ELVIS AG Warns of Liability Risks Due to Gas Crisis

The European Cargo Alliance of International Forwarders (ELVIS) AG warns operators of temperature-controlled storage facilities about immense liability risks that could arise from damages related to the energy crisis. Companies are urgently advised to review and, if necessary, adjust their insurance coverage. Furthermore, the alliance advises operators of refrigerated warehouses to jointly establish with their clients how to handle the goods if their cooling cannot be maintained due to a lack of energy.

(Alzenau) “The risk of supply shortages of liquefied gas increases with each passing day of war. Since the cooling of many warehouses relies on this energy source, operators face massive problems and cost risks,” says Nikolja Grabowski, CEO of ELVIS AG, referring to current studies. Without Russian gas supplies and without a reduction in demand, Germany could face a shortfall of about 210 terawatt-hours (TWh) of gas by the end of the heating period at the end of May 2023. In this case, gas consumption would need to decrease by around 25 percent. The consequence would be load shedding, which, according to the applicable alert level of the emergency gas plan, would first affect the industry and thus also the operators of temperature-controlled warehouses.

If, for example, the cooling chain were interrupted, the affected goods would quickly become unusable. The question arises as to who must bear the resulting damage. The answer is: According to the liability without fault principle, the warehouse keeper is generally liable, unless the damage would have occurred even with the diligence of a prudent businessman. However, proving this is likely to be difficult. Both the federal government and gas suppliers have repeatedly informed about possible supply shortages in the past. An so-called “ideal” warehouse keeper, it could be argued, had the opportunity to prepare for the situation, explore alternatives, and implement solutions to prevent impending damage.

“In this context, one should not rely too heavily on the protection of a liability insurance policy,” warns Grabowski. Whether insurers will cover any damages generally depends on the individual case and which asserted breaches of obligations or exclusions apply. Grabowski: “Regarding insurance coverage, there are currently many uncertainties that complicate the situation for policyholders.”

Therefore, ELVIS urgently advises operators of temperature-controlled warehouses to take immediate action to avoid potential damages and to best prevent possible liability. Specifically, the alliance recommends:

• Informing depositors about the impending cooling failure and obtaining instructions on how to handle the stored goods in the event of a supply shortage.
• Agreeing on a contractual liability exclusion in the event that the cooling chain is interrupted due to a disruption in gas supply.
• Examining and possibly retrofitting an alternative energy supply for cooling and heating.
• Considering and carrying out relocations while maintaining the cooling chains.
• Stockpiling sufficient gas to bridge supply shortages (for example, through additional tanks).
• Preparing an emergency plan to mitigate the consequences of the supply shortage.
• It should also be noted that a gas supply shortage can have implications for other insurance sectors. For example, business interruption insurance and machinery breakdown insurance should be mentioned here.

Photo: © ELVIS AG / Image caption: Nikolja Grabowski, CEO of ELVIS AG