This is another short clause. So there is little excuse for me being so slow at dealing with it except that I've been away working (though not very effectively) on a book. Yes, the point of the contract is to produce a book. It's easy to forget that and get side-tracked.
8. Responsibility for Damage or Loss
The Publishers shall not be held responsible for any damage to or loss of the Work, including illustratios or any other material, while in their custody or in in course of production or in transit whether resulting from negligence or from any other cause whatsoever.
If you are an illustrator, this means DON'T, under absolutely any circumstances, send your only copy of original artwork, because if they lose it you're screwed. There may be no alternative but to let them have the originals, but at least keep a very good quality colour photocopy so that the book is not completely doomed if they do lose or spill coffee on the pictures. Obviously you should either hand-deliver your pictures or send them by the most secure mail system you can find, such as kevlar-clad delivery boy guarded by polar bears.
If you are just sending your MS, there isn't really anything to lose or destroy. If you are sending paper printout, because your publisher is still lurking the age of the dinosaurs and insisted on it, they could lose that, but it doesn't cost much to print and post another copy. I am assuming that there is no such thing as a person who submits a typescript (and reads this blog), so the days when the publisher could lose the only copy of the text are, thankfully, long gone.
If you send in your MS not by email but on removable media, there is a chance they could lose a memory stick, I suppose, but as memory sticks are cheap this shouldn't worry you too much. The most significant threat for most writers is that you send reference for art work (pictures the illustrator will refer to) and the publisher loses that. I've lent books to publishers on occasion, and of course they are books that the publisher can't get hold of easily - out of print or rare books. When I've done this, I've handed them over in a meeting and have (eventually) got them back. As this is the main danger, and you can reasonably argue that it does not constitute part of 'the Work', you can probably let this clause stand.
If you are an illustrator, I'd suggest you try to get this clause changed, at the very least to cross out the reference to negligence. You don't really want them to be able to get you to redraw an illustration for free because they spilt gin on it, let the art director's cat sit on it, allowed a toddler to 'improve' it, or scrunched it under their wheelie office chair.