October 19, 2016

18 E&O Loss Prevention Practices Every Transportation and Logistics Business Needs to Employ


Claims involving errors or omissions (E&O) made by employees can have a devastating effect on your company. Something as simple as a typographical error can cost you money. For that reason, it is important to establish guidelines for all employees to follow that will help mitigate the potential for situations that could result in a claim against your company. Below are some best practices recommendations your company should be exercising:

  1. Ensure all incoming correspondences (mail, express deliveries, efaxes, etc.) your office receives are date stamped to help complete the “paper trail.” It is also important to show when instructions were received and acted upon.
  2. Coach employees to bring potential and actual problems to management’s attention immediately. Encourage open communication on all levels so employees speak up early and to resolve problems quickly.
  3. Keep a properly executed power-of-attorney (POA) on file for all customers. The POA should incorporate your Terms & Conditions of Service.
  4. Utilize current Terms & Conditions of Service at all times on all documents your clients receive (including POA, credit agreement and invoice). If Terms and Conditions exist on the reverse of any of these documents, the front should contain a bold print reference to the terms and the liability limitations therein. Incorporate a hot link to your terms and conditions of service within your email signatures. Additionally, complete the venue clause at the end of the Terms and Conditions and have your clients sign and date it at the bottom. Incorporating all of these steps will improve your chances of invoking the liability limitations contained in the Terms and Conditions of Service in your defense.
  5. Make sure you have adequate insurance coverage encompassing all aspects of your business and the services you perform. Sample coverage to consider includes: Errors and Omissions, Cargo Legal Liability, Cargo Insurance, General Liability, Warehouse Legal or Bailee, Workers’ Compensation, Directors and Officers Liability and Cyber Liability.
  6. Maintain current certificates of insurance and licensing on all truckers, warehousemen, etc.
  7. Document everything, and send follow-up correspondence as often as possible. Employees should take file notes for all phone conversations with customers and agents/sub-contractors.
  8. Record all important dates in a consistent manner company-wide to ensure these important dates do not get missed in the event someone is out of the office or unavailable. Additionally, identify or flag shipments in advance which could be problematic to help ensure they receive priority treatment.
  9. Agreements between your company and other brokers and forwarders should be in writing. If possible, utilize indemnity or hold harmless agreements with your agents and independent contractors.
  10. Subscribe to on-line services and regulatory bodies to receive up-to-date information on laws, regulations, etc. Participate in local chapters of your industry organizations to keep up with trends.
  11. Monitor your receivables and conduct proper checks of all companies to whom you extend credit. If you are “fronting” duties for clients, ensure they are financially-sound.
  12. Do not perform services you are not familiar with or experienced enough to perform. Ensure you have the expertise before getting into a project.
  13. Supply your Terms and Conditions of Service to all parties in the transportation process.
  14. Always identify and understand the role(s) you are asked to undertake. If possible, your customers should sign a customer agreement setting out the duties, responsibilities and rights of both parties. In the agreement, reference your limitations of liability and Terms and Conditions of Service in bold, italic or underlined print.
  15. Never guarantee the outcome of a petition or protest with Customs and never guarantee delivery by a certain date.
  16. Ensure communication with clients is clear and unambiguous. Train employees to ask again for clarification if they are unsure what the client wants or has requested, or bring the issue to management’s attention.
  17. Do not allow contracts with clients or agents/sub contractors to be executed without the knowledge and approval of your management team and full review by your legal counsel.
  18. In the event of a claim, do not admit liability and contact your insurance agent immediately.

Mistakes will happen, and it is important that you have proper procedures and insurance coverage in place to fully protect your business. These are just a few recommendations to help mitigate an Error and Omission claim. Only you know what’s best for your business, but incorporating the above recommendations is sure to improve the processes you already have in place.

For more information about E&O Coverage and to find out if your company is adequately covered, contact your local Avalon Representative or send us an email.

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