Warehouse-to-Warehouse Clause: Meaning, Example, History

What Is a Warehouse-to-Warehouse Clause?

A warehouse-to-warehouse clause is a provision in an insurance policy that provides coverage of cargo in transit from one warehouse to another. It covers cargo from the moment it leaves the origin warehouse until it arrives at the destination warehouse. Separate coverage is necessary to insure goods before and after the transit process.

Key Takeaways

• A warehouse-to-warehouse clause is a provision in an insurance policy associated with commercial insurance.
• Warehouse-to-warehouse clauses protect against the risk of loss from theft or damage to goods during shipment between warehouses.
• Large manufacturers typically pay for commercial insurance coverage that includes warehouse-to-warehouse clauses.

Understanding a Warehouse-to-Warehouse Clause

A warehouse-to-warehouse clause is commonly found in commercial insurance policies and covers the risks of shipping. Different types of insurance policies are available for shipping various goods from one destination to another. Automatic insurance may be included or offered for an additional cost, especially for retail shipping. However, for commercial shipping, automatic insurance may or may not be included and may not be sufficient.

Commercial businesses may opt for one-time coverage or have an open policy that covers all shipments over a specified period. When shipping is involved, commercial business partners generally have insurance coverage standards. In some cases, sellers take responsibility for insurance coverage, while in others, the buyer assumes the responsibility.

Insurance coverages are usually categorized by location, including warehouse, warehouse-to-warehouse, and destination. The warehouse-to-warehouse clause covers damages that occur during transit from a storage warehouse to a destination warehouse, but other clauses or protection plans are needed for coverage of storage or destination warehouses.

In a commercial shipping insurance policy, the insured pays a premium for coverage against damages. The warehouse-to-warehouse clause ensures policyholders are protected against the risk of loss for damaged goods during transit processing. The premium is relatively small compared to the actual costs of shipped goods.

Example of a Warehouse-to-Warehouse Clause

Commercial insurance for the transportation of goods is vital for supply chain departments managing the distribution of their own manufactured goods. In large business distribution, sellers often cover shipping costs and insurance. Warehouse-to-warehouse clauses are crucial because sellers may only provide insurance coverage for the transit period.

Let’s consider the case of a tire manufacturing company. The company produces tires in China and distributes them worldwide. The company would partner with an insurer to provide commercial insurance coverage for the tires during transit to different buyers.

With an insurance policy that includes a warehouse-to-warehouse clause, the tire company would pay a premium to insure the cost of any loss or damage that occurs between the manufacturer’s warehouse and the buyer’s warehouse. The transportation process may involve transporting the tires by truck from the manufacturer to a port, by boat from one port to another, and finally by train to the buyer’s warehouse.

History of Warehouse-to-Warehouse Clauses

The warehouse-to-warehouse clause was introduced in the late 19th century to cover land transport. Initially, there was no time limit on sea passage or the journey to the loading port. To incentivize cargo owners to promptly take delivery of goods, a time limit was imposed after discharge. During the Second World War, the time limits were extended to 60 days. Insurance companies further developed these policies and procedures, integrating them into broader offerings for commercial cargo insurance.

In the commercial insurance industry, a standardized set of terms known as Institute Cargo Clauses has been developed to provide a framework for commercial insurance policies involving the insurance of goods through land and water transportation. Institute Cargo Clauses are typically divided into classes A, B, or C and help establish uniformity for insurance policies.

Warehouse-to-warehouse clauses typically include requirements for insurance coverage from the time goods leave a specified warehouse until a specified termination, such as:

• Delivery to the client, final warehouse, or place of storage at a specified destination
• Delivery to an alternative or secondary warehouse or place of storage as designated
• 60 days after completion of shipment, covering the holding of undeliverable goods at a specified location or locations

Purpose of a Warehouse-to-Warehouse Clause

A warehouse-to-warehouse clause in a commercial insurance policy aims to protect the policyholder from losses incurred while goods are being shipped from one warehouse to another. It safeguards against the risks of loss or damage during transit processing.

Does a Warehouse-to-Warehouse Clause Cover Goods Before and After Arrival?

A warehouse-to-warehouse clause protects against losses incurred while goods are being shipped from one warehouse to another. However, it does not typically provide protection for losses at a storage warehouse or destination warehouse, which require a separate protection plan.

What Guarantee Does a Policyholder Have With a Warehouse-to-Warehouse Clause?

A policyholder with a warehouse-to-warehouse clause is guaranteed that goods will arrive undamaged at the intended destination, or the cost of lost or damaged goods will be covered.

The Bottom Line

A warehouse-to-warehouse clause is frequently used in commercial shipping to protect against losses during the transfer of products from one warehouse to another, such as from a storage facility to another destination. However, it does not address the risk of loss before or after shipment, focusing solely on the risk during transit.