However, as the cold storage industry expands, it faces a complex liability risk due to strict priorities around public and employee safety, as well as the intricate processes of storage and transportation.
The UK cold chain sector has emerged as the fastest-growing segment in the country’s warehousing and storage market, which generated approximately £56.49 billion in revenue in 2024 and is projected to reach an estimated £89.79 billion by 20301.
To successfully leverage the industry’s growth potential and build resilience, it will be necessary to navigate risks and uncertainties. A realistic appraisal of liability exposures specific to cold storage facilities and effective risk management is paramount for operational success and long-term sustainability.
Key liability threats for cold storage warehousing
The NHS spending on drugs rose to nearly £19 billion in 2022-2023, over 8% more than in the previous year, with drug wastage caused by poor temperature management a significant driver of the inflated costs2.
Key risk areas for consideration in cold storage warehousing are:
Temperature control
The fundamental premise of cold storage is to ensure the integrity of perishable goods by maintaining precise temperatures in the facility. Any deviation from this could lead to product spoilage, financial losses and impact client relationships. For businesses that rely heavily on one major customer, such a failure could also affect future revenue.
Ben Davies, Account Director, Haulage, Gallagher, says, “Clients should consider insurance extensions for losses from key suppliers or customers. This is particularly important for businesses that rely on a major supplier or customer that accounts for over half of their turnover. If that business has a loss, then our client would also be disproportionately impacted.”
Causes of temperature fluctuations include equipment malfunction or disruption of the power supply. Therefore, continuous temperature monitoring, regular equipment maintenance and reliable power supplies are essential to maintaining the right temperature conditions.
State of power in the cold chain sector: Can innovative solutions help moderate soaring costs?
A major concern for the cold chain sector is the significant increase in energy costs along with rising demand. This raises the question: Will investment in renewable energy and energy-efficient solutions help to mitigate these rising costs3?
Hygiene and contamination
The integrity of stored goods can be impacted by cross-contamination within the storage environment. Therefore, regular cleaning, proper sanitation, segregation and hygiene practices should be implemented across the facility to mitigate the liability for contamination.
Staff and employees should receive regular training and adhere to strict hygiene practices, with those rules extending to onsite visitors.
Safety and security
Anyone on cold storage premises must use the necessary protection and security gear as they work with heavy-duty equipment and may be operating in sub-zero temperatures for several hours at a time.
Special care needs to be taken to ensure no harm or accidents are caused on the floor of the facility. Plans must be in place to prevent and mitigate risks to individuals and businesses due to security breaches or natural disasters impacting the facility.
Regulatory compliance
Non-compliance with regulatory standards can result in regulatory fines, penalties and potential lawsuits. Compliance obligations can range from health and safety to handling and logistics. Ensuring that the warehouse exceeds, or at the very least meets, all these standards is crucial for reducing liability.
Safeguarding your people and business: Insurance considerations
Outlined below are the key liability categories in cold chain warehousing, each presenting unique challenges and potential legal implications for the industry. Working with broker and insurer partners, entities in the cold chain sector can ensure they have adequate coverage for these liabilities to protect their operations.
- Product liability: Spoilage or contamination of perishable goods and the potential legal implications if these goods cause harm to consumers
- Premises liability: Accidents, injuries or health issues affecting employees, visitors and contractors due to inadequate safety measures, or the challenging working conditions in cold environments
- Contractual liability: Inability to adhere to contract clauses outlining responsibilities to prevent disputes with suppliers and customers, with potential penalties for non-compliance.
- Directors’ and officers’ (D&O) liability: Alleged wrongful acts by the company’s directors and officers in their managerial capacity
- Employment practices liability (EPL): Employment-related disputes and claims, typically wrongful termination, discrimination, harassment or retaliation
- Fiduciary liability: Mismanagement of employee benefit plans, such as retirement or health insurance
- Crime and fraud liability: Internal theft, fraud or embezzlement by employees or management
- Regulatory and compliance liability: Failure to comply with all relevant regulations and industry standards resulting in fines, penalties and lawsuits
- Operational liability: Issues arising from equipment malfunctions, power failures or other operational disruptions impacting the integrity of stored goods
- Environmental liability: Careless handling and disposal of refrigerants and other hazardous materials that cause potential environmental damage
- Security liability: Security compromises by theft, vandalism or any form of unauthorised access to the warehouse, leading to loss or damage of stored goods
- Cyber liability: Exposure to different forms of cyber-attacks and data breaches due to increasing adoption of technology in warehouse management
Ensure you have appropriate insurance coverage, displaying proactive risk management and business confidence to insurers and other stakeholders.
Building risk resilience: Stay well-advised
Today, liability risks are shifting within the cold chain sector against the backdrop of evolving global uncertainties, geopolitical events, workforce patterns, technological advancement and climate change. Many of these evolving threats are not factored into traditional insurance programmes.
With that in mind, making well-informed insurance decisions is key. Engaging with specialists who understand the cold chain industry, as well as the broader dynamics of global and local threats, can help you move forward with confidence.
The right partners can ensure you have clearly defined contractual terms in place, implementing robust security measures, conducting regular audits and contingency planning to mitigate risks.
As a proud member of the Cold Chain Federation, Gallagher is committed to delivering advanced risk advice to assist in appropriate insurance placement and extensions. We see this as crucial to continuing the drive for excellence and innovation in the cold chain industry in the coming years. Contact a Gallagher representative for a personalised review of your insurance considerations.
