Logistics: Bite-Size Insights

In this edition of Logistics: Bite-Size Insights, we consider the risks involved in transporting fine art, review liability considerations for claims presented in contract, tort and bailment, and provide an update on the progress of the Freight Crime Bill.

Art on the move: legal considerations in fine art transport

Transporting art brings with it a variety of risks – in addition to the high theft risk, a mere bump on the road or lost container can cost a haulier or insurer millions. The growing demand for fine art transport, now a multi-billion dollar industry, attracts an increased risk of damage. The transportation of fine art demands a high standard of care due to their fragility and often high value. Types of claims can include transit damage, water or heat damage and mis-declared values.

The services that hauliers are prepared to provide to their customers has also evolved. What was once a pure transit service has developed into a full one-stop service which may include packing and unpacking, storage and even hanging or displaying artworks in galleries. This presents increased risks – do hauliers really have the skills to safely hang a valuable piece of art?

Fine art can include a variety of mediums such as paintings, sculptures, manuscripts, books and tapestries, all of which have different risk profiles when being transported. Precise categorisation of art objects is important in order to attract the correct liability under an insurance policy. Policies will also need to be adapted to cover any ancillary services provided; transit presents different risks to warehousing, for example.

Unless a specialised haulier, there is a risk that boiler plate templates may not adequately consider the additional risks that transporting art objects entails. Further, hauliers may be asked to move or handle certain art objects which could require specialised contracting and equipment.

What can hauliers do to minimise the risks involved in transporting fine art?

Scope of services clauses may be used, setting out, for example, whether the services include packing, storage, escort or transit. Further, limitations of liability clauses may also be used to limit contractual risks by including special handling clauses and declared values in contracts. It is also important to consider when those limits of liability apply. For example, hauliers will need to ensure that the limits for transit equally apply to ancillary services. Therefore, the definition of ‘transit’ (and when that transit ends) will need to be considered very carefully.

Hauliers and insurers may also seek to insist upon condition reports being prepared before handling any art, and upon delivery. Vetting subcontractors, training handlers and including climate control requirements are also excellent methods of minimising risks of art being damaged or stolen in transit. With investment in fine art becoming increasingly popular, a thorough review of policy wordings could assist in limiting claims associated with transit risks.

Contacts: Shaan Burton and Nina Lala

What terms are in play when considering the interrelation between contract, tort and bailment

We consider here that age old question – what is my liability? It is worth remembering that it is possible for a commercial relationship to give rise to several causes of action. A contract for the storage or carriage of goods may give rise to relationships in contract, tort and bailment. Frequently, all three will be alleged in any legal proceedings. However, there are advantages in bringing claims under one head or another.

If a claim is brought in tort, there are limits to a party’s liability for the actions of employees and subcontractors. If a claim is presented to an employer arising from the actions of an employee, this will succeed only if the employee is acting in the ordinary course of his employment. The employer will not be liable if the actions of the employee are considered to be a “frolic of his own” and outside the ordinary course of employment. This can mean that it is difficult to claim in tort against employers for the criminal acts of employees.

That having been said, where the obligation upon the employer is to safeguard the goods (such as might be the case in a warehouse contract or a contract for the carriage of goods) and an employee employed for that purpose steals the goods, it may be the case that the employer is liable.

A good example of this is the case of Brinks v Igrox [2010] where Brinks was responsible for shipping a consignment of silver to India. Igrox was employed by the port authority to fumigate the pallets upon which the silver was shipped. Their employee (employed to carry out the fumigation in question) entered the container and stole a large number of the silver bars. Igrox denied liability alleging that the employee was not acting in the course of his employment. However, the Court of Appeal considered that there was sufficient connection between the employment and the theft to hold the employer vicariously liable.

However, in tort, an employer will rarely be vicariously liable for the negligence of independent subcontractors. Any such claim would be directed at the subcontractor itself.

A claim in bailment or contract will frequently not encounter such difficulties. If an employee steals the goods, the contract or duties in bailment will be breached and a liability arises.

A claim in tort and in bailment requires the claimant to have a proprietary interest in the goods. If it does not, then its loss is purely economic and irrecoverable. It may, however, be the case that the claimant was contractually obliged to purchase the goods and (although lacking legal title) the claimant may be the party which has suffered the loss. Notwithstanding this, the lack of proprietary interest in the goods may defeat a claim in tort or bailment. A claim in contract, however, does not have any such requirement - suffering loss is sufficient regardless of where title to the goods lay at the time.

Furthermore, the damages recoverable for a claim in contract are frequently (although not always) more generous. In particular, the ability to claim for the loss of anticipated profits can be a significant advantage. Moreover, if a claim is presented in tort, the concept of contributory negligence can significantly reduce the claim.

There are several technical requirements to fulfil before a claim in contract can succeed. If these are not clearly established at the outset, an alternative claim in tort or bailment can be useful.

Further, a contract (and indeed a bailment relationship) may contain contractual terms which are unfavourable. As such, a claim against a third party in tort may be a more attractive option. With the Brinks v Igrox matter, Brinks had the option of pursuing the contractual carrier responsible for employing the fumigators. However, that party contracted on standard terms which limited liability to £100. Although a claim in contract would have been much easier (in terms of not having to establish title, strict liability for the actions of employees and subcontractors) the damages recoverable would have been so low as to make a claim pointless.

A handy reminder for insurers and insureds to consider how and on what basis claims are presented and defended. The result could be quite different depending on whether we are talking about a claim in tort, bailment or contract. This is particularly so where a liability may be significantly limited by industry terms, such as RHA or BIFA.

Contact: Shaan Burton

Freight Crime Bill - update

The Second reading of this Bill is due to take place on Friday 12 September.

In advance of the Second reading, written questions have been tabled in Parliament.

On 29 August, Clive James (Liberal Democrat) asked ‘… the Secretary of State for the Home Department, what steps she is taking to tackle road freight crime’ and Sarah Hall (Labour) asked ‘… the Secretary of State for Transport, what assessment her Department has made of the potential impact of freight crime on the economy since 2020.'

Answers to both questions remain outstanding, and we will continue to track further developments.

Contacts: Shaan Burton and Joanna Manthorpe