As consumers frequently turn to e-commerce for their purchasing products (a trend greatly accelerated by the COVID-19 pandemic), retailers of all sizes have adopted the “last mile” business model to efficiently deliver their goods to their customers. This development has introduced the “last mile carrier” to the already-growing list of potential litigation targets where claimants sustain injuries or property damage as a consequence of “last-mile” deliveries and services. Economic forecasts expect US ecommerce sales to cross $1 trillion for the first time in 2022, which, prior to the pandemic, was not forecasted until 2024. The need and use for last-mile delivery providers has increased. Naturally, this increases liability exposure to all companies related to transportation and last-mile services. When trucking companies or third-party logistics providers expand their services or outsource the last-mile deliveries, there are numerous risks to consider.
As with all commercial transportation, the possibility is always there for all types of accidents, from catastrophic accidents to fender benders. Bodily injury and property damage claims are routine. With last-mile drivers performing other related services, such as product installation, more atypical claims can also occur. Aside from the claims themselves, reputational harm is ever present with the publicity of litigation.
What is “Last Mile” Service?
In simplest terms, “last mile” service is when the consumer good is physically delivered the “last mile” from the shipper to the consumer. In a typical last mile delivery, the consumer purchases a product from the merchant, and the merchant—instead of performing the delivery itself—contracts with a transportation company (i.e. a motor carrier or third-party logistics provider) to manage the delivery. The transportation company then contracts with a last-mile carrier to pick up the product from the merchant’s store or distribution center and deliver it to the consumer.
Last Mile Claim Exposure
The most obvious risk is an accident causing personal injury during last mile delivery. While most sophisticated motor carriers and their insurers know the importance of immediately responding to serious and catastrophic accidents (Weber Gallagher’s 24-Hour Rapid Response Team routinely does this for clients in Pennsylvania, New Jersey, New York and Delaware), the last mile carrier does not typically possess the resources to perform these services. Last mile carriers deliver in residential areas where large trucks face additional challenges beyond those on the highways. Thus, in addition to collisions causing personal injury, the risk of property damage during these tight deliveries is significantly increased.
In addition, since drivers performing last-mile deliveries are also installing products such as appliances and other durable goods, defective installations may lead to personal injury claims. Those same drivers may also sustain work-related injuries not otherwise common to truck drivers. Improper installation can also lead to fire-related claims. Our commercial transportation department is presently defending a motor carrier in a last mile claim where a dryer fire allegedly resulting from an improper installation resulted in a house fire. Assault claims are also a risk associated with last mile drivers.
Managing Last Mile Risk
With the expansion of traditional services comes an increased risk of liability. Trucking companies need to be aware of the potential claims they face in providing these new services, and what protections they have against such claims. There are, fortunately, ways to mitigate these risks.
The most effective way to control risk in last mile claims is through effective contracting. Typically, the motor carrier contracts with the retailer (i.e., the “store”) wherein the motor carrier agrees to defend and indemnify the producer in last-mile claims. Thus, when a consumer sues the retailer from which they purchased the product that was delivered, the retailer tenders the claim to the motor carrier to defend and indemnify it. However, the motor carrier did not actually perform the last mile delivery. Thus, the motor carrier must effectively contract with the last mile carrier to ensure that the claim is then tendered to the last mile carrier so the last mile carrier (or, more likely, its insurer) defends both the motor carrier and the retailer. This can only be done by contract. Motor carriers cannot venture into the last mile universe without an enforceable contract that will effectively transfer risk down to the last mile carrier. Weber Gallagher’s Commercial Transportation Team understands these contracts and has put together programs for carriers and service providers that transfer risk to where it properly belongs.
Once the contract with the last mile carrier is signed, however, the motor carrier cannot simply file the contract away and hope that the last mile carrier honors the contract terms. In many instances, the last mile carrier’s insurance lapses, or is canceled, or its motor carrier safety fitness rating is downgraded. The contracting carrier must not only vet the last mile carrier when onboarding it, the contracting carrier must devote resources to ensuring that the last mile carrier remains compliant with the contract during the entirety of its term. Otherwise, the contracting carrier will be left “holding the bag” when defending the claim. Risk transfer, by contract, is the single most effective way to manage last mile risk. However, it must be done correctly.
When a last mile service results in a serious accident, the contracting carrier cannot assume that the last mile carrier or its insurer will devote the necessary resources to immediately investigate the accident. Taking the attitude that “it’s not our problem—it’s the last mile carrier’s problem” is a dangerous and risky proposition. When a serious accident occurs in a last mile delivery, the contracting carrier must respond immediately to gather information, data, images, statements, and knowledge to properly evaluate and, if necessary, defend the lawsuit when it eventually gets filed. As noted, our Commercial Transportation Team provides this service across the Mid-Atlantic region.
Another issue for trucking companies to consider is whether liability insurance would apply to such claims. Trucking companies typically obtain liability insurance under commercial auto policies, which generally provide liability coverage only for those claims that arise from the ownership, maintenance or use of a covered motor vehicle. Claims that arise out of the negligence of a driver in delivering or installing a product may not be considered to arise out of the ownership, maintenance or use of a covered auto, and insurance companies may deny coverage under commercial auto policies.
Another option for insurance coverage for these claims may exist through commercial general liability (“CGL”) policies. Such policies provide coverage for claims of bodily injury or property damage that arise out of an “occurrence” or accident. As discussed, trucking companies can face claims of bodily injury resulting from negligently delivered products; however, trucking companies may also face claims of bodily injury resulting from negligently installed products. An improperly installed kitchen appliance or an improperly assembled item of furniture may result in bodily injury to an individual, thereby exposing the trucking company to another type of claim for bodily injury or a claim for property damage.
Trucking companies providing last mile services should be aware that the amount of coverage provided by a CGL policy is likely very limited. CGL policies contain several exclusions that may apply. For example, there are “Expected or Intended Injury” exclusions, “Damage to Property and Damage to Your Product” exclusions and “Employer’s Liability” exclusions, which could result in a denial of coverage in a last mile claim. Before trucking companies make the decision to expand their services to include last-mile deliveries, they must consider the level of risk exposure associated with this type of service. Adding last-mile delivery to a trucking company’s offered services exposes trucking companies to additional bodily injury and property damage claims. As the holidays approach and e-commerce continues to expand, the risk will continue to grow. Trucking companies must review their coverage to avoid such risks.
Even the best risk management procedures will not negate liability exposure for the commercial transportation industry related to last-mile delivery services. The attorneys at Weber Gallagher are experienced litigators in all commercial transportation matters, including those related to last-mile services.
 Weber Gallagher’s 24-Hour Immediate Response Team provides emergency on-site services
Chief Marketing and Business Development Officer