Insurance and Liability 101: Protecting Cargo and Business Continuity

Every shipment, warehouse, and mode of transport carries risk—whether it’s damage, theft, spoilage, misrouting, or delays. For instance, cargo theft has risen 1,500% since the first quarter of 2021, with an average value of $200,000 per theft. The trend continued with a 36% increase in Q1 of 2025 versus Q1 of 2024. Regardless of the cause, cargo loss or liability claims can be financially devastating without the proper coverage.

Shippers often misunderstand what’s covered under standard agreements, leaving dangerous gaps in protection. To truly safeguard goods and maintain business continuity, logistics providers must build resilience into their operations, including cargo insurance and other liability policies as part of that strategy.

Understanding common policy types

Every policy in the supply chain covers a specific aspect, with its own limits and a clear party responsible, such as the shipper, carrier, warehouse partner, or business. To make sense of these differences, let’s break down key insurance types across the supply chain, what they cover, and who should secure them.

Cargo insurance

Cargo insurance protects goods while in transit, covering loss or damage from external causes. There are two primary types of cargo insurance: all-risk and named perils. All-risk policies provide broad coverage, while named perils policies protect only against risks specifically listed in the carrier contract. This insurance is typically the responsibility of the shipper, though in some cases, responsibility may shift to the buyer.

Warehouse legal liability insurance

Warehouse legal liability insurance protects inventory while it is in storage against loss or damage caused by the warehouse operator’s negligence, such as mishandling, climate control failure, or poor facility maintenance. This type of policy is the responsibility of the warehouse owner or 3PL logistics partner.

Carrier liability 

Carrier liability establishes a carrier’s legal responsibility for goods in transit, but it is usually capped by weight or dollar value. In the U.S., the Carmack Amendment governs interstate shipments and outlines both the carrier’s obligations and its exceptions. This liability coverage is the responsibility of the carrier, though shippers often purchase additional cargo insurance to fill gaps.

Freight forwarder or 3PL coverage

Freight forwarder or 3PL insurance primarily protects the provider from losses due to negligence, documentation errors, or mishandling. Shippers should understand that these policies do not guarantee full coverage of their cargo’s value. The freight forwarder or 3PL secures its liability coverage, but shippers remain responsible for obtaining separate cargo insurance to fully protect their goods.

Business interruption insurance for operational disruptions

Business interruption insurance compensates for lost income and operating expenses when a company’s operations are suspended due to a covered event, such as fire, storm damage, or equipment breakdown. This policy is the responsibility of the business owner, not the logistics provider.

Responsibility for insurance shifts across the supply chain. Shippers generally cover goods in transit, warehouse operators cover negligence during storage, carriers maintain limited liability, and businesses insure themselves against income disruptions. Coverage gaps most often occur when shippers assume a partner’s policy provides broader protection than it does, or when liability limits fall short of the cargo’s full value.

Common risk factors and scenarios

Despite your insurance strategy, disruptions will happen. Understanding how different types of coverage apply in real-world situations helps shippers and logistics partners avoid costly surprises.

Storm damages warehouse roof; who covers stored goods?

When a warehouse suffers physical damage, responsibility for the stored goods depends on the cause of loss and the coverage in place. Warehouse legal liability insurance may cover damage if negligence is involved, while the shipper’s own cargo or property insurance may need to respond to other perils. Clarifying roles and confirming coverage before storing goods is essential.

Truck overturns en route; carrier liability vs. shipper policy

If a truck accident results in cargo loss or damage, carrier liability is often capped by weight or value limits, leaving shippers undercompensated. In these cases, cargo insurance secured by the shipper is critical to cover the full value of the goods and bridge the gap between liability limits and actual losses.

Cold chain failure causes spoilage; who pays?

Temperature-sensitive products pose unique risks. If a refrigeration unit fails or procedures aren’t followed, determining responsibility can be complex. Warehouse or carrier liability may apply if negligence is proven, but shippers typically rely on cargo insurance to recover losses tied to spoilage.

Other risk-related considerations

Bills of Lading (BOLs) include Incoterms that spell out when responsibility for cargo shifts from one party to another. These terms clarify who is liable for loss or damage at each stage of the journey. Misunderstanding Incoterms can create coverage gaps, especially if ownership transfers before goods reach their destination. Reviewing the BOL carefully and aligning insurance policies accordingly is essential for avoiding disputes and ensuring continuous protection.

Modern logistics also faces digital threats that can have physical consequences. A cyberattack on a warehouse management system, for example, could interrupt operations and lead to loss of access or damage to goods. While traditional cargo and liability insurance focus on physical risks, businesses should assess how cyber risks intersect with insurance coverage and business continuity planning.

Best practices for shippers and 3PLs

Taking these proactive steps helps reduce risk, strengthen coverage, and improve claims outcomes when they occur.

• Review contracts for liability caps and exclusions: Many carrier and warehouse agreements include liability limits or exclusions that reduce coverage. Reviewing these terms upfront helps identify where exposure lies and enables proactive supplemental insurance acquisition.
• Require certificates of insurance and understand what they include: A certificate of insurance (COI) verifies that a partner carries coverage. However, it doesn’t always guarantee the scope of protection you might assume. Requesting and reviewing COIs ensures policies are current, adequate, and aligned with your business requirements.
• Maintain an updated inventory and value declaration: Accurate inventory records and declared values are essential for fair compensation in the event of a loss. Keeping this information up to date helps avoid disputes and supports a smooth claims process.
• Implement operational safeguards to prevent claims: Insurance is a safety net, but prevention is the first line of defense. Tools such as temperature monitoring, proper packaging, and facility security systems help reduce risk and demonstrate due diligence to insurers.
• Develop a risk management plan that includes both insurance and operational contingencies: A comprehensive risk management plan combines financial protection with operational strategies. By mapping out “what if” scenarios and integrating insurance with contingency plans, businesses can respond faster, minimize losses, and maintain continuity when disruptions occur.

Even with these best practices, risk can’t be eliminated. That’s why shippers benefit from working with logistics partners like WSI, who help identify vulnerabilities and strengthen continuity plans.

WSI’s role in risk mitigation and continuity

In addition to warehousing space or transportation services, WSI helps customers navigate insurance and liability considerations. By combining operational safeguards with transparent processes, WSI provides customers with greater confidence that their goods are protected throughout the supply chain.

Inventory transparency and documentation

Accurate records are critical for both preventing and resolving claims. WSI provides visibility into inventory status and detailed documentation that supports liability protection and smooth claim resolution.

Safety protocols and preventive measures

From climate control systems to secure handling procedures, WSI’s facilities are designed with risk reduction in mind. These safeguards not only protect goods in real time but also demonstrate compliance that insurers and customers value.

Facility-level compliance and secure storage

WSI maintains facilities to meet regulatory and safety standards, ensuring cargo is stored in environments that minimize the risk of damage or loss. This includes everything from fire suppression systems to controlled access protocols.

Communication during claims and disruptions

When issues arise, WSI acts quickly to communicate with customers and coordinate the claims process. Clear, proactive updates help minimize uncertainty and speed recovery.

WSI doesn’t sell insurance but acts as a strategic partner to help customers reduce exposure and strengthen continuity plans.

Looking ahead: protecting business continuity

Insurance provides a safety net, but business continuity depends on operational resilience. The future of logistics includes greater visibility, automation, and risk-sharing partnerships that help companies respond faster when disruptions occur. Organizations that prepare for “what if” scenarios reduce exposure and gain a competitive edge in an increasingly unpredictable environment. Risk can’t be eliminated, but it can be managed with the right combination of insurance and operational strategy.