Good neighbor agreements – the risk implications

The benefits of good neighbor agreements are well recognised and utilised by cargo handling operators, and others in the supply chain to successful effect. Sharing infrequently used equipment gives greater flexibility in operations has significant cost savings. Usually reciprocal arrangements, they are not always formally outlined in well-defined contracts.

“In such circumstances the casual nature of the arrangement, though often workable and agreeable to both parties, can lead to potential risks where liability and responsibility in the unfortunate event of an incident or breakdown may not be clear,” says TT’s Mike Yarwood. “It is these circumstances that we are seeking to help operators avoid with our recently published ‘Risk Byte: Good neighbour agreements’.”

This is the first in a series of ‘Risk Bytes’ which TT is providing to its membership and those in the global supply chain. They are designed to provide a snapshot of the risks associated with day-to-day operating risks that may not be recognised or, if they are, not sufficiently covered by the relevant insurance policies. ‘Risk Bytes’ are aimed at simplifying complex risk issues by providing easily digestible information and guidance.

As regards good neighbour agreements the primary risk, explains Yarwood, "Is in the event of the equipment or machine being lost or damaged during the period of the loanleading to financial exposure for the owner. In addition, this might severely impact business operations and cancel out any benefit gained from the arrangement, and sev

This first topic of ‘Risk Bytes’ outlines provisions that should be made in a formalised written contract, giving clarity on where the risk and liability rests during the operation of any shared asset and gives the opportunity for thorough due diligence to be carried out before the agreement is signed.

Yarwood concludes, “Of course, we recommend checks on financial stability and whether sufficient and appropriate insurance cover is in place. But we are also offering advice on adequate staff training, health and safety provision and include a readily recognised case study of a typical asset sharing operation.”