Last-mile liability and the reputational harm shippers face

Todd, who was not speaking specifically about any Amazon-related suits but rather the general exposure associated with last-mile delivery, said the risk to shippers is not that great, but there is reputational harm that could be done simply by being named as a co-defendant.

“Legally, if you are merely the shipper, there is not a lot you could have done to impact the outcome of that accident,” he said. “You are not choosing the equipment, you are not choosing the driver. … You are only contracting with the driver or the platform to [facilitate that delivery].”

Still, there is risk, and Todd said there are some steps shippers can take to ensure they minimize that risk, whether it is from accident-related claims or damage or service claims.

“In this environment, there are so many new entrants [to delivery],” he said. “The conversation I have with folks around procurement is what is the exact service [the provider offers]. If you are going out and buying a carrier’s service, regardless about how it is presented, you have expectations of that service.”

The shipper needs to understand what services it needs and what services the provider or freight forwarder offers so it can align needs with capabilities. For instance, some shippers may contract with a technology provider that provides transparency into the delivery, but it is up to the tech provider to then contract with a delivery provider. If there is a claim, who is responsible in that case?

“For example, you have packages that get lost or a real service failure in a series of deliveries that lead to a bad customer experience. As a shipper you have a claim, but who do you have a claim against?” Todd asked. “If you are dealing with a carrier directly, that is real simple – you have the claim against the carrier.”

Todd said that when vetting a provider – be it a technology provider, a broker or the delivery service itself – shippers should look for red flags. For carriers, that means researching their U.S. Department of Transportation numbers, reviewing their safety ratings from federal databases, records of reportable crashes and more. He also noted that in today’s digital age, it is easy to research providers online through social media and online searches, although he has not seen many enterprises go to that level of granularity.

“From my perspective, a provider’s track record and user’s experience is what any good procurement team would want to know and it is the conversations that these procurement teams are [and should be] having,” he said.

When a shipper contracts with a broker or freight forwarding service, the level of risk is lower but does not disappear entirely. As a result, Todd recommended ensuring the contract spells out details such as requiring the broker/forwarder to use only carriers that have the necessary licenses and requisite safety record.

“If you knew they were unsafe or unlawful and you hired them anyway … then you can have responsibility because you used them,” he noted.

The risk increases if the shipper owns its own trailers.

Todd suggests shippers include clauses that require the last-mile delivery provider to defend the shipper in the case of litigation, and this may include any and all legal fees, in any contract. When writing the initial contract, it is also important to ensure termination language that protects the shipper should the provider become a liability.

“In general, it is not that difficult to terminate, but it is something that requires some thought at the front end,” he said.

An easy way to address this is to include tiered volume pricing. “If you don’t have a volume commitment, you could just throttle [back] your tender, providing you have a provider that can pick up those volumes,” Todd said.

While the risks for shippers are not great, they do exist, Todd noted, pointing to the greatest risk in most cases being reputational harm. Managing that risk starts with finding the right partners and vetting those partners correctly.

Click for more articles by Brian Straight.

You may also like:

Drones are flying into weather data deserts. Can they be stopped?

Navigating COVID-19 shipping chaos: Finding capacity and servicing the customer

Need a warehouse? You may have to wait 9 months