Managing Risk Issues for Over-The-Threshold, Last Mile Deliveries

By Renee Paul

In today’s brave new technology-driven world, instant gratification is everyone’s expectation and demand, whether it’s access to information and entertainment or shopping and getting those must-have products delivered…immediately. All you have to do is look at Amazon to see the transformative impact.

There is another side to that coin, though, at least when it comes to the delivery aspect: The risks and liabilities in getting the package from a warehouse or storage facility to its final destination – or the “last mile.” Same-day delivery speaks to our expectations of immediacy: Some 25% of consumers will pay more for fast service; same-day delivery is expected to command a 25% market share by 2025, growing in value from last year’s $1.35 billion.

A particular concern about this environment is when the last foot of that last mile requires a step across the threshold of the customer’s home to install the new appliance or set up new furniture. It makes the risk exposure of same-day deliveries expand considerably. The gas dryer is hooked up wrong and the customer’s house explodes. A malfunctioning hose on the new refrigerator floods the kitchen. An over-sized couch shoehorned through a door damages the wall.

It’s as critical to manage the liability of the drivers who must cross those thresholds as the fleet operators or freight brokers who employ or contract with them. New legal challenges over the definition of employee or contractor are making the on-boarding, hiring and contracting process critical to the motor carrier or freight broker business model, not to mention compliance with state and federal employment rules.

In this environment, shippers are demanding to be held harmless by motor carriers and freight brokers who deliver and install. And if freight brokers use a contractor to perform a delivery and installation, the contractor coverage contracts must include “hold harmless” clauses for dealings with both consumers and shippers.

More importantly, there must be confidence that these drivers really can be held harmless. Unlike their dock-to-dock counterparts, over-threshold drivers go into homes. Their dealings with the public make it imperative to go beyond merely checking on driving records to dig deep into their personal histories, including credit scores and background checks, and conducting drug screenings, too. These critical risk controls by the freight broker over who is hired or contract with must be completed in an effective and fast on-boarding process.

Both the motor carrier and the driver or freight broker and contractor also must have general liability insurance that goes beyond the general trucking exposure. What’s often overlooked for last mile/over-the-threshold deliveries is an endorsement to that policy for completed products and operations, no exclusions for water damage and additional coverage for “your work.” That offers extra protection against malfunctions of the installed product, or claims of failure in the performance of the delivery that the customer might lay at both the carrier and freight broker’s door.

As the transportation industry responds to the growing demand for last mile and over-the-threshold deliveries, it becomes increasingly important to analyze contracts carefully to ensure all parties are covered, that on-boarding employees or contractors is done completely and that risk is transferred in the contract and insurance procurement process. Failing to address gaps in protection can have costly consequences.

Contact your HUB Transportation Specialist for information on insurance solutions to integrate into Hub onboarding and insurance procurement solutions to transfer your risk.