Cold chain
Who is liable when the cold chain breaks
A reefer container arrives with an excursion logged somewhere over 72 hours at sea, and three parties each have a plausible story for why it was not their fault. Liability for a broken cold chain is not decided by who seems most responsible. It is decided by where the contract says risk sat when the break happened, what that contract caps the responsible party's liability at, and whether anyone can actually prove where the excursion occurred. This guide walks through how that allocation works in practice, what evidence a claim lives or dies on, and how one claim moves from alarm to settlement.
Key facts
- The Incoterm decides who was legally holding the risk when the break happened, but it does not decide who pays. That is a separate question answered by contract limits and insurance.
- A carrier's liability under the applicable transport convention is capped by weight, not by cargo value, so it typically covers a small fraction of a spoiled reefer load. Cargo insurance is what usually pays the real loss.
- Without placement-correct, calibrated logger data and clean handover readings at each transfer point, a claim fails on evidence even when the facts clearly favor you.
- Claim notice periods under carriage contracts are short, often measured in days, and missing the window can extinguish an otherwise valid claim regardless of the damage.
Start with the Incoterm, not the thermometer
Before asking who is liable, ask where risk had passed when the excursion happened. The Incoterm on your sales contract, not the bill of lading and not who happened to be driving the truck, fixes that point. Under an FOB or FCA sale, risk passes to the buyer once goods cross the ship's rail or are handed to the first carrier, so an excursion recorded after that point is the buyer's problem to chase, even though the seller packed the product. Under a CIF or CIP sale, the seller arranges carriage and insurance but risk still passes early, at loading, so the seller's exposure is the insurance placed, not the outcome of the voyage. DAP and DDP push risk transfer all the way to destination, which means a seller carrying those terms is exposed to a shipping-line failure it has no operational control over.
This matters because exporters and importers routinely misread which party is exposed based on who paid for the freight, not on where risk actually sat. Paying for carriage and insurance under CIP does not mean the seller remains liable if the goods arrive damaged, it means the seller was obligated to place a minimum level of cover, full stop. Whoever holds risk at the moment of the break is the party with standing to claim against the carrier and the one whose own cargo policy should respond. Get the Incoterm and the risk-transfer point right first. Everything downstream, including who calls the surveyor and who files the claim, follows from that one line in the sales contract.
The contract of carriage caps what the carrier owes
Once you know who held risk, the next question is what the carrier is contractually on the hook for, and the answer is almost always less than the cargo is worth. Ocean carriage under a bill of lading typically incorporates the Hague-Visby Rules or a national equivalent, which cap a carrier's liability per package or per kilogram, not by the cargo's commercial value. Air waybills fall under the Montreal Convention with a similar weight-based cap, and road haulage under the CMR Convention works the same way. In every case liability is a formula tied to weight, and for anything perishable or high-value per kilogram, that formula produces a number far below what the shipment is actually worth.
There is a second limit hiding behind the first: carriers can usually disclaim liability entirely for loss caused by the inherent nature of the goods, including natural deterioration, unless the shipper can show the carrier failed to maintain the contracted temperature or otherwise breached its duty of care. A reefer carrier that maintained the set point the whole voyage owes nothing even if the product still spoiled, because the contract covers maintaining the box, not guaranteeing the product's condition on arrival. Read the carrier's tariff conditions and the reefer clause on the bill of lading before a shipment, not after a claim.
The storage contract has its own, separate cap
A cold store's warehousing agreement is a different contract with its own liability ceiling, and it is usually just as far below cargo value as the carrier's. Standard warehousing terms, whether based on a national warehousemen's association standard form or the facility's own conditions, typically cap liability at a fixed amount per unit of weight or per pallet, and they routinely exclude consequential loss such as a lost sale or a contract cancellation entirely. Many also carve out loss caused by equipment breakdown, power failure, or an act outside the operator's reasonable control, which is precisely the scenario that causes most storage-side excursions.
The practical effect is that a cold store rarely makes a claimant whole even when it was clearly negligent, for example a compressor failure that went unmonitored overnight. What the storage contract's liability clause is actually useful for is establishing whether the facility breached its duty of care, which matters for the insurance claim that follows, since an insurer that can show the loss traces to a third party's negligence will often pursue subrogation against the warehouse afterward. Before signing a storage agreement, confirm the liability cap in writing, confirm whether alarm and generator backup are contractual obligations rather than marketing claims, and keep a copy of the clause on file, because it is the first document a surveyor asks for.
Cargo insurance is what usually pays
Given how low both the carrier's and the warehouse's caps sit, the party actually holding risk at the time of loss almost always recovers, if at all, from its own cargo insurance policy rather than from a liability claim against the transport chain. A policy written on Institute Cargo Clauses A cover, or an equivalent all-risks wording, responds to physical loss or damage from an external cause during the insured transit, and a well-written reefer policy extends warehouse-to-warehouse, covering the pre-carriage and post-discharge storage legs as well as the main voyage. Clauses B and C wordings, common on cheaper policies, name specific covered perils and can exclude refrigeration breakdown outright, the single most common way an exporter discovers, at the worst possible moment, that their policy never covered the risk they were exposed to.
Two exclusions catch cold-chain shippers specifically. Inherent vice, meaning loss caused by the natural characteristics of the goods rather than an external event, is excluded from most cargo policies by default, and insurers will argue a slow, gradual deterioration is inherent vice rather than a covered excursion unless the logger data proves otherwise. Refrigeration machinery breakdown is frequently a named exclusion or requires a specific endorsement, so confirm it is on the policy before, not after, a compressor fails. Because the policy is what actually pays the real value of the loss, it is worth more diligence than the freight rate gets, and the reefer-specific endorsements and warehouse-to-warehouse extension are the two lines to check on every renewal.
The evidence problem: proving where the break happened
None of the contracts above pay out on the basis of a temperature excursion alone. They pay on proof of where the break happened, because that determines which party's liability or which leg of the policy applies. This is where most claims that should succeed actually fail. A single logger at the door of a container tells you the door zone's temperature, not the pallet's core temperature three rows back, and a carrier or insurer will use that placement gap to argue the reading is not representative of the cargo that was actually damaged. Placement matters as much as calibration: loggers belong at the load's coldest and warmest likely points, typically the front, middle and rear of a container or the top and bottom of a pallet stack, with a placement diagram kept alongside the download.
Calibration is the second half of the problem. An uncalibrated or out-of-date logger produces a reading a counterparty can dismiss on a technicality regardless of how damning the graph looks, so loggers need a current calibration certificate that travels with the shipment's paperwork, not sit in a drawer at the packhouse. Claims that settle quickly have logger data that is unambiguous, placement-correct, and calibrated, cross-referenced against the reefer unit's own telemetry where available. Claims that drag on or die are the ones where a single logger, undocumented placement, or a data gap at exactly the point of excursion leaves room for every party to point at someone else.
Handover points, notice periods, and when to call a surveyor
Every point where custody changes hands is a moment to capture a temperature reading and get it acknowledged in writing, because that reading fixes liability to whoever held the goods immediately before it. That means a reading and a signature at stuffing, at gate-in to the terminal, at discharge, at gate-out from the destination terminal, and at delivery to the cold store or consignee. A clean reading at handover protects the party handing the goods over; a reading nobody captured protects nobody, since the gap gets attributed to whichever leg is easiest for the other side to blame.
Claim notice periods are short by design, because carriers and insurers want a claim raised while evidence is fresh and the goods can still be surveyed. Under most transport conventions, a claim for visible damage needs to be lodged at or near the moment of delivery, and a claim for damage not immediately visible on unloading typically needs written notice within days, not weeks. Missing that window can bar an otherwise valid claim outright regardless of how strong the temperature data is. As a working rule, call a surveyor the moment an excursion is confirmed and before the cargo is unloaded, reworked, or moved into a mixed batch, because an independent survey report taken at the point of discovery carries the most weight with an insurer weighing a disputed claim.
Excursion versus damage, and a worked example from alarm to settlement
A logged excursion is not the same thing as demonstrable product damage, and conflating the two is the fastest way to have a claim rejected. An excursion is a data point: the temperature left the set range for some duration. Damage is what you can show resulted from it, established through visual inspection, shelf-life testing, or a commodity-specific damage assessment such as core temperature mapping or a cutting test on produce. Insurers and carriers routinely pay an excursion that produced no provable damage nothing at all, and they are entitled to, because the policy and the carriage contract both respond to loss, not to a number on a graph.
Trace one claim through: a reefer of soft fruit sails under a CIF sale, so the buyer holds risk from loading and the seller's cargo policy was placed to protect that transfer. Mid-voyage the container's telemetry alarms for a six-hour excursion above the set point. On discharge the buyer's agent pulls the logger data, confirms placement at front, middle and rear with current calibration certificates, and calls a surveyor before unloading. The surveyor's report documents visible softening and a core temperature reading consistent with the excursion window, cross-referenced against the container's own telemetry log. The buyer files notice with the carrier within the short window the bill of lading specifies, preserving that claim even though the carrier's package limit will only cover a fraction of the loss, and separately notifies the cargo insurer with the survey report, the calibrated logger data, and the handover readings attached. The insurer settles against the sum insured because the evidence chain is unbroken from alarm to survey to notice, then separately pursues the carrier for its capped share through subrogation. That is what a claim surviving contact with three different liability regimes looks like: risk identified early, evidence captured at every handover, notice filed before the clock ran out.
Incoterms reference
Check where risk transferred before you decide who pays.
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