findings from around the globe.

It is in this unusual, indeed unprecedented environment, that the TT Club points out that all sectors of the industry will be put under pressure by customers and suppliers to help mitigate potential issues, losses and liabilities. The scenarios faced will be many, various and complex, affecting port, terminal and warehouse operators as well as carriers across all modes, forwarders and logistics companies.

The demand to maintain reliability, and continued flexibility of the services provided, will be acute for many stakeholders, faced with the common three business imperatives during the current crisis of staff, customers and cash. Those involved in the global transport industry are by their nature experienced problem solvers often employing innovative solutions. Where contractual relationships are in place, the supplier is generally obligated to explore all reasonable options to mitigate a potential loss arising in circumstances such as presented by this coronavirus outbreak.

Peregrine Storrs-Fox, TT Club’s Risk Management Director is at pains to emphasise the necessity for this. As we have mentioned here recently many individual suppliers around the world, ports, shipping lines and so on, are immediately turning to the force majeure clause, something Storrs-Fox points out requires any party doing so to understand they may well face the burden of evidencing that they took all reasonable steps to mitigate the loss in the case of a dispute arising in the future.

Depending on the individual stakeholder responsibilities, there are a number of proactive risk mitigation strategies that may be considered. Clearly, keeping well informed and maintaining open channels of communication with the national or local authorities relevant to the business obligations will be key, both to compliance with additional requirements and service to customers, even recognising that such obligations may be in another part of the world and possibly managed through a partner.

Many established ‘crisis management’ plans will be relevant for the circumstances faced, even if the scale and scope of the current disruption was not envisaged. Such frameworks will, however, assist in identifying vulnerabilities that may impact the ability to fulfil usual obligations or carry out standard business requirements. The specifics of this virus, such as exposure through contact with surfaces, necessitates consideration of additional protections and training for staff and will almost certainly make usual personnel and site security procedures more complex.

The TT Club is urging stakeholders to maintain as much normal rigour as possible in their internal systems and processes, in sound safety practices and in robust physical and cyber security, with Storrs-Fox emphasising that such standard business ‘hygiene’ retains lasting significance, alongside the much heightened health hygiene to which we are all responding. He continues:

“As we have advised in the past, fundamentally there is a need to communicate, to have an open dialogue with customers and suppliers and a good understanding of fast-changing controls and regulations imposed by local, national and even international authorities.

”The physical movement of cargo is understandably experiencing delays due to cancelled ship sailings, shortage of air freight capacity and land border checks and these disruptions to the norm will cause friction between the various links in the chain. An understanding of ‘what is going on’ by participants in the chain will serve to ease such friction.”