Marine Insurance

Marine insurance Marine insurance  covers the loss or damage of ships, cargo, terminals, and any transport or cargo by which property is transferred, acquired, or held between the points of origin and final destination.

Cargo insurance—discussed here—is a sub-branch of marine insurance, though Marine also includes Onshore and Offshore exposed property container terminals, ports, oil platforms,  pipelines!" #ull" Marine Casualty" and Marine Marine $iability.

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[edit edit]] Origins of formal marine insurance Maritime insurance was the earliest well-developed %ind of insurance insurance,, with origins in the &ree% and 'oman maritime loan. (eparate marine insurance contracts were developed in &enoa and other )talian cities in the fourteenth century and spread to northern *urope. +remiums varied with intuitive estimates of the variable ris% from seasons and pirates. pirates. /he modern origins of marine insurance law in *nglish law were in the law merchant, merchant, with the establishment in *ngland in 01 of a speciali2ed chamber of assurance separate from the other Courts. $ord Mansfield, Mansfield, $ord Chief 3ustice in 3ustice in the mid-eighteenth century, began the merging of law merchant and common law principles. law principles. /he establishment of $loyd4s of $ondon, $ondon, competitor insurance companies, a developing infrastructure of specialists such as shipbro%ers shipbro%ers,, admiralty lawyers, and ban%ers!, and the growth of the 5ritish *mpire gave *mpire gave *nglish law a prominence in this area which it largely maintains and forms the basis of almost all modern practice. /he growth of the $ondon insurance mar%et led to the standardi2ation of policies and 6udicial  precedent further  precedent  further developed marine insurance law. )n 710 the Marine )nsurance 8ct was passed which codified codified the  the previous common law" it is both an extremely thorough and concise piece of wor%. 8lthough the title of the 8ct 8ct refers to marine insurance, the general principles p rinciples have been applied to all non-life insurance. )n the 7th century, $loyd4s and the )nstitute of $ondon 9nderwriters a grouping of $ondon company insurers! developed between them standardi2ed clauses for the use of marine insurance, and these have been maintained since. /hese are %nown as the )nstitute Clauses because the )nstitute covered the cost of their publication. :ithin :ithin the overall guidance of o f the Marine )nsurance 8ct and the )nstitute Clauses parties retain a considerable freedom to contract between themselves. Marine insurance is the oldest type of insurance. Out of it grew non-marine insurance and reinsurance.. )t traditionally formed the ma6ority of business underwritten at $loyd4s. ;owadays, reinsurance

Marine insurance is often grouped with 8viation 8viation and /ransit i.e. cargo! ris%s, and in this form is %nown by the acronym 4M8/4. 4M8/4.

[edit edit]] Practice /he Marine )nsurance 8ct includes, as a schedule, a standard policy %nown as the 4(& form4!, which parties were at liberty to use if they wished. 5ecause each term in the policy had been tested through at least two centuries of 6udicial precedent, the policy was extremely thorough. #owever, it was also expressed in rather archaic terms. )n 77, the $ondon mar%et produced a new standard policy wording %nown as the M8' 7 form and using the )nstitute Clauses. /he M8' form is simply a general statement of insurance" the )nstitute Clauses are used to set out the detail of the insurance cover. )n practice, the policy docu ment usually consists of the M8' form used as a cover, with the Clauses stapled to the inside. /ypically each clause will be stamped, with the stamp overlapping both onto the inside cover and to other clauses" this practice is used to avoid the substitution or removal of clauses. 5ecause marine insurance is typically underwritten on a subscription basis, the M8' form  begins< We, the Underwriters, agree to bind ourselves each for his own part and not one for seve vera rall and not joint" i.e. /he another [...]. )n legal terms, liability under the policy is se underwriters are all liable together, but only for their share or proportion of the ris%. )f one underwriter should default, the remainder are not liable to pic% his share of the claim. /ypically, marine insurance is split between the vessels and the cargo. )nsurance of the vessels is /ypically, generally %nown as 4#ull and Machinery4 #=M!. 8 more restricted form of cover is 4/otal 4/otal $oss Only4 /$O!, generally used as a reinsurance, which only covers the total loss of the vessel and not any partial loss. Cover may be on either a 4voyage4 or 4time4 basis. /he 4voyage4 4vo yage4 basis covers transit between the  ports set out in the policy" the 4time4 basis covers a period of time, time, typically one year, and is more common.

[edit edit]] Protection and indemnity Main article< +rotection and indemnity insurance 8 marine policy typically covered only three-quarter of the insured4s liabilities towards third  parties. /he typical liabilities liabilities arise in respect of collision with another ship, %nown as 4running down4 collision with a fixed ob6ect is an 4allision4!, and wrec% removal a wrec% may serve to  bloc% a harbour, for example!. )n the 7th century, shipowners banded together in mutual underwriting clubs %nown clubs %nown as +rotection and )ndemnity Clubs +=)!, Clubs +=)!, to insure the remaining one-quarter liability amongst themselves. /hese Clubs are still in existence today and have become the model for other speciali2ed and noncommercial marine and non-marine n on-marine mutuals, for example in relation to oil  pollution and nuclear ris%s.

Marine insurance is often grouped with 8viation 8viation and /ransit i.e. cargo! ris%s, and in this form is %nown by the acronym 4M8/4. 4M8/4.

[edit edit]] Practice /he Marine )nsurance 8ct includes, as a schedule, a standard policy %nown as the 4(& form4!, which parties were at liberty to use if they wished. 5ecause each term in the policy had been tested through at least two centuries of 6udicial precedent, the policy was extremely thorough. #owever, it was also expressed in rather archaic terms. )n 77, the $ondon mar%et produced a new standard policy wording %nown as the M8' 7 form and using the )nstitute Clauses. /he M8' form is simply a general statement of insurance" the )nstitute Clauses are used to set out the detail of the insurance cover. )n practice, the policy docu ment usually consists of the M8' form used as a cover, with the Clauses stapled to the inside. /ypically each clause will be stamped, with the stamp overlapping both onto the inside cover and to other clauses" this practice is used to avoid the substitution or removal of clauses. 5ecause marine insurance is typically underwritten on a subscription basis, the M8' form  begins< We, the Underwriters, agree to bind ourselves each for his own part and not one for seve vera rall and not joint" i.e. /he another [...]. )n legal terms, liability under the policy is se underwriters are all liable together, but only for their share or proportion of the ris%. )f one underwriter should default, the remainder are not liable to pic% his share of the claim. /ypically, marine insurance is split between the vessels and the cargo. )nsurance of the vessels is /ypically, generally %nown as 4#ull and Machinery4 #=M!. 8 more restricted form of cover is 4/otal 4/otal $oss Only4 /$O!, generally used as a reinsurance, which only covers the total loss of the vessel and not any partial loss. Cover may be on either a 4voyage4 or 4time4 basis. /he 4voyage4 4vo yage4 basis covers transit between the  ports set out in the policy" the 4time4 basis covers a period of time, time, typically one year, and is more common.

[edit edit]] Protection and indemnity Main article< +rotection and indemnity insurance 8 marine policy typically covered only three-quarter of the insured4s liabilities towards third  parties. /he typical liabilities liabilities arise in respect of collision with another ship, %nown as 4running down4 collision with a fixed ob6ect is an 4allision4!, and wrec% removal a wrec% may serve to  bloc% a harbour, for example!. )n the 7th century, shipowners banded together in mutual underwriting clubs %nown clubs %nown as +rotection and )ndemnity Clubs +=)!, Clubs +=)!, to insure the remaining one-quarter liability amongst themselves. /hese Clubs are still in existence today and have become the model for other speciali2ed and noncommercial marine and non-marine n on-marine mutuals, for example in relation to oil  pollution and nuclear ris%s.

Clubs wor% on the basis of agreeing to accept a shipowner as a member and levying an initial 4call4 premium!. :ith :ith the fund accumulated, reinsurance will be purchased" however, if the loss experience is unfavourable one or more 4supplementary calls4 may be made. Clubs also typically try to build up reserves, but this puts them at odds with their mutual status. 5ecause liability regimes vary throughout the world, insurers are usually careful to limit or exclude 8merican 3ones 8ct liability.

[edit edit]] Actual Actual total loss and constructive total loss >ire aboard M? #yundai >ortune resulting >ortune resulting in a constructive total loss /hese two terms are used to differentiate the degree of proof where a vessel or cargo has been lost. 8n 8n actual total loss refers to the situation where the position is clear and a constructive total loss refers to the situation where a loss is inferred. )n practice, a constructive total loss might also  be used to describe a loss where the cost of repair is not economic" i.e. a 4write-off4. 4write-off4. /he different terms refer to the difficulties of proving a loss where there might be no ev idence of such a loss. )n this respect, marine insurance differs from non-marine insurance, where the insured is required to prove his loss. /raditionally, /raditionally, in law, marine insurance was seen as an insurance of 4the adventure4, with insurers having a sta%e and an interest in the vessel and@ or the cargo rather than, simply, an interest in the financial consequences of the sub6ect-matter4s survival.

[edit edit]] Average /he term 48verage4 has two meanings< ! )n marine insurance, in the case of a partial loss, or emergency repairs to the vessel, average may be declared. /his covers situations, where, for example, a ship in a storm might have to  6ettison certain cargo to protect the ship and the remaining cargo. 4&eneral &eneral 8verage4 8verage4 requires all  parties concerned in the venture #ull@Cargo@>reight@5un%ers! #ull@Cargo@>reight@5un%ers! to contribute to compensate the losses caused to those whose cargo has been lost or damaged. 4+articular 8verage4 is levied on a group of cargo owners and not all of the cargo owners. A! )n the situation where an insured has under-insured, i.e. insured an item for less than it is worth, average will apply to reduce the amount payable. /here are different ways of calculating average, but generally the same proportion of under-insurance will be applied to any payout pa yout due. 8n average adjuster  is  is a marine claims specialist responsible for ad6usting and providing the general average statement. #e is usually appointed by the shipowner or insurer.

[edit] Excess, deductible, retention, co-insurance, and franchise 8n excess is the amount payable by the insured and is usually expressed as the first amount falling due, up to a ceiling, in the event of a loss. 8n excess may or may not be applied. )t may be expressed in either monetary or percentage terms. 8n excess is typically used to discourage moral ha2ard and to remove small claims, which are disproportionately expensive to handle. /he equivalent term to 4excess4 in marine insurance is 4deductible4 or 4retention4. 8 co-insurance, which is typically applied in non-proportional treaty reinsurance, is an excess expressed as a proportion of a claim, e.g. B, and applied to the entirety of a claim. 8 franchise is a deductible below which nothing is payable and beyond which the entire amount of the sum insured is payable. )t is typically used in reinsurance arbitrage arrangements.

[edit] onners and chinamen /hese are both obsolete forms of early reinsurance. 5oth are technically unlawful, as not having insurable interest, and so were unenforceable in law. +olicies were typically mar%ed +.+.). +olicy is +roof of )nterest!. /heir use continued into the 7D1s before the y were banned by $loyd4s, the main mar%et, by which time, they had become nothing more than crude bets. 8 4tonner4 was simply a 4policy4 setting out the global gross tonnage loss for a year. )f that loss was reached or exceeded, the policy paid out. 8 4chinaman4 applied the same principle but in reverse< thus, if the limit was not reached, the policy paid out.

[edit] !"ecialist "olicies ?arious types of specialist policy exist, including< #e$building ris%s&  /his covers the ris% of damage to the hull whilst it is under construction. 'acht (nsurance&  )nsurance of pleasure craft is generally %nown as 4yacht insurance4 and includes liability coverage. (maller vessels, such as yachts and fishing vessels, are typically underwritten on a 4binding authority4 or 4lineslip4 basis. )ar ris%s& 9sual #ull insurance does not cover the ris%s of a vessel sailing into a war 2one. 8 typical example is the ris% to a tan%er sailing in the +ersian &ulf  during the &ulf :ar . :ar ris%s cover protects, at an additional premium, against the danger of loss in a war 2one. /he war ris%s areas are established by the $ondon-based 3oint :ar Committee, which has recently moved to include the Malacca (traits as a war ris%s area due to piracy . )f an attac% is classified as a EriotE then it would be covered by war ris% insurers.A (ncreased *alue +(*&  )ncreased ?alue cover protects the shipowner against any difference between the insured  value of the vessel and the market value of the vessel.

Overdue insurance&  /his is a form of insurance now largely obsolete due to advances in communications. )t was an early form of reinsurance and was bought by an insurer when a ship was late at arriving at her destination port and there was a ris% that she might have  been lost but, equally, might simply have been delayed!. /he overdue insurance of the /itanic was famously underwritten on the doorstep of $loyd4s. argo insurance&  Cargo insurance is underwritten on the )nstitute Cargo Clauses, with coverage on an A, ., or  basis, A having the widest cover and  the most restricted. ?aluable cargo is %nown as specie.

$in%s< Fescription of cover< A )nstitute Cargo Clauses< G +leasurecraft = Commercial marine policy summaries< H

[edit] )arranties and conditions /his section may be confusing or unclear to readers. +lease help clarify the section" suggestions may be found on the tal% page. (Ma !"##$ 8 peculiarity of marine insurance, and insurance law generally, is the use of the terms condition and $arranty . )n *nglish law, a condition typically describes a part of the contract that is fundamental to the performance of that contract, and, if breached, the non-breaching party is entitled not only to claim damages but to terminate the contract on the basis that it has been repudiated by the party in breach. 5y contrast, a warranty is not fundamental to the performance of the contract and breach of a warranty, whilst giving rise to a claim for damages, does not entitle the non-breaching party to terminate the contract. /he meaning of these terms is reversed in insurance law. )ndeed, a warranty if not strictly complied with will automatically discharge the insurer from further liability under the contract of insurance. /he assured has no defense to his  breach, unless he can prove that the insurer,by his conduct has waived his right to invo%e the  breach, possibility provided in section GHG! of the Marine )nsurance 8ct 710 M)8!. >urthermore in the absence of express warranties the M)8 will imply them, notably a warranty to  provide a seaworthy vessel at the commencement of the voyage in a voyage policy section G7!! and a warranty of legality of the insured voyage section H!. . G

[edit] !alvage and "ri/es /he term 4salvage4 refers to the practice of rendering aid to a vessel in distress. 8part from the consideration that the sea is traditionally 4a place of safety4, with sailors honour-bound to render assistance as required, it is obviously in underwriters4 interests to encourage assistance to vessels in danger of being wrec%ed. 8 policy will usually include a 4sue and labour4 clause which will cover the reasonable costs incurred by a shipowner in his avoiding a greater loss. 8t sea, a ship in distress will typically agree to 4$loyd4s Open >orm4 with any potential salvor. /he $loyd4s Open >orm is the standard contract, although other forms exist. /he $loyd4s Open

>orm is headed 4;o cure - no pay4" the intention being that if the attempted salvage is unsuccessful, no award will be made. #owever, this principle has been wea%ened in recent years, and awards are now permitted in cases where, although the ship might have sun%, pollution has  been avoided or mitigated. )n other circumstances the EsalvorE may invo%e the (CO+)C terms most recent and commonly used rendition is (CO+)C A111! in contrast to the $O> $loyd4s Open >orm! these terms mean that the salvor will be paid even if the salvage attempt is unsuccessful. /he amount the salvor receives is limited to cover the costs of the salavage attempt and B above it. One of the main negative factors in invo%ing (CO+)C on the salvors behalf! is if the salvage attempt is successful the amount at which the salvor can claim under article G of $O> is discounted. /he $loyd4s Open >orm, once agreed, allows salvage attempts to begin immediately. /he extent of any award is determined later" although the standard wording refers to the Chairman of $loyd4s arbitrating any award, in practice the role of arbitrator is passed to specialist admiralty ICs. 8 ship captured in war is referred to as a pri2e, and the captors entitled to pri2e money. 8gain this ris% is covered by standard policies.

[edit] Marine (nsurance Act, 0123 Main article< Marine )nsurance 8ct 710 /he most important sections of this 8ct include< s.H< a policy without insurable interest is void. s.D< imposes a duty on the insured of uberrimae fides as opposed to caveat emptor !" ie. that questions must be answered honestly and the ris% not misrepresented. s.J< the proposer of the insurer has a duty to disclose all material facts relevant to the acceptance and rating of the ris%. >ailure to do so is %nown as non%disclosure or concealment  there are minor differences in the two terms! and renders the insurance voidable by the insurer. s.GGG!or example, after purchasing automobile insurance, some may tend to be less careful about loc%ing the automobile or choose to drive more, thereby increasing the ris% of theft or an accident for the insurer. 8fter purchasing fire insurance, some may tend to be less careful about preventing fires say, by smo%ing in bed or  neglecting to replace the batteries in fire alarms!.citation needed 

8 second type of behavior that may change is the reaction to the negative consequences of ris%, once they have occurred and once insurance is provided to cover their costs. /his may be called e' post  moral ha2ard. )n this case, insured parties do not behave in a more ris%y manner that results in more negative consequences, but they do as% an insurer to pay for more of the negative consequences from ris% as insurance coverage increases. >or example, without medical insurance, some may forgo medical treatment due to its costs and simply deal with substandard health. 5ut after medical insurance becomes available, some may as% an insurance provider to  pay for the cost of medical treatment that would not have occurred otherwise. (ometimes moral ha2ard is so severe it ma%es insurance policies impossible. Coinsurance, co  payments, and deductibles reduce the ris% of moral ha2ard by increasing the out-of-poc%et spending of consumers, which decreases their incentive to consume. /hus, the insured have a financial incentive to avoid ma%ing a claim. Moral ha2ard has been studied by insurersH and academics. (ee wor%s by Lenneth 8rrow,B0D /om 5a%er,J and 3ohn ;yman. 3ohn ;yman suggests that two types of moral ha2ard exist< efficient and inefficient moral ha2ard. *fficient moral ha2ard is the viewpoint that the over consumption of medical care brought forth  by insurance does not always produce a welfare loss to society. 'ather, individuals attain better health through the increased consumption of medial care, ma%ing them more productive and netting an overall benefit to societal welfare. 8lso, ;yman suggests that individuals purchase insurance to obtain an income transfer when they become ill, as opposed to the traditionalist stance that individuals diversify ris% via insurance. )nsurance analysts sometimes distinguish moral ha2ard from a related concept they ca ll morale ha2ard. [edit] Marine Insurance Introduction

Marine insurance in Canada is governed by the Marine )nsurance 8ct which is modeled on the *nglish 8ct. Over the years we have prepared various papers relating to marine insurance. $in%s to these  papers are provided below. 'eaders are cautioned that the papers, though current as of the date  prepared, are not updated. •

Outline of the Law of Marine Insurance - 2008

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Miscellaneous Marine Insurance Issues - 2007

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Provincial Regulation of Marine Insurance - 2007

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re!uentl" #s$ed %uestions Relating to Marine Insurance - 2000

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#dditional #ssureds and &o-#ssureds - 2000

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'arranties in Marine Insurance - ()))

/o review the Canadian #ulls +acific Clauses A11B clic% here. &ase *u++aries

(ynopsis of significant developments in A117-A11 Marine insurance cases of interest include< >euiltault (olution (ystems )nc. v. urich Canada, A1 >C A01, where a defence to a claim under an all ris%s cargo policy was upheld on the basis that the cause of the loss was inherent vice or insufficient pac%aging and that the assured had not  proven a fortuity" (ociNtN /elus Communications v. +eracomo )nc., A1 >C H7H, where the Court upheld a denial of coverage on the basis of the wilful misconduct of the assured in deliberately cutting a submarine cable" More Marine $td. v. 8xa +acific )nsurance Company, A11 5C(C JJ, where the Court upheld an annual aggregate deductible clause and dismissed a claim against the bro%er" and Oppenheim v Midnight Marine $td., A11 ;$/F G, reversed A11  ;$C8 0H, where there were two different clauses relating to 6urisdiction and arbitration but the Court of 8ppeal gave effect to the $ondon arbitration clause. Synopsis of signicant developments in 2007-2008 /here were relatively few cases dealing with marine insurance in A11D-A11J. *imberwest +orest orp. v. -acific ink cean /ervices orporation, A11J >C J1 is a case of particular interest in that it suggests that a waiver of subrogation clause can be extended beyond the entities named in the clause. Mc&ntosh v 0oal 1 /un 2lliance, A11D >C AG, is a case that notes that mar%eting a vessel can be a breach of a pleasure use warranty and holds that a pleasure use warranty is a true warranty and not a suspensive condition.

Collisions  Cutting of (ubmarine Cable  $iability  $imitation - )nsurance  :ilfull Misconduct (ociNtN /elus Communications v. +eracomo )nc., A1 >C H7H /he plaintiff was the owner of two submarine cables on the bottom of the (t. $awrence 'iver. /he defendants were the owner of a fishing vessel and the operator of the vessel who was also the principal of the owner. /he operator snagged one of the submarine cables belonging to the

 plaintiff while fishing. /he operator cut the cables with a saw believing that it was not in use. 8 few days later he snagged the cable a second time and did the same thing./he plaintiff commenced these proceedings alleging negligence and damages of approximately P million to repair the cable. /he defendants denied liability saying insufficient notice had been given of the location of the cables and that, in any event, the cables should have been buried. /he defendants further disputed the damages and claimed the right to limit liability. 8 further issue was whether the defendantQs insurance coverage was 6eopardi2ed by reason of Rwilful misconductS on the part of the insured@defendants. On liability the Court found that the cables were included in notices to mariners and were shown on navigation charts and that it was the duty of the defendants to be aware of them. /he Court further found that it was not practical to bury the cables and held that the sole cause of the loss was the intentional and deliberate act of the defendant operator. :ith respect to damages, the Court held that the plaintiff was entitled to damages in the nature of superintendence and overhead and allowed 1 for this. /he Court then turned to limitation of liability and noted that to avoid limitation the plaintiff had to prove a personal act or omission of the defendant committed either Rwith intent to cause such lossS or Rrec%lessly and with %nowledge that such loss would probably resultS. /he Court held, for the first time in Canada, that this test had been met and the defendants were not entitled to limit liability. /he Court said that the defendant operator had intentionally cut the cable and that the loss was the diminution in value of the cable, not the cost of repair. /he Court said the defendant operator intended the ver y damage but 6ust did not thin% the cable would be repaired. /he Court further held that the defendant operator was Rrec%less in the extremeS and that the loss was a certainty. /urning to the insurance issue, the Court referred to authorities that established wilful misconduct Rimplies either a deliberate act intended to cause the harm, or such blind and uncaring conduct that one could say that the person was heedless of the consequencesS. /he Court had little difficulty in concluding this test had been met and the insurance coverage void. Marine )nsurance  Cargo 8ll 'is%s - 5urden of +roof  (ufficiency of +ac%ing >euiltault (olution (ystems )nc. v. urich Canada, A1 >C A01 /he plaintiff was the owner of a cargo of machines stowed in three containers and shipped by sea from Montreal to *urope. /wo containers were stowed under dec% and the third was stowed on dec%. 9pon delivery of the containers it was discovered that all of the units were damaged by rust. 8 claim by the plaintiff under its cargo policy with the defendant was denied on the grounds of inherent vice or insufficiency of pac%aging. (pecifically, the defendant alleged that the damage occurred because the timbers used to brace the cargo had excessive water content which condensed during the voyage. /he evidence established that the three containers were in good condition and that there was no ingress of water into the containers. /he plaintiff relied on the fact that it had previously sent several similar shipments pac%ed in the same way without incident. #owever, the Court found as a fact that the pac%ing was insufficient in that the wood used to brace the cargo was unsuitable and the individual units should have been wrapped in

some manner. /he Court accepted that an all ris%s policy requires that there be a RfortuityS and that the burden was on the plaintiff to prove such fortuity. Marine )nsurance  )nterpretation of +olicy - 8nnual 8ggregate Feductible - $iability of 5ro%er  More Marine $td. v. 8xa +acific )nsurance Company, A11 5C(C JJ /he policy in issue in this case contained a clause stipulating an annual aggregate deductible R88FS! of PAB1,111. /he assured alleged that the clause was added without its %nowledge and without consideration. 8dditionally, the assured alleged that its bro%er was negligent. /he evidence established that in the initial correspondence b etween the bro%er and the insurer the 88F clause excluded claims for constructive total loss and total loss, however, the endorsements ultimately issued did not exclude such claims. /he Court found that this was a deliberate decision even though there was no direct evidence on how or why the change was made. /he Court further found that the assured was aware of the 88F clause. /he 88F clause was initially in the amount of P11,111 but it was later increased to PAB1,111 due to the poor claims history of the assured. 8gain, the Court found that this was %nown to the assured. /he assured argued that a concluded policy of insurance could not be amended and that it had not expressly approved the 88F. /he Court held that clearly a policy can be amended and further that the bro%er was the agent of the assured and had the authority to bind the assured. /he Court additionally held that the assured had ratified the acts of the bro%er by ta%ing advantage of those acts. /he assured additionally argued that there was no consideration for the 88F clause and that on its proper interpretation it did not apply to a constructive total loss. /he Court held that there was consideration in that the changes to the policy benefitted both parties. >urther, the Court held that the 88F clause was not ambiguous and did apply to a constructive total loss. /he Court then turned to the allegations against the bro%er. /he Court noted that a bro%er owes a stringent duty to provide both information and advice to an assured, however, held that there was no breach of duty in the circumstances. /he Court noted that the bro%er did not communicate some aspects of its negotiations with underwriters but held the assured did not suffer any loss as a result. /he Court found as a fact that in order to obtain insurance coverage the assured had to agree to an 88F clause that included constructive total losses and total losses. Marine )nsurance  (tay of +roceedings - 8rbitration Clause- )nconsistent Clauses  :aiver8ppeals  (tandard of 'eview  )nterpretation of Contracts Oppenheim v Midnight Marine $td., A11 ;$/F G, reversed A11 ;$C8 0H /he plaintiffQs barge san% at sea while carrying cargo and while being towed by one of the  plaintiffQs tugs. /he cargo owners subsequently commenced proceedings against the plaintiff and arrested the tug. /he plaintiff advised the defendant, the insurer of the barge, of the action but the insurer refused to provide security or a defence as it was investigating whether the barge had

 been unseaworthy. /he plaintiff ultimately settled with the cargo owners and commenced this action for indemnity. /he defendant insurer brought this application to stay the proceedings on the grounds of an arbitration clause in the policy. /he main difficulty was that there were two arguably inconsistent clauses in the policy. /he cover note said that it was sub6ect to *nglish law and practice and to the non-exclusive 6urisdiction of the *nglish courts. #owever, within the  policy itself was a clause that required any dispute to be referred to arbitration in $ondon. /he arbitration clause included words that it was to apply Rnotwithstanding anything else to the contraryS and that in the event of conflict Rthis clause shall prevailS. 8t first instance the motions 3udge dismissed the application holding that the contract of insurance must be interpreted as a whole. On appeal to the ;ewfoundland Court of 8ppeal, the Court first addressed the standard of review applicable when dealing with interpretation of contracts. /he Court agreed that the interpretation of a contract was a question of mixed fact and law but did not agree that this meant in every case the standard of review was palpable and overriding error as opposed to correctness. /he Court said that if a decision-ma%e fails to consider a relevant factor this is an error of law reviewable to a standard of correctness. /he Court went on to find that the motions 3udge had made 6ust such an error by failing to give any meaning to the arbitration clause in the policy. /he Court resolved any conflict between the arbitration clause and the clause in the Cover ;ote by finding that the reference to Rnon-exclusiveS in the Cover ;ote recogni2ed the 6urisdiction of the arbitrator in the arbitration clause and the 6urisdiction of foreign courts over enforcement proceed ings. /he Court refused to apply the contra proferentum rule of contract interpretation noting that resort should  be had to the rule only when all other rules of construction fail. 8 secondary issue was whether insurer had waived the right to rely upon the arbitration clause having not invo%ed the clause in  prior years in prior disputes. On this issue the Court of 8ppeal accepted the evidence of a witness on *nglish law to the effect that a failure to invo%e an arbitration or 6urisdiction clause for  practical and commercial reasons is not a waiver in a subsequent dispute. )n result, the appeal was allowed and the present action was stayed in favour of arbitration proceedings in $ondon. Marine )nsurance - (ubrogation - Control of 8ction - 8dmiralty +ractice - (tri%ing +leadings #odder /ugboat Co. $td. v 33M Construction $td. et al., A11 >C8 AD7, affirming A117 >C 0 /his case involved damage to two barges that were under charter. >ollowing the incidents giving rise to the damage an action was commenced in the name of the owner and the charterer against /exada and +acific. /his action was essentially a subrogated action brought by the underwriters of the barges. (ubsequently a second action was commenced by the owner against the charterer as well as /exada and +acific. /exada and +acific then brought this motion to stri%e the second action on the grounds that it was frivolous and vexatious. /he motions 3udge declined to completely stri%e the second action as there were aspects of the second action, including uninsured losses, which were not included in the first. )nstead the 3udge ordered that the actions  be restructured such that the owner was the plaintiff in one action and the charterer the plaintiff

in the other. 8dditionally, the 3udge ordered that the actions be specially managed and heard together. Furing the course of his reasons the motions 3udge also had to consider whether the underwriter or the insured had the right to control the subrogated action. /he 3udge held that even though the underwriter may have paid the full amount under the policy the insured retains the right to control the proceeding until it is fully indemnified. 8 subrogation receipt did not alter  the common law on this point. /he underwriters were subsequently granted status to appeal the order A117 >C8 A17! and launched an appeal. /he appeal was dismissed with the Court merely saying that the order was a response to unusual circumstances, did not offend any principal of law or procedural fairness and was not pre6udicial to any party. Carriage of &oods - Fec% Carriage - Marine )nsurance - :aiver of (ubrogation - Grd parties /imberwest >orest Corp. v. +acific $in% Ocean (ervices Corporation, A117 >C8 7 affirming A11J >C J1 /his was a subrogated claim for the loss of approximately CP million worth of logs. /he logs were lost from the dec% of a barge while en route from ?ancouver to California. /he issues in the case were< first, whether the cargo was sufficiently described as dec% cargo to remove it from the application of the #ague-?isby 'ules thus denying the defendants the right to rely upon exclusion or benefit of insurance clauses in the contract!" and second, whether the waiver of subrogation clause in the plaintiffQs insurance policy protected all of the defendants o r 6ust the specifically named contracting carrier. /he contract of carriage was contained in a letter of understanding and set of standard terms and conditions which incorporated a bill of lading that was RcontemplatedS to be issued. /he bill of lading, which was never in fact issued, included on its face a statement that Rall cargo was carried on dec% unless otherwise statedS. /he plaintiff argued that a printed statement of dec% carriage in a standard bill of lading that was not actually issued was not sufficient compliance with 8rt c! of the #ague-?isby 'ules to oust the application of the 'ules. /he motions 3udge held, however, that the plaintiff was bound by the terms of the contract including the bill of lading terms and these contained a clear statement as to dec% carriage. )n result, the 'ules did not apply. /he second ma6or issue in the case concerned a clause in the plaintiffQs policy of insurance which specifically waived subrogation against the contracting carrier. /he contracting carrier had entered into time charters for the tug and barge with two affiliated companies who actually carried out the contract through their employees. /he issue was whether these other companies and their employees could ta%e the benefit of the waiver of subrogation clause which did not name them specifically or by class. /he motions 3udge reviewed the complicated history of the waiver of subrogation clause and concluded that it was intended to waive subrogation against the RcarrierS or RtowerS, terms that were used indiscriminately. 8s the other parties fell within the definition of RcarrierS in the bill of lading, they were entitled to the benefit of the waiver of subrogation clause. #e further held that extending the benefits of the waiver of subrogation to these other entities would be a permissible incremental change in the law. On appeal, the Court of 8ppeal upheld the decision of the motions

3udge but for different reasons. /he Court of 8ppeal enforced the waiver of subrogation clause not on the basis of the intention of the parties but referred to a separate clause in the policy whereby underwriters waived rights of subrogation whenever the assured had waived rights of recovery. /he Court of 8ppeal held that pursuant to the terms of the bill of lading recovery had  been waived against all of the defendants and therefore rights of subrogation were also waived.

Marine )nsurance - Fiscovery  +rivilege  Coverage 8dvice 9niversal (ales $imited v. *dinburgh 8ssurance Co. $td., A117 >C B1 /he plaintiffs the insureds! sought indemnity from the defendants the insurers! for a settlement  payment made by the plaintiffs to the federal government related to the sin%ing and raising of the R)rving :haleS. /he insurers denied coverage alleging the settlement was made without their consent contrary to the terms of the policy. )n these applications the plaintiffs@insureds sought  production of various letters between the defendants@insurers and their counsel relating to coverage advice. /he plaintiffs said the documents were relevant in that they might show the decision to deny coverage pre-dated the settlement with the government. /he plaintiffs applications were dismissed both at first instance before a +rothonotary and o n appeal. )t was held that the documents were protected by solicitor-client privilege and that such privilege had not been waived. :arranty of $egality  5reach of *xpress :arranties  Fisclosure of Material Circumstances  :aiver  Ocean Masters )nc. v. 8&> M.8./. 8llian2 8&> M8/ $td.!, A11D ;$C8 GB, affirming A110  ;$/F H1 /he +laintiff4s fishing vessel caught fire and san% H1 miles off the coast of ;ewfoundland. 8t the time, the vessel was en route to recover its crab gear which was already in the water at a location D1 miles off the coast. #owever, the vessel4s C() certificate limited the vessel4s operation to within A1 miles of the coast and the certificate of the Master of the vessel imposed a similar restriction. 8 request for coverage under the vessel4s hull policy was denied by the Fefendant underwriters on the grounds of breach of an express warranty that the vessel would be operated in compliance with its C() certificate, breach of the warranty of legality and failure to disclose material facts. /he Court of 8ppeal for ;ewfoundland held that the trip was not illegal in its entirety, as held by the trial 3udge, but was only illegal during the time the vessel was beyond the A1 mile limitation contained in its certificate. 8ccordingly, at the time of the loss there was no  breach of this warranty. )n reaching this conclusion the Court gave effect to clause J of the policy which provided R)f any breach of a clause or condition of insurance shall occur prior to a loss

under this insurance, such breach shall not avoid the coverage...unless such breach shall exist at the time of such loss.S :ith respect to the implied warranty of legality, the Court held that when the vessel san% it was not being operated illegally and therefore the warranty did not apply. >inally, the Court noted that the fact the vessel had been operated beyond the limit imposed by its C() certificate had no bearing on the loss and that any failure by the assured to disclose this could not be relied upon to release the insurer from liability. )nsurance 5reach of +leasure 9se :arranty - $iability of 5ro%er  Mc)ntosh v 'oyal = (un 8lliance, A11D >C AG )n A11A the +laintiff@assured purchased a high performance power boat and too% out insurance with the Fefendant@insurer through the co-Fefendant bro%er. /he +laintiff intended at some point to use the boat in a business but obtained a policy that was for pleasure use only. /he +laintiffQs  bro%er %new of the assuredQs intended use and attempted to obtain commercial coverage but was unable to do so. /he +laintiff was specifically advised by the b ro%er that commercial coverage was not available and that the boat was only insured for pleasure use. ;evertheless, the +laintiff set up a company called Offshore +erformance /ours, had ROffshore +erformance /oursS decals  put on the boat and too% the boat to a number of meets during the summer of A11A to promote the business. )t was claimed that no paying customers were carried in A11A. /he following year the policy was renewed with the pleasure use warranty and the assured continued to mar%et the  boat by ta%ing it to meets. 8gain, the +laintiff claimed he was unable to attract any paying customers. Furing the fall of A11G, after having used the boat for pleasure purposes, the vessel was stolen while on a trailer at the +laintiffQs cottage. ;ot surprisingly, the insurer denied coverage for the theft on the grounds that the assured had breached the pleasure use warranty. /he denial was upheld by the 3udge who did not believe the +laintiffQs claim that there were no  paying passengers. /he 3udge found as a fact that there were paying customers and, therefore, a  breach of the pleasure use warranty. /he 3udge further held that the pleasure use warranty was a true warranty and not a suspensive condition. /he 3udge then turned to the claim by the +laintiff against the bro%er. /he 3udge found that the bro%er had not met the required standard of care of a  bro%er in that he failed to sufficiently explore the +laintiffQs business plans and provided inaccurate information that the pleasure use warranty would only be breached when a paying customer was ta%en on the boat. /he 3udge held that the mere act of using the boat to promote a charter business amounted to a commercial use of the boat. #owever, the 3udge held that there was no causal lin% between the breach of duty by the bro%er and the +laintiffQs damages. (pecifically, the +laintiff did not rely upon the bro%erQs advice and instead chose to deliberately ignore it by ta%ing paying passengers onboard. )n result, the action against the bro%er was also dismissed. )nsurance  *xceptions  )nchmaree  $iner ;egligence Clause  Fue Filigence  Onus of +roof 

(ecunda Marine (ervices $td. v $iberty Mutual )nsurance Co., A110 ;(C8 JA 8ffg. A11B ;((C J1 /he +laintiff4s vessel lost its propeller when its tail shaft bro%e while towing a barge. /he cost of salvage and repairs was approximately PD11,111. /he vessel was insured at the material times by the Fefendant pursuant to a policy that incorporated the )nstitute /ime Clauses #ulls! amended to include a $iner ;egligence clause in place of the standard )nchmaree clause. /he policy covered, inter alia, damage caused by Rbrea%age of shaftsS provided there was no Rwant of due diligence by the 8ssuredS. /he underwriters denied the claim alleging there had been a lac% of due diligence. /he issues in the case were first, who had the burden of proving want of due diligence and, second, was the loss caused by want of due diligence. /he ;ova (cotia Court of 8ppeal first considered the nature of the $iner ;egligence clause and held that it was essentially an Rall ris%s clauseS covering all damage to the vessel by accidents unless caused by want of due diligence. /he ;ova (cotia Court of 8ppeal then extensively reviewed the a uthorities and held that want of due diligence was an affirmative defence, the burden of which was on the underwriters to prove. /he ;ova (cotia Court of 8ppeal then turned to the question of whether want of due diligence had been proven. /he ;ova (cotia Court of 8ppeal noted that the trial 3udge had found that all statutory requirements had been met and that reasonable care had been exercised in the maintenance of the vessel and further noted that an appellate court will exercise a high degree of deference to findings of fact at trial. /he ;ova (cotia Court of 8ppeal found no reason to interfere with these findings of the trial 3udge and dismissed the appeal. )nsurance  R8ll 'is%sS Cargo )nsurance  >ortuity  )nherent ?ice  ;elson Mar%eting )nternational )nc. v 'oyal = (un 8lliance )nsurance Company of Canada, A110 5CC8 GAD /his matter concerned damage to three separate shipments of laminated wood flooring carried on three different vessels from (ingapore to $ong 5each. 9pon arrival all three shipments were found to be damaged by moisture. /he ma6or issue in the case was whether the damage was due to a fortuity, and therefore covered by the all ris%s cargo policy, or whether it was due to R inherent vice or nature of the sub6ect matterS, an excluded peril. 8t the trial the +laintiff led expert evidence that the moisture was from exposure to rainfall during transshipment and storage and the Fefendant underwriters led expert evidence that the moisture had been absorbed by the cargo while at the mills awaiting shipment and that the absorbed moisture was released in the holds of the vessels and subsequently condensed onto the cargo. /he trial 3udge agreed with the underwriter4s expert and found as a fact that the moisture came from the cargo in the holds of the vessels. #owever, he further found that Rthe environments the cargoes interacted with were abnormally and unnaturally amplified in the hold by conditions, the causes of which, although not addressed by evidence, manifestly had nothing to do with the inherent characteristics of the cargoesS. /he trial 3udge therefore held that Rthe damage leading to the loss claim was not due to

the inherent vice or nature of the cargoes, as pleaded by the defendants, but rather was caused by the fortuity of being put in holds which substantially altered the normal environmentS. /he underwriters appealed. On appeal, the 5ritish Columbia Court of 8ppeal stated that in order for the loss to be considered fortuitous the +laintiff was required to prove that the conditions in the holds of the three vessels was other than what might have been expected as part of the ordinary incidents of carriage. /he 5ritish Columbia Court of 8ppeal reviewed the evidence and found that there was no evidence that the conditions in the holds were exceptional such as to constitute a fortuity. /he loss was accordingly held to be Rattributable to the nature of the sub6ect matter of the insuranceS. /he appeal was allowed and the claim against the underwriters was dismissed. #ull )nsurance  +erils of the (ea  :ear and /ear  ?ermin B007GB 5.C. $td d.b.a :est Coast 'esorts v 8llian2 )nsurance Co. of Canada, A110 5CC8 H07 /he issue in this case was whether the sin%ing of a barge was due to perils of the sea. /he barge had been built in 7GG and had been used as a floating sport fishing lodge since 77B. (he had  been laid up for the winter in (eptember 777 and san% in March A111. 8t the time of her sin%ing ordinary wear and tear had opened her seams allowing the continuous ingress of substantial amounts of sea water and requiring continual pumping to %eep her afloat. 8 +?C RdiaperS had been previously fitted to control the ingress of water but this was in shreds at the time she was laid up in (eptember of 777. 8fter the barge was raised it was discovered that the  pump which had been %eeping her afloat was wor%ing properly. /he +laintiff, the assured, alleged that the shore power to the pump must have been interrupted and that the loss was, accordingly, fortuitous and due to a peril of the sea. /he Fefendant underwriters alleged that the cause of the sin%ing was a failure in the plan%ing of the barge due to worm infestation which allowed water to enter at a rate that overwhelmed the pump. /he trial 3udge agreed with the underwriters and held that the cause of the sin%ing was chronic lea%age and the failure of a  plan%. 8s a consequence, the trial 3udge held the loss was caused by ordinary wear and tear or the actions of vermin, excluded perils, and not by a peril of the sea and the case was dismissed. 8n appeal by the +laintiff was dismissed by the 5ritish Columbia Court of 8ppeal. /he 5ritish Columbia Court of 8ppeal noted that 8nglo-Canadian law required that for a loss to be considered a peril of the sea, the actual entry of sea water must have been caused by a fortuity. #ere, the fortuity alleged by the +laintiff, the failure of the p ump, was not such an antecedent fortuity and the loss was therefore not caused by a peril of the sea. )t is important to note that in reaching this conclusion the 5ritish Columbia Court of 8ppeal referred to the leading decision of  the (upreme Court of Canada in C.C.'. >ishing $td. v 5ritish 'eserve )nsurance Co., 771  (.C.'. JH, wherein it was held that where several factors combine to cause a loss, the loss will  be considered to be caused by a peril of the sea if one of the causes was fortuitous. /he 5ritish Columbia Court of 8ppeal read this case as requiring that the competing causes which combine to produce the loss must all have been operative in relation to allowing the ingress of water. /he

CC' >ishing case was held not to be applicable as the failure of the pump, even if a fortuity, did not cause the entry of seawater into the vessel. :arranty of $egality  5reach of *xpress :arranties  Fisclosure of Material Circumstances  :aiver >ailure to 'eport Claim  'elief >rom >orfeiture  ;iagara &orge 3et 5oating $td. v 8T8 Canada )nc., A110 Can$)) HD0A O; (.C.! /he +laintiff operated 6et boats on the ;iagara 'iver and had protection and indemnity insurance through the Fefendant on the (+AG form. On 0 3uly 77B the +laintiff received a letter from a third party putting it on notice of a claim for damages and in6uries sustained as a result of the manner in which the Fefendant4s vessels had been operated a few days earlier. )n the letter the third party suggested the Fefendant should forward the letter to its insurer. /here had been no collision between the Fefendant4s boats and the third party4s boats. /he principal of the Fefendant considered that the letter was merely a wa%e complaint and did not forward it or otherwise advise its insurer. ;othing further happened until AG >ebruary A111 when the Fefendant was served with a (tatement of Claim for PA. million in damages. /he Fefendant was advised on AJ >ebruary and subsequently denied coverage on the basis of the failure of the +laintiff to give prompt notice of any claim as required by (+AG. /he Court had little difficulty in finding that the +laintiff had, in fact, failed to give the required notice. /he significant issues in the case were whether the +laintiff was entitled to relief from forfeiture on the basis of s. A7 of the )nsurance 8ct of Ontario, s. 7J of the Courts of 3ustice 8ct of Ontario or pursuant to the common law of equity. /he Court held that the relief from forfeiture provision in the )nsurance 8ct had no application to a contract of marine insurance which was expressly excluded from the 8ct by s.AA. :ith respect to s.7J of the Courts of 3ustice 8ct, the Court noted that there was a constitutional issue as to applicability of that act to a co ntract of marine insurance but did not find it necessary to deal with that issue as the +laintiff would not in any event have been entitled to relief having failed to act reasonably in the circumstances. >inally, the Court turned to the general law of equity and, although the point was conceded by the Fefendant, held that in appropriate circumstances the court could provide equitable relief from forfeiture in marine insurance cases. /he %ey to determining whether relief should be granted is whether the insurer had suffered or is li%ely to suffer pre6udice as a result of the late reporting. )n the circumstances of the case the Court held that the insurer had suffered pre6udice in that it did not have the opportunity to retain its own counsel, conduct its own investigation or negotiate with the third  party. Moreover, even though the witnesses were all still available the Court noted that memories fade over time. 8dditionally, the Court noted that the insurer not having been notified of the claim could not ma%e the necessary business decisions as establishing reserves, modifying  premiums or estimating its loss ratios. )n result, the +laintiff4s request for coverage was dismissed.  (ubrogation  5uilders 'is% +olicy  9nnamed )nsureds  :aiver of (ubrogation

(ecunda Marine (ervices $imited v >abco )ndustries $imited, A11B >C B0B /he +laintiff in this matter hired the Fefendant to perform welding and other wor% on its vessel R5urin (eaS. Furing the course of the wor% there was a fire that the +laintiff alleged was caused  by the negligence of the Fefendant. /he Fefendant disputed the allegations of negligence and also defended arguing that the action was a subrogated action brought by the +laintiff4s insurers  pursuant to a builder4s ris% policy of insurance and that as a matter of law subrogation under such  policies against subcontractors was prohibited. /he Fefendant brought this application for summary 6udgment to determine the subrogation issue. /he 3udge reviewed the construction contract between the parties and noted that it was completely silent with respect to obligations to insure. #e then reviewed the builder4s ris% insurance policy and noted that it contained a clause entitled R8dditional 8ssureds and :aiver of (ubrogationS which permitted the assured to name others as additional assureds and to obtain a waiver of subrogation against those parties provided it did so prior to a loss. /he 3udge noted that the contract between the parties did not require the +laintiff to name the Fefendant as an additional assured or to obtain a waiver of subrogation against it. /he 3udge then reviewed the various authorities relied upon by the Fefendant for the  proposition that subrogation under a builder4s ris% policy was not permitted as a matter of law. /he 3udge held that these cases did not stand for the proposition alleged. /he 3udge held that the issue was determined by the language used in the construction contract and the insurance policy. /he 3udge further held that even if there was such a rule of law in respect of land based construction pro6ects sub6ect to provincial law, such a rule would not form part of marine insurance where rights of subrogation are specifically dealt with in the Marine )nsurance 8ct. >inally, the 3udge considered that the decisions of the (upreme Court of Canada in $ondon Frugs $td. v Luehne = ;agel )nternational $td., 77A G (C' A77 and >raser 'iver +ile = Fredge $td. v Can-Five (ervices $td., 777 G (C' 1J established the appropriate principled approach to privity of contract issues and reinforce the holding that there was no rule of maritime law barring subrogation. >loating #omes  Moorage :arranty  >ailure to Fisclose Material >acts 8bell v $loyd4s, A11B 5C(C DB /he +laintiff in this matter purchased a floating home which burned to the waterline six months after the purchase. /he home was originally moored at Cowichan 5ay and insurance was ta%en out which contained a warranty that it would be permanently moored at that location. /he +laintiff then entered into a contract to purchase a water lot in a new development and moved the home to the new development. /he insurer was advised and the warranty was changed to reflect the new location. )n the event, the +laintiff4s contract to purchase the lot did not complete and the home was temporarily moored at the new location. /he developer of the facility advised the +laintiff that he was trespassing and requested that he move his ho me. /he +laintiff failed to do so and the developer eventually had the home moved and tied to off-shore pilings. /he home was

at this location when it burned. /he underwriters denied coverage for breach of the moorage warranty and for failure to disclose the location of the home, a material fact. /he trial 3udge agreed with the underwriters that there had been a clear breach of the warranty and that the change in location to the off-shore pilings was a material fact which ought to have been brought to the attention of the underwriters. )t is interesting to note that although the insurance policy was said to be a marine insurance policy the Court referred to various general provisions of the )nsurance 8ct of 5ritish Columbia, including a relief from forfeiture provision. /he Court seems to have accepted that these general provisions apply to contracts of marine insurance, which is debatable. Marine )nsurance  :arranties  Feviation - :aiver = *stoppel  8rbitration 8greement  'ight of 8ppeal Mc8sphalt Marine /ransport $imited v $iberty )nternational Canada, A11B O;(C GHB7 /his was an application for leave to appeal the decision of an arbitrator. /he 8pplicant was the owner of the barge R;orman Mc$eodS which it had purchased in China. 8rrangements were made to have the barge towed from (hanghai to ?ancouver together with another barge also destined for Canada. +rior to the tow the 8pplicant arranged with its underwriters for the barge to  be included on its existing insurance policy. /he 'espondent underwriters agreed to hold the  barge covered provided< the tug was approved by a surveyor" the surveyor Rattend and approve all stages of the towing operationS" the surveyor Rapprove prevailing weather conditions or stipulate acceptable weather criteria for each stage of the towing operationS" and, the recommendations of the surveyor were complied with. 8 surveyor did issue a Certificate of 8pproval which required, inter alia, that the departure from (hanghai or intermediate ports ta%e  place in favourable weather and on receipt of a suitable weather forecast. /he tug and two barges departed (hanghai on G1 8pril A11. /he contemplated route was to proceed via 3apan where  bun%ers were to be ta%en aboard. #owever, after leaving port the Master decided to ta%e on  bun%ers at ;a%hoda, 'ussia which was done. :ithin a few hours of leaving ;a%hoda the flotilla encountered rough weather. /he two barges collided and both were damaged. /he 8pplicant paid PA.B million to repair the R;orman Mc$eodS and suffered an additional PB11,111 in losses. (ubsequent to the incident the 8pplicant and 'espondent entered into an agreement to submit any dispute to Rfinal and bindingS arbitration. 8t the arbitration, the arbitrator found that the survey warranty and Certificate of 8pproval constituted true warranties and that they had been  breached in that the departure from the intermediate port of ;a%hoda did not ta%e place in favourable weather conditions and no surveyor attended at ;a%hoda. )n addition, the arbitrator found that the change of course was a deviation within the meaning of s. HGA! of the  Marine  &nsurance 2ct . /he held covered clause in the policy would have protected the 8pplicant if it had given the requisite notice.! >inally, the arbitrator held that there was no waiver or estoppel on the part of underwriters in sending a surveyor to survey the loss and in approving the continuation of the tow. /he first issue the Court had to consider on this application was whether

the parties had excluded a right of appeal. /he Court noted that if the parties had provided that the arbitration was Rfinal and binding with no right of appealS there could be no serious argument on the issue. #owever, the agreement merely provided the arbitration was to b e Rfinal and bindingS and therefore the Court had to determine the intent of the parties. /he only evidence of this outside the agreement was a statement by the lead underwriter that Ra 6udicial resolution would have no value in this case other than to result in heavy heav y costs to the parties, to the benefit only of their lawyersS. /he Court held that this statement ta%en together with the wording of the agreement indicated the parties wished their dispute to be resolved by the arbitrator without any appeals. /his was sufficient to dispose of the application but the Court nevertheless continued to consider whether the issues on appeal were questions of law, upon which an appeal could be allowed, or questions of fact for which there could be no appeal. /he Court held that the issues as to whether the weather warranty and the warranty requiring surveyor approval at intermediate stages were true warranties were questions of law. /he arbitrator4s findings with respect to notice and waiver and estoppel were, however, questions of fact upon which no appeal was allowed. Marine )nsurance  5ad >aith  $imitation +eriod - +leading  (tri%ing  'easonable Cause of 8ction >orestex Management Corp. et al. v 9nderwriters at $loyds et al., A11H >C G1G RMany years ago when small boys wore suspenders and ships had gender...S (o begins the 'easons for 6udgment of +rothonotary #argrave in this application b y the Fefendants to stri%e out the (tatement of Claim of the +laintiff. + laintiff. /he facts were that on H 8ugust A111 the R/exadaS R/exadaS went aground in a passage in the Iueen Charlotte )slands and was subsequently declared a constructive total loss. /he +laintiff gave underwriters notice of the casualty on J 8ugust A111 and underwriters denied coverage for breach of the trading warranty on 1 8ugust A111. /he +laintiff subsequently commenced an action against underwriters for coverage under the policy of insurance. /hat action was, however, dismissed following a status review on 7 3anuary A11G. /he dismissal was appealed by the +laintiff but the appeal was not served. /he +laintiff attempted to bring on a motion e' parte to extend the time to serve the appeal but was ordered to serve the underwriters. /his was not done and the >ederal Court of 8ppeal dismissed the appeal for delay on G 3anuary 3anuar y A11H. /he +laintiff subsequently commenced the present action against underwriters alleging bad faith. /he Fefendant underwriters filed a (tatement of Fefence and  brought the present motion to dismiss the action on various grounds. #owever, #owever, as they had filed a (tatement of Fefence the +rothonotary held that they were only entitled to argue that the (tatement of Claim failed to disclose a reasonable cause of action. /he thrust of the Fefendants argument was that there could be no action for bad faith without an initial finding that there was coverage under the policy. /he +rothonotary first considered the requirements of an action for  bad faith. #e reviewed 8merican 8merican and Canadian authorities and noted that although a claim under  a policy and a claim c laim for bad faith are two distinct causes of action they are related in that a claim

for bad faith cannot succeed unless there is a finding that there is coverage under the policy. #e next considered the effect of the dismissal of the claim under the policy and held that an order dismissing an action for delay does not set up a res judicata defence and therefore, sub6ect to any time bar defence, does not prevent p revent a +laintiff from re-commencing an action. /he +rothonotary next considered whether there was a limitation period that would bar the +laintiff from recommencing an action on the policy. /he /he Court was referred to s. G7 of the +ederal ourt 2ct  which incorporates provincial limitation periods and was urged to apply the one year limitation  period set out in section AA! of the 5ritish Columbia &nsurance 2ct . #owever, the +rothonotary questioned whether the 5ritish Columbia &nsurance 2ct  extended  extended or ought to extend to marine insurance, a federal underta%ing. /he +rothonotary did, however, apply the two year limitation  period in the 5ritish Columbia imitations 2ct  and  and applying that period held that the action was not time barred. /he denial of coverage cove rage occurred on 1 8ugust A111 and the bad faith action was commenced on 7 8ugust A11A.! 8ccordingly, 8ccordingly, the +rothonotary noted that the existing bad faith action could be amended by adding a supporting claim under the policy and held that if this was done it was not plain and obvious and beyond doubt that the +laintiff4s action could not succeed. )n result, the motion to stri%e the claim was dismissed. Marine )nsurance  5reach of :arranty :arranty &artsman et al. v *lite )nsurance et al., A11H A 11H O;(C BD /he +laintiff in this matter purchased a vessel from the Fefendant marina and as%ed the marina about insurance. (he was told that the marina could not provide insurance but was given the name of a bro%er who arranged insurance with the Fefendant insurer. 8 temporary binder was issued for G1 days that was conditional on the vessel being laid up at the doc% pending receipt of a completed application and survey. surve y. )t was also conditional on the vessel not being used except for instructional purposes by the marina. 8lthough the +laintiff alleged she was not advised of these conditions the Court did not believe her. )n breach of the conditions the +laintiff too% the vessel on a cruise during which it was damaged. +redictably, the insurer denied coverage and the Court upheld the insurer4s denial. Marine )nsurance  3ury /rials /rials  ;elson Mar%eting )nternational v 'oyal and (un 8lliance 8lliance )nsurance, A11G 5C(C HG7 /he issue in this appeal was whether the Master had correctly set aside a 6ury notice. /he underlying facts were that a cargo of wooden flooring carried from Malaysia to $ong 5each, California was damaged. /he cargo was insured by the +laintiff with the Fefendant but the Fefendant denied coverage on various grounds. 8t first instance the Master set aside the 6ury notice served by the +laintiff on the grounds that the principal issues in the case were ones of construction of the terms of the insurance policy, a matter not within the purview of a 6ury. /he

+laintiff appealed arguing that there were many factual issues that were within the pu rview of a  6ury and that the Master had misconstrued the case. /he appeal 3udge held, however, that the Master was correct in his analysis, holding that the proper test was whether the construction issues would remain once the factual issues were resolved. )f so, the principal issues are ones of construction and the matter should be heard by 6udge alone. Marine )nsurance  (ue and $abour  +roportion payable when insured and uninsured property involved  ;orth Coast (ea +roducts $td. v. );& )nsurance Company of Canada, A11H 5CC8 7B affirming affirming A11G 5C(C B7A /he insured +laintiffs incurred expenses in recovering trays and the oysters in them from the seabed when the lines of their oyster o yster farm were vandali2ed. /he +laintiffs were insured for the loss of the trays but not for the oysters o ysters themselves. /hey claimed under the sue and labour  provisions of their marine insurance policy for all the expenses incurred in in recovering the trays and oysters. 9nderwriters claimed that only a portion of the expenses could be claimed and an d that the claim should be in rateable proportion to the value of the insured trays to the uninsured oysters. /he policy wording included provisions for reducing recoverable sue and labour expenses where the property was underinsured but bu t was silent with respect to cases where there was both insured and uninsured property. /he matter was disposed of by (pecial Case. /he underwriters relied on *nglish case law from 71A unard /teamship o. td. v. Marten! that appeared to state that sue and labour expenses should be recoverable ratably where expenses are incurred for both insured and uninsured property. #owever, the trial 3udge found for the insureds  because the terms of the policy did not specify what would happen when expenses were incurred in respect of insured and uninsured property. On appeal, the Court of 8ppeal upheld the trial 3udge holding that the sue and labour clause of the policy only onl y limited the insurer4s obligation in the specific circumstances identified in that clause, none of which applied. )nsurance  Firect 8ction 8gainst )nsurers  )nterpretation of +olicies  $imits of Coverage (olway v $loyd4s 9nderwriters, A11B O;(C 10B1 )n this matter the +laintiffs arranged for a motor carrier to move and store their pe rsonal  belongings. /he truc% was stolen and the +laintiffs4 +laintiffs4 belongings were never recovered. /he +laintiffs obtained a 6udgment against the carrier which was not satisfied. /he +laintiffs then commenced this direct action against the carrier4s primary and excess liability underwriters. 5oth underwriters agreed that the +laintiffs4 loss was covered but disagreed as to how the loss should  be apportioned between them. /he primary underwriter argued that the limit of its its policy was PB11,111 as provided for in the transportation section of its policy. /he /he excess underwriter argued that the applicable limit was that in the warehouse and storage section of the primary

 policy of P,111,111. /he issue was then one of interpretation of the primary policy. /he Court noted that the normal rule for construction of insurance contracts requires a search for an interpretation which, from the whole of the contract, advances the true intent of the parties at the time the contract was entered into. /he Court further noted that the general principles of interpretation of insurance contracts include< ! the contra proferentum rule" A! the principle that coverage provisions should be construed broadly and exclusion clauses narrowly" and G! the desirability, at least where the policy is ambiguous, of giving effect to the reasonable expectations of the parties. /he Court then considered in detail the provisions of the primary  policy and ultimately concluded that the applicable limit depended on the proper characteri2ation of the claim against the carrier either as breach of a transportation contract or breach of a storage contract. /he Court held that since liability was imposed on the carrier at the trial for breach of a term relating to storage of the +laintiffs4 goods, the limitation of P,111,111 for warehousing or storage was applicable. )nsurance  )nterpretation  *xclusions  Felay  Fec% Cargo  Concurrent Causes  /imber /rade >ederation Clauses  5ad >aith  +unitive Famages Continental )nsurance Co. v 8lmassa )nternational )nc., A11G O;(C 1HAA /his case concerned a shipment of lumber carried from Canada to (audi 8rabia, some of which was loaded on dec% and some of which under dec%. Furing the voyage the vessel suffered engine failure and had to be towed to +iraeus, &reece for repairs. /he shipment was insured under a n open cargo policy. /he assured was concerned about the possibility of the lumber cargo  becoming damaged during the repair process by lac% of ventilation. )n the event, some of the cargo was damaged before the engine problems had been repaired. 5elieving the cause of the damage was the failure to properly ventilate the holds, a covered peril, underwriters agreed to advance the assured approximately 9(PGB1,111. ;otwithstanding this agreement, underwriters advanced only approximately 9(PA01,111. 8fter the cargo arrived in (audi 8rabia, it was surveyed by a surveyor appointed by underwriters. /he essence of that surveyor4s opinion was found to be that the damage to the cargo was caused by delay although other factors contributed. 9nderwriters denied the claim on the basis of an exclusion for delay in the /imber /rade >ederation Clauses. /he underwriters argued that this clause excluded all damages caused by delay even if delay was only a contributing cause. 8t the trial the 3udge did not accept the evidence of the underwriter4s surveyor because that surveyor had received RinputS from counsel and@or another surveyor also retained by underwriters. /he trial 3udge found as a fact that the damage was caused by lac% of ventilation and was therefore not excluded under the policy. )n any event, the trial 3udge held that the exclusion clause would only be operative if delay was the sole cause of the loss. 8 secondary issue concerned whether the cargo carried on dec% was covered by the policy. /his issue arose because the /imber /rade >ederation Clauses differentiate  between under dec% and on dec% cargo. 9nder dec% cargo is sub6ect to all ris%s coverage whereas on dec% cargo is sub6ect to specified perils coverage. /he damage was not caused by any of the

specified perils applicable to on dec% cargo and, therefore, it appeared that the dec% cargo should not be covered. #owever, the trial 3udge found that there was an ambiguity in the policy when read together with the certificate of insurance in that it was not clear whether an on dec% bill of lading was required to have been issued to bring into effect the on dec% clauses. (he resolved the ambiguity in favour of the assured and held that the on dec% cargo was afforded all ris%s coverage. >inally, the trial 3udge considered allegations of bad faith made against underwriters and a claim for punitive damages. )n the course of her reasons on this issue the trial 3udge was critical of the way in which underwriters handled the file. /he criticisms included the following< ma%ing an interim payment of only 9(PA01,111 when underwriters had agreed to pay 9(PGB1,111" interfering with and attempting to influence the surveyor" failing to list relevant documents and lying about same on discovery" and, raising allegations the damage was caused  by inherent vice when underwriters %new there was no basis for this defence. (he concluded that there was definite evidence of unfairness and deception. #owever, and notwithstanding these findings, she declined to order punitive damages on the grounds that the conduct was not so outrageous that punitive damages were required to act as a deterrent. Charters 5ailment  :aiver of (ubrogation  ;orth Ling $odge $td. v &owlland /owing $td. et al., A11B 5CC8 BBD affg. in part A11H 5C(C H01 /his matter concerned liability for the sin%ing of the barge R(ea $ion ?)S and is fully summari2ed under Miscellaneous Cases - Charter +arties see here!. 8n issue considerd by the trial 3udge but not by the Court of 8ppeal was whether the hirer@charterer was immune from suit  by reason of clauses in the hull insurance policy including charterers as additional assureds and waiving subrogation against charterers. /he trial 3udge held that these clauses were not effective since the policy also contained an express clause which provided that the benefits of the insurance policy would not automatically extend to third parties but would only be extended if the option was exercised by the owner. /he trial 3udge found that the owner did not exercise this option. 5ad >aith - +unitive Famages :hiten v +ilot )nsurance Co., A11A (CC J 8lthough not a marine insurance case, this decision by the (upreme Court of Canada is of significant interest to marine insurers. /he facts were that the +laintiffQs home was destroyed in a fire. /he Fefendant, the +laintiffQs insurer, denied the claim made under the insurance policy on the grounds that the fire had been deliberately set even though the local fire chief, the FefendantQs own fire investigator and the FefendantQs initial expert all agreed that there was no evidence of arson. 8t trial, the 6ury awarded the +laintiff P million in punitive damages against

the Fefendant for bad faith denial of coverage. On appeal to the Ontario Court of 8ppeal the  punitive damage award was reduced to P11,111.11. On further appeal, the (upreme Court of Canada stated that although the P million award of the 6ury was higher than the court would have made it was within the high end of the range where 6uries are free to ma%e their assessment. 8ccordingly, the (upreme Court reinstated the 6uryQs punitive damage award of P million for failure to act in good faith. $iability +olicies - )nterpretation - )llegality - +ay to be +aid Conohan v /he Cooperators, A11A >C8 01 /his case arose out of a collision between the E$ady 5rittanyE and ECape $ight ))E off +rince *dward )sland. 8t the time of the collision the ECape $ight ))E was at anchor. >ollowing the collision, blood alcohol readings were ta%en from the Master of the E$ady 5rittanyE which indicated his blood alcohol content was above the legal limit. 8n action was commenced by the owners of the ECape $ight ))E against the E$ady 5rittanyE. /he insurers of the E$ady 5rittanyE refused to defend or participate in that action alleging that the insured was in breach of the terms of the policy in that the vessel was being operated in an illegal manner. /he owner of the E$ady 5rittanyE thereafter admitted liability for the collision, confessed to 6udgment and assigned all of his rights of claim against his insurers to the owners and underwriters of the ECap e $ight ))E. /he owners and underwriters of the ECape $ight ))E then brought this action against the Fefendant, the insurer of the E$ady 5rittanyE. /he Fefendant denied it was liable on various grounds. >irst, it alleged that there was a breach of the implied warranty of legality contained in s. GH of the  Marine &nsurance 2ct . (econd, it alleged that the collision was caused by Ewilful misconductE, an excluded peril under s. BG of the Marine &nsurance 2ct . /hird, it alleged that the collision was caused by Edrun%en or impaired operation of the vessel or other wrongful actE, an excluded peril under the policy of insurance. >inally, it alleged that it was only liable to pa y the insured if the insured has Ebecome liable to pay and shall pay by way of damages to any other person any sum...E. 8s the insured had not actually paid any sum it argued that its liability was not invo%ed. 8t trial the /rial 3udge held< first, that the implied warranty of illegality did not apply to the third  party liability portions of the policy" second, that there was no Ewilful misconductE" third, that on a proper reading of the policy the exclusion of Edrun%en or impaired operation of the vessel or other wrongful actE did not apply to the third party liability clause of the policy as that clause contained its own separately enumerated exclusions. /he /rial 3udge did, however, hold that the  policy was, in fact, a pay to be paid policy and that the Fefendant was, accordingly, not liable. /he +laintiff appealed. /he >ederal Court of 8ppeal reviewed the case authorities relating to Rpay to be paidS clauses and affirmed the decision of the /rial 3udge. $iability +olicies - *xclusions - Rcourse of transitS

&arfield Container /ransport )nc. v Chubb )nsurance Co. of Canada, A11A! H 8.C.:.(. Gd! 11 /he +laintiff was a transportation company speciali2ing in ta%ing cargo from ships and delivering such cargo to the customs clearance warehouse and, eventually, to the purchaser. /he +laintiff was insured by the Fefendant under a policy which provided coverage for goods shipped under a bill of lading and in due course of transit. )n this instance the +laintiff delivered equipment to the customs clearance warehouse as required by the bill of lading. :hile the equipment was at the warehouse the +laintiff contacted the purchaser and was instructed to deliver the equipment to another truc%ing firm. /he +laintiff transported the equipment to another warehouse where it had the speciali2ed loading equipment necessary to do the tas%. Furing the course of loading the equipment was damaged. /he Fefendant insurer denied coverage saying that the carriage under the bill of lading and in the due course of transit came to an end at the customs clearance warehouse. /his argument was accepted at first instance. On appeal to the Iuebec Court of 8ppeal, however, the Court of 8ppeal held that the carriage and course of transit did not come to an end at the customs clearance warehouse despite the fact that the ultimate destination was not specified in the bill of lading. /he Court held that the +laintiff was obliged to deliver the equipment to the ultimate destination and temporary disruptions that were not unreasonable did not brea% the chain of transit. (ervice *x 3uris - (tay of +roceedings Continental )nsurance Co. v 8lmassa )nternational )nc., A11A O.3. ;o. A1A, affirming A11 O.3. ;o. GAA7 /his matter concerned a cargo policy ta%en out by a Iuebec merchant from an Ontario based insurer insuring a cargo of lumber carried from Iuebec to (audi 8rabia. Furing the course of the voyage the ship suffered engine damage and called at an intermediate port for repairs. 8s a result of the delay, the lumber cargo was damaged and a claim was made under the policy. /he insurer initially made a payment on account but later denied coverage. /he assured brought an action in Iuebec against the insurer and the insurer brought an action in Ontario against the assured to recover the monies paid. /he assured brought the present motion to stay the Ontario proceedings. /he motion was granted. /he motions 3udge held that mere residency of the insurer in Ontario was insufficient to create a real and substantial connection with Ontario and that the appropriate forum was Iuebec. /he 6udgement was appealed. )n a short endorsement the Ontario Court of 8ppeal affirmed the decision of the motions 3udge. :arranties - 8uthority of 5ro%er  *l%horn Fevelopments $td. v (overeign &eneral )nsurance Co. et al., A11 5CC8 AHG, A11 5.C.3. ;o. 0G1

/his was an application by the Fefendants for summary dismissal of the +laintiffQs claim for coverage under a hull and machinery policy. /he policy contained a warranty that any movements of the barge would be sub6ect to underwritersQ prior approval. )n breach of this warranty, the barge was moved without any notice to underwriters and san% four days after the move had been completed. 8 marine surveyor was appointed but he was unable to come to a firm opinion on the cause of the sin%ing. (ubsequent to the sin%ing, the insurers and the bro%er agreed to cancel the insurance policies effective the day of the move. /he issues in the case were whether the warranty was a true promissory warranty or merely a suspensive condition and was the insurance policy properly cancelled retroactively. 8t first instance the motions 6udge held that in order for a clause to constitute a promissory warranty there must be Ra substantial relationship  between the warranty and the loss incurredS. /he motions 6udge further held that in order to answer this question there was a need for further evidence concerning the cause of the sin%ing of the barge. /he motions 6udge therefore dismissed the application and ordered that the matter  proceed to trial. On appeal, the 5ritish Columbia Court of 8ppeal held that the motions 6udge erred in requiring that a Rsubstantial relationshipS exist between the warranty and the loss incurred. (uch a test was retrospective in nature and would be a serious practical impediment to the marine insurance business. /he Court of 8ppeal went on to find that the clause in issue was clearly intended by the parties to be a promissory warranty the breach of which discharged the insurers from any liability. /he Court of 8ppeal further held that the cancellation of the policy by agreement between the insurers and the bro%er was effective as the bro%er had the apparent or ostensible authority of the assured. (tay of +roceedings :aterwor%s Construction $td. v $iberty Mutual )nsurance Co., A11 ;((C AB, A11 ;.(.3.  ;o. GBB /his action arose out of the sin%ing of a concrete casing which was determined to be a ha2ard. /he +laintiff alleged that its liability for the cost of removal of the casing was covered by an insurance policy issued by the Fefendant. /here was, however, a second action between the +laintiff and other parties relating to the liability for the sin%ing. /he Fefendant insurer brought this application to stay the insurance action pending the outcome of the liability action. /he Court declined the stay holding that there were separate issues in the two actions. (ubrogation Chubb )nsurance Co. of Canada v Cast $ine $td., A11 I.3. ;o. AG0G /his was a subrogated action by a cargo insurer against an ocean carrier for damage occasioned to a container of cheese. /he Fefendant carrier brought this motion arguing that the +laintiff insurer had no right to bring the action as it had no rights of subrogation. /he Fefendant relied

upon the terms of the receipt signed by the assured which referred to the payment by the insurer as a loan. ;otwithstanding the language of the receipt, the court held that the payment by the insurer was a true insurance indemnity as it was reimbursable by the assured only in the event that it should obtain indemnification from another source. )n result, the FefendantQs motion was dismissed. Cargo )nsurance - Cancellation - Misrepresentation  ;uvo *lectronics )nc. v $ondon 8ssurance et al., A111! H7 O.'. Gd! GDHOnt. (.C.! /his matter arose out of the loss of B cartons of integrated circuits valued at 9(P,H1G,111.11 and carried by air from (an >rancisco to /oronto. /he shipment left (an >ranciso on 8ugust 1, 770, and arrived at /oronto on the morning of 8ugust , 770. )t was then placed in the 8ir Canada cargo warehouse but was never seen again. /he +laintiff consignee commenced this action for the value of the lost cargo against its cargo underwriter and the air carrier. /hat part of  the 6udgment dealing with the claim against the carrier is considered below under ECarriage of &oodsE.! /he cargo underwriter denied coverage on the basis that it had cancelled the policy of insurance prior to the loss and also on the basis that the assured had failed to disclose prior losses. /he shipment was insured under an open cargo policy that provided that it could be cancelled upon G1 days written notice Ebut such cancellation shall not affect any ris%s which have already attached hereunderE. /he policy further provided that notices mailed to the bro%er were deemed to have been received by the assured. On 3uly 1, 770, the underwriter faxed a notice of cancellation to the bro%er giving G1 days notice of cancellation and stating that the cancellation would be effective on 8ugust 1, 770. /he underwriter too% the position that the  policy was cancelled as of Airst, the notice of cancellation was vague and imprecise in that it did not say how the G1 days was to be calculated and did not specify the exact time on 8ugust 1, 770, the cancellation would be effective. /he Court held that the notice of cancellation could be interpreted to mean that coverage would be in force for the entire day of 8ugust 1, 770. (econd, the policy required that the notice of cancellation be mailed to the bro%er. /hird, the policy also contained statutory conditions which contained clauses dealing with termination that were different from those in the bod y of the  policy and which the underwriter made no attempt to comply with. /he Court therefore held that the policy was ambiguous and the underwriter had failed to give proper notice of cancellation. /he Court next turned to the issue of whether the policy was void ab initio by reason of the assuredQs failure to disclose at the time it applied for the policy that it had suffered prior losses. /he evidence disclosed that the assuredQs bro%er had advised the underwriter that there had been no losses except for one lost pac%age value PG11.11! three years earlier. /his information was not accurate. )n fact, the assured had suffered a series of losses in the hands of its courier totalling PJ,111.11. /his information did not come to the attention of the underwriter until after

the loss in issue. /he underwriter submitted that these facts were material to the ris% and should have been disclosed. /he underwriter led the evidence of an expert independent underwriter to the effect that the courier losses would have caused him to either increase the premium or modify the conditions of carriage. /he Court, however, found as a fact tha t the Fefendant underwriter would have written the ris% even if it had been advised of the prior losses. 9nder these circumstances it was irrelevant what an independent underwriter would have done. /he Court held that a successful defence on the basis of material non-disclosure requires proof that, if the facts had been disclosed, the underwriter who wrote the ris% would have declined the ris% or required a higher premium and evidence from an independent EprudentE underwriter to the same effect. 8ccordingly, the Court held that the underwriter had failed to prove material nondisclosure and the underwriter was held liable for the insured value of the lost cargo. ;ote< /he underwriter was not without a remedy as there was a recovery from the air carrier which is detailed below under ECarriage of &oodsE.! $iability of 8gents and 5ro%ers - Material >acts - Onus of +roof  1GD77 Ontario $td. v Lent $ine )nternational $td., A111 O.3. ;o. G1DH, A111! AA C.C.$.). Gd! GA Ont. (.C.! /his was an action against a freight forwarder and insurance bro%er for breach of contract and negligence arising out of damage to a cargo of chocolate bars shipped to /rinidad. /he cargo was insured sub6ect to the )nstitute >ro2en >ood Clauses which only provided coverage in the event of mechanical brea%down of the reefer units for a period longer than AH hours and such coverage ceased B days after discharge from the ship. /he +laintiff was unable to meet these conditions and, hence, there was no insurance coverage. /he claim against the freight forwarder and insurance bro%er for breach of contract was based on an alleged contractual agreement that the Fefendants were to procure Eall ris%s, warehouse to warehouseE insurance coverage for the shipment. /he Court found, however, that although the +laintiff had initially requested Eall ris%s, warehouse to warehouseE coverage it later instructed the freight forwarder to procure coverage sub6ect to the )nstitute >ro2en >ood Clauses. 8ccordingly, the Court found that there was no  breach of contract. /he Court next considered the question of negligence. /he Court reviewed the authorities on the duties owed by insurance agents and bro%ers to their customers. /hese authorities established that the duty included< to review the needs of the customer" to provide information about available coverage and advice about which forms of coverage are appropriate" to exercise reasonable s%ill and care to obtain policies in the terms bargained for and to service those  policies as required" to advise the customer if they are unable to obtain the policies bargained for" and to point out gaps in the coverage and advise the customer how to protect against those gaps. /he Court held that although the +laintiff had been advised of the limiting conditions of the )nstitute >ro2en >ood Clauses, the Fefendants had a duty to do more. (pecifically, the Court

found that extended coverage was available and that the Fefendants should have advised the +laintiff of this coverage. /he Court re6ected the FefendantsQ argument that the +laintiff had not  proven that it would have been granted the extended coverage if it had so requested. /he Court held that there was no onus on the +laintiff to prove this. 8n additional argument advanced by the Fefendants was that there had been material nondisclosure on the part of the +laintiff. /he Court re6ected this argument saying that even if there had been material non-disclosure the effect would be to ma%e the contract of insurance voidable and not void ab initio. 8s the underwriter never exercised the right to void the policy the Fefendants could not rely upon the voidability of the policy as proof that the +laintiff suffered no loss. >urther, the Court held that there was insufficient evidence that the facts not disclosed were material. /he Court noted that the onus was on the Fefendants to lead evidence from the underwriter that it, in fact, regarded the non-disclosure as material and also to lead expert evidence of an independent underwriter that a prudent underwriter would be of the same view. )n the result, the Fefendants were liable for failing to obtain the proper insurance coverage. Cargo )nsurance - )nsufficiency of +ac%ing 'ainbow /echnicoloured :ood ?eneer $td. v /he ECanmar ConquestE et al., 3une AJ, A111! ;o. /-ABJ1-7D >.C./.F.!, A111 >.C.3. ;o. 1GA /his was an action by the +laintiff against its cargo insurer for damage to a guillotine press in an amount in excess of P11,111.11. /he Fefendant insurer argued that coverage was excluded by clause H.G of the )nstitute Cargo Clauses 8! in that the press was insufficiently pac%ed and  prepared for shipment. /he Court reviewed the evidence of the surveyors, all of whom gave the opinion that the securing of the press in the container was inadequate, and dismissed the action. 9nseaworthiness $aing v 5oreal +acific, October G, A111! ;o. 8-00-77 >.C.8.!, A111 >.C.3. ;o. 00B /his was an appeal from a 6udgment of the /rial Fivision dismissing a claim under a marine insurance policy for the loss of an excavator. /he excavator was loaded on the self-propelled  barge, E+alaquinE, and was being carried across the (trait of &eorgia. Furing the crossing the seas became rough and the excavator shifted and ultimately fell overboard. /he +laintiff settled an action brought by the owner of the excavator and brought proceedings for indemnity pursuant to the terms of his insurance policy. /he Fefendant insurer denied the claim on the basis that the vessel was unseaworthy at the commencement of the 6ourney. /he /rial 3udge found that the  barge was unseaworthy in that it was too heavily laden for the sea conditions that could reasonably be expected and the excavator was not properly secured. (he further found that the +laintiff had %nowledge of the facts that made the vessel unseaworthy. )n result, the +laintiff4s

action was dismissed. On appeal, the Court of 8ppeal held that the /rial 3udge correctly applied the test of privity, ie. whether the shipowner had %nowledge of the facts constituting the unseaworthiness and %nowledge that those facts rendered the ship unseaworthy or turned a blind eye to the facts giving rise to the unseaworthiness. )n the result, the appeal was dismissed. #ll Ris$s &overage - 'ear and ,ear

5evan v &artside Marine *ngines $td. et al., A111 5.C.3. ;o. BAJ 5.C. +rov. Ct.! /his was an action against a repairer and an insurer under an all ris%s policy for damage caused when a transmission overheated. /he +laintiff alleged that the repairer had been negligent in  performing prior repairs to the trolling valve control lin%age. /he +laintiff further alleged that the damage was covered by his all ris%s policy. /he repairer denied negligence and the insurer defended on the basis of an exclusion in the policy excluding liability for damage caused by wear  and tear and mechanical brea%down. /he Court found that there could have been multiple causes of the transmission failure including pre-existing damage, wear and tear and improper use of the trolling gear by the +laintiff or previous owners. 8s a result, the Court held that negligence on the part of the repairer had not been proven. :ith respect to the claim against the insurer, the Court noted that there are limits to the coverage afforded by an all ris%s policy and that the +laintiff was required to prove that the cause of the transmission failure Ewas due to a casualtyE. /he Court held that the +laintiff had not proven that the loss was due to a casualty and coverage was denied. :aiver of (ubrogation - 8dditional 8ssureds - +rivity of Contract >raser 'iver +ile = Fredge $td. v Can-Five (ervices $td., 777 G (.C.'. 1J (.C.C.!. /his was an action by the owners and underwriters of the derric% barge E(ceptre (quamishE against the charterer of the barge. /he E(ceptre (quamishE was lost in the (trait of &eorgia when it was left by the charterer unattended in heavy weather. /he charterer defended the action alleging that the loss of the barge was due to the negligence of the owner, that there was an agreement that the owner would insure the barge for the benefit of the charter, and that the action, which was a subrogated action by hull underwriters, was barred by reason of a waiver of subrogation and Eadditional insuredsE clause in the hull policy. /he waiver of subrogation clause waived subrogation against charterers. /he Eadditional insuredsE clause gave the owner  permission to charter and made the charterer an additional insured under the policy. /he owners and underwriters argued that the charterer was not entitled to rely on these terms because it was not a party to the policy and because the owners and underwriters had executed an agreement following the loss in which they agreed to proceed with legal action against the charterer and in which the owner waived any rights it had under the waiver of subrogation clause. 8t trial reported at 77B!, 7 5.C.$.'. Gd! A01!, the court held that the loss of the barge was due to the

negligence of the charter, that there was not sufficient evidence of an agreement to insure, and that the doctrine of privity applied to prevent the charterer from relying upon the waiver of subrogation and Eadditional insuredsE clauses. On appeal reported at 77D!, G7 5.C.$.'. Gd! JD!, the 5ritish Columbia Court of 8ppeal upheld that part of the trial 6udgement holding that there was no agreement to insure. /he Court of 8ppeal then embar%ed on a lengthy analysis of the doctrine of privity and concluded that the doctrine of privity no longer applied to prevent a third party from ta%ing the benefit of a waiver of subrogation clause. /he Court of 8ppeal further  held that the agreement entered into between underwriters and owners following the loss was ineffective as the charterers rights had crystalli2ed upon the happening of the loss. On further appeal to the (upreme Court of Canada, the (upreme Court upheld the decision of the Court of 8ppeal. /he (upreme Court held that new exceptions to the doctrine of privity must meet a two  part test< . the parties to the contract must intend to extend the benefit to the third party see%ing to rely on the contractual provision" and A. the activities performed by the third party must be the very activities contemplated as coming within the scope of the contract in general, or the  provision in particular, as determined by reference to the intentions of the parties. 8pplying this two part test, the court found that there could be no question that owners and underwriters intended to extend the benefit of the waiver of subrogation clause to a class of third parties charterers! that included the charterer and that the relevant activities arose in the context of the charter relationship, the very activity anticipated in the waiver of subrogation clause. :ith respect to the agreement entered into between underwriters and owners following the loss, the (upreme Court agreed with the Court of 8ppeal that the happening of the loss crystalli2ed the chartererQs rights and that the waiver of subrogation clause could thereafter not be amended without the agreement of the charterer. Contribution 8mong )nsurers /renton Cold (torage $td. v (t. +aul >ire = Marine )nsurance Co., 777!,  C.C.$.). Gd! AD, Ont. Ct. &en. Fiv.!. 8lthough not a marine insurance case this decision relates to an issue that marine underwriters are often called upon to deal with. /he case concerned a fire at the assured4s warehouse which resulted in damage to goods belonging to one of its customers. /he assured had two liability  policies" a warehouseman4s legal liability policy and an umbrella excess policy that also provided comprehensive general liability coverage. /he insurer under the warehouseman4s legal liability  policy settled the claim with the assured4s customer and sought a B1 contribution from the insurer under the second policy. /he court first considered whether the second policy was a true umbrella policy and held that it was not. /he court next considered the EOther )nsuranceE clauses in the two policies. /he clauses were virtually identical, each providing that their own insurance was excess. /he court held that the two clauses were mutually repugnant and cancelled each other out. )n result, both underwriters were required to share equally in the settlement. /he

insurer under the second policy was not, however, required to contribute to the defence costs as these costs were excluded in its policy. Fiscovery - +rivilege Commercial 9nion 8ssurance Company +$C. v M./. >ishing Co. $td., 777!, 0A >./.'. DH, >.C./.F.!, affirmed 777! AHH ;.'. GDA, >.C.8.!. )n this matter the +laintiff insurers paid out a fire damage claim. (ubsequently, it was learned that the fire may have been intentionally set. /he insurers then instituted a fresh investigation into these allegations which ultimately resulted in commencement of the present action to recover the insurance moneys paid. 8t issue in this motion was whether the reports and information subsequent to the commencement of the second investigation were privileged from  production. /he court at first instance reviewed the law of privilege and ultimately held that the dominant purpose of that investigation was to commence an action to recover the insurance moneys paid out. )ndeed, the court could see no other reason for such investigation. On appeal to the >ederal Court of 8ppeal, it was noted that the motions 3udge d id not determine if litigation was in reasonable prospect when the reports were prepared or whether litigation was the dominant purpose for the creation of the reports. /he Court of 8ppeal noted that this was because counsel had agreed that they could determine what documents and information had to be disclosed if the 3udge merely determined whether the dominant purpose of the investigation was to commence an action to recover the insurance moneys paid. )n light of this agreement, the Court of 8ppeal found no error in the finding of the motion 3udge and dismissed the appeal. Marine )nsurance - 8ll 'is%s +olicy 'ussell v Canadian &eneral )nsurance Co.,777!,  C.C.$.). Gd! AJH , Ont. Ct. &en. Fiv.!. )n this matter the +laintiff claimed under an all ris%s marine policy for damage caused to a sailboat by the accumulation of water in the interior of the vessel. /he damage to the sailboat occurred during the period from 771 to 77G. /he assured put the vessel into storage at the end of the summer in 771 and left it in storage until October 77G when it was discovered to be full of water. /he accumulation of water had rendered the vessel a constructive total loss. /he insurer  denied coverage on the basis that there was wilful misconduct on the part of the assured, that the +laintiff Ecourted the ris%E and that the damage was caused by wear and tear, an excepted peril under the policy. /here was conflicting evidence as to whether the assured periodically inspected the vessel while it was in storage. /he assured testified that he did periodically inspect the vessel. /he insurer led expert evidence to the effect that the assured could not have possibly inspected the vessel given the amount of water that had accumulated. /he court, however, held that there was no requirement that the assured inspect the vessel. /he court also held that there was no Ewilful misconductE on the part of the assured as he did not intend to damage the vessel and there

was no deliberate courting of the ris% as the damage was not foreseen. 8dditionally, the court found the damage was not caused by wear and tear as the damage was highly unusual and not the result of an occurrence ordinarily to be expected. 5reach of :arranty of )nspection (hearwater Marine $td. v. &uardian )nsurance Co. et.al., October , 77J! ;o.C81AA7J J 5.C.C.8.! /he +laintiff claimed under a marine insurance policy for the constructive total loss of a 7G year old converted wooden fish pac%er. /he vessel san% while moored to a log boom brea%water. /he Fefendant insurers denied coverage arguing that the assured had breached a warranty that  provided< E?essel inspected daily basis and pumped as necessaryE. /he vessel was not boarded on a daily basis for the purpose of EinspectionE. )t was, however, observed from a distance often of G11 yards! and pumped as necessary. /he trial 6udge held that compliance with the warranty did not require daily boarding of the vessel but, rather, that daily observation by a %nowledgeable observer was sufficient. /he trial 6udge further went on to consider whether the warranty was a =quot"true warranty =quot", the breach of which would void the policy, or merely a suspensive condition, the breach of which merely suspends the policy while the breach continues. /he trial  6udge held that the warranty was a suspensive condition. /his was relevant as the vessel had been  boarded and pumped the day before the sin%ing. 8 final issue concerned whether the vessel was truly a constructive total loss, i.e.. whether the cost of repair exceeded the insured value. /his, in turn, depended on whether the assured4s normal labour charge-out rate was used to calculate the repair cost or whether the actual cost to the assured i.e.. without a profit element! was used. /he trial 6udge held that the normal charge-out rate should be used. /he insurer appealed. /he 5ritish Columbia Court of 8ppeal stated that =quot"the trial 6udge reached the right conclusions for the right reasons =quot" and dismissed the appeal. )nsurance - *xtent of insurer4s obligation to repair  $oc%wood v Moreira, 8pril AH, 77J! ;o. CAHHH Ont. C.8.! )n this matter the insured4s pleasure craft was bro%en into b y vandals who used citronella candles in the interior of the vessel. 8s a consequence, a thic% sooty substance covered the interior of the vessel. /he assured made a claim under the insurance policy and the insurers responded by having the interior of the vessel cleaned. /he assured was not satisfied with the first cleaning so the insurers authori2ed a second cleaning. /he assured was still not satisfied and too% the  position that the only way the vessel could be restored to its original condition was by removing the dec% and replacing the interior at a cost of P11,111. /he trial 6udge held that the insurer4s obligation under the policy was to restore the boat to substantially the same condition it was in  before the vandalism, which had been done. /he insurer was not required to restore the boat to

the exact condition it was in before the vandalism. /he trial 6udge further re6ected a claim of b ad faith against the insurer, holding the insurer had responded promptly to the claim an d without malice. /he insured appealed. /he Ontario Court of 8ppeal in a brief endorsement noted that they agreed with the trial 6udge that the boat =quot"was substantially repaired =quot" and dismissed the appeal. Cargo )nsurance - *xclusions - )nstitute >ro2en Meat Clauses Iueen Charlotte $odge $td. v #iway 'efrigeration $td. and 'oyal )nsurance,3anuary D, 77J! ?ancouver 'egistry ;o. C7H0GJB 5.C.(.C.! )n this matter the +laintiff had purchased a used refrigeration unit from one of the defendants for use in transporting meat and vegetales to the Plainti./s shing lodge in the %ueen &harlotte islands1 ,he goods were insured under a olic" of insurance that included the Institute ro3en Meat &lauses #-241 ,hese clauses contained an e5clusion e5cluding an" loss arising fro+ 6!uotuntness of container111 where loading therein is carried out rior to attach+ent of this insurance or " the assured or their servants 6!uot1 'hile in transit the refrigeration unit ceased functioning and the goods within were soiled1  ,he Plainti. sued oth the vendor of the refrigeration unit and the insurer1 ,he &ourt found that the cause of the failure of the refrigeration unit was a defective art1 'ith resect to the liailit" of the vendor of the refrigeration unit the Plainti. argued the vendor was liale for reach of the i+lied warranties of tness and +erchantailit" in the *ale of 9oods #ct1 ,he vendor argued that it had contracted out of the i+lied ter+s " the use of the words 6!uot:o 'arrant" 6!uot in a !uotation given to the Plainti.1 ,he &ourt held however that these words were not su;cientl" clear to e5clude the i+lied ter+s1 'ith resect to the liailit" of the insurer the &ourt held that the loss was e5cluded " the ter+s of the olic" and the insurer was not liale1 In reaching this conclusion the &ourt noted that the insurer did stiulate for the inclusion of the Institute ro3en Meat clauses in its negotiations with the ro$er and that the ro$er was as a +atter of law the agent for the assured1

$iability )nsurance - Coverage (trangemore4s *lectrical $imited v )nsurance Corporation of ;ewfoundland $imited, 77D ).$.'. )-GHDB ;fld. (.C.! /his was an action under a policy of commercial insurance. /he +laintiff was in the business of servicing and repairing vessels. One such vessel which incidentally was owned by the +resident of the +laintiff company! was destroyed by fire while in the po ssession of the +laintiff for servicing. /he boat owner brought an action against the +laintiff who, in turn, requested

coverage under the liability provisions of the insurance policy. /he Fefendant insurer denied coverage, relying on an exclusion in the policy that excluded coverage for =quot"personal  property in your care custody or control =quot". #owever the policy also contained a specific exclusion for watercraft which provided that the exclusion did not apply to =quot"watercraft while ashore on premises you own or rent =quot". /he Court held that clearly the boat in issue was on the premises of the assured and therefore the policy applied.  ;egligence of 5ro%er  +ercy v :est 5ay 5oat 5uilders and (hipyards $td. et.al., October AJ, 77D! ;o. C81AJ1D ?ancouver 'egistry 5.C.C.8.!. /his was an appeal of a decision in which an insurance bro%er was found liable for not obtaining the proper coverage for its client, a yacht builder. /he issue arose when the builder was sued by a customer after the customer4s yacht caught fire. /he customer alleged that the boat was negligently manufactured by the builder. /he action by the customer was settled out o f court for a substantial sum. /he builder sought reimbursement of the settlement funds and of its full legal costs from the bro%er. /he builder alleged that the bro%er had enticed it awa y from another  bro%er@insurer by promising =quot"full coverage =quot" at better rates. 8s it turned out, the  policy obtained for the builder by the bro%er did not provide the same coverage as was provided  by the prior policy. (pecifically, it did not cover the product liability claim of the builder4s customer. )f the prior policy had been in place, the builder would have been covered for this claim. /he bro%er was found liable both at trial and on appeal for failing to properly review its client4s prior policies and for failing to properly advise the client of the exclusions to coverage. $ate 'eporting Femitri v. &eneral 8ccident )ndemnity Co., ;ovember A0, 770! ;o. (1GA70 ;ew :estminster 'egistry 5.C.(.C.!. /his is not a recent case but it is one which we have only recently become aware of. /he +laintiff  was in6ured and his vessel was damaged when it was rammed by a vessel insured by the Fefendant. /he +laintiff obtained 6udgement against the assured but was unable to recover from the assured and was therefore attempting to recover direct from the insurer pursuant to statute. /he insurer denied liability on the grounds that its assured had failed to give it prompt notice of the claim as required by the terms of the policy. /he accident occurred in (eptember of 77 but the assured did not give notice until ;ovember of 77A. /he Court held that the assured had failed to give prompt notice and declined to give relief from forfeiture. )n result, the +laintiff was not able to recover from the insurer. 5reach of $ay 9p :arranty

Marler v 'oyal )nsurance Company et.al, October G, 770! ;o. CAH1B@7GOnt. Ct. &en. Fiv.! /his was an action by a vessel owner against his underwriter and insurance bro%er. /he underwriter provided the bro%er with a quotation for insurance which contemplated issuance of an 8ll 'is% policy upon compliance with all survey recommendations and a re-survey. )t also included a warranty< =quot":arranted laid-up and out of commission =quot". /he quotation was  provide to the assured who instructed the bro%er to procure the insurance. /he assured subsequently put the vessel in the water. :hen the bro%er learned of this she advised the assured that the warranty did not permit the boat to be in the water. /he insurer later advised the assured that the policy was cancelled. ;ine days later the vessel san%. /he Court held that the assured, an experienced sailor, boat owner and marine lawyer, was aware of the meaning of the warranty and had breached the warranty by putting the vessel in the water. 8ccordingly, the action was dismissed. /ower4s $egal $iability Catherwood /owing $td. v. Commercial 9nion 8ssurance Co. et.al.,3uly D, 770! ?ancouver 'egistry ;o.C81777D 5.C.C.8.! /he issue in this case was whether the tug owner4s +=) policy offered coverage in respect of loss of or damage to cargo on board a barge. /he barge and cargo were owned by the same person and were being towed by the tug owner pursuant to a contract of towage at the time of the loss. /he insurer denied coverage on the basis of a clause in the policy that excluded =quot"all liability in respect of cargo =quot". /he tug owner relied on the wording of a /ower4s $iability endorsement which extended coverage to the =quot"tow or the freight thereof or to the property on board =quot". 5oth the trial 3udge and the Court of 8ppeal held that the cargo exclusion in the policy applied only to cargo on board the insured vessel i.e.. the tug! and not to cargo on  board the barge which was owned by the cargo owner and not insured under the policy. >urther, it was held that the word =quot"freight =quot" in the endorsement meant goods transported in a vessel. )n result, there was coverage under the policy. /ower4s $egal $iability 5urrard /owing Co. v 'eed (tenhouse $imited, 8pril AG, 770!?ancouver 'egistry  ;o.C8170B7 5.C.C.8.! /his case involved the interpretation of a /ower4s $egal $iability +olicy. /he facts were that a  barge under demise charter to a tug company capsi2ed while under tow and the cargo was lost. /he barge was an insured vessel under the tug company4s policy. /he issue in the case was whether the tug company had legal liability coverage for the lost cargo. /he policy contained an express exclusion for =quot"liability in respect of cargo on board vessels insured herein =quot".

)t also, however, contained an endorsement which provided< =quot"coverage is extended to include $egal $iability of the 8ssured...in respect of loss of, or damage to...her tow...or the  property thereon... =quot". /he /ug company argued that this endorsement extended the coverage to cargo on the barge notwithstanding the exclusion. /he Court of 8ppeal held, however, that in interpreting the insurance policy it was necessary to distinguish between liabilities arising out of contracts of towage and those arising out of contracts of carriage. /he Court held that the endorsement applied only to contracts of towage and not to contracts of carriage. )t further held that, as the tug and barge were both supplied by the tug owner, the contract was one of carriage. 8ccordingly, the cargo exclusion applied and the 9nderwriters were not liable under the policy. *xclusion for #ousehold 'esident - *stoppel (nair v #alifax )nsurance, 77B!, HB ;.(.'. Ad! GA, ;.(.(.C.! )n this matter the +laintiff sought a declaration of coverage. /he +laintiff had earlier been foun d 11 liable for a very serious boating accident that rendered his former housemate a quadriplegic. /he insurer denied coverage on the grounds of an exclusion in the policy excluding coverage to =quot" any person residing in your household =quot" . /he Court held that by the time of the accident the assured and the in6ured party E were no longer a unit that possessed the elements of intimacy and communityE such that the exclusion could apply. )n any event, the Court held that the insurer was estopped from denying coverage on the grounds that it had defended the assured in the liability action for over four years. Furing this period, no denial of coverage was ever issued, no reservation of rights letter was sent and the assured was never as%ed to sign a non-waiver agreement. 5reach of :arranty $ewis v Canada, 3uly A1, 77B!, ;o. /-1AJ-7G, >.C./.F.! /his case concerned a total loss of a vessel due to fire. 8t the time of the fire the vessel was under the command of someone other than the assured. /he policy, however, contained a  provision that prohibited anyone other than the named insured from operating the vessel without the prior approval of the insurer in writing. /he +laintiff, assured, claimed he had sought and obtained verbal approval to substitute another as master. /he insurer denied that any approval had been sought or given. /he Court found in favour of the insurer and held that there had been a  breach of warranty and, accordingly, there was no coverage under the policy. >raudU +oirier v $aurentian Casualty Co.,;ovember J, 77B!, ;o. 0B>, Ont.Ct. &en.Fiv.!.

/his case concerned a claim under an insurance policy for theft of a boat and trailer allegedly left on the side of a road when the trailer tire became flat. /he Court held that the assured and his witnesses were not credible and concluded the assured had failed to prove his case. )n reaching its conclusion the Court too% into account that the assured had serious financial problems and the vessel was for sale at the time of the alleged theft.

argo (nsurance 4uide )hat is cargo insurance5

Cargo insurance is an insurance policy ta%en up to protect against loss of or damage to your goods while they are being transported. /he policy is meant to indemnify you if there is any loss or damage to your cargo. Cargo insurance would cover the goods while they are being transported over sea, air and land includes  parcel post and carryings by courier service!. 8lthough the term Emarine cargo insuranceE is sometimes used, it actually includes cover for the land transit commencing from the moment the goods leave the storage until they arrive at the final warehouse. :hy should ) buy Ocean Cargo )nsuranceU

:hile physical damage on transit claims may not be a problem, importers and exporters should  be aware that over B1 voyages a year encounter heavy weather where shipping containers are lost overboard. Fue to the international policy of all shippers with safe-landed cargo contributing to the loss will require that the owner of the goods either put up a cash security, post a bond or will be unable to have the goods released from the carrier until a financial guarantee is given to respond for the contribution. :ith an open cargo policy, the insurance company will post the bond and ensure the speedy release on owners4 cargo. #ow much insurance do ) need to buyU

/he standard practice is to cover the invoice cost plus freight plus a percentage to cover the anticipated profit normally 1 to A1 is adequate!. /he largest shipment anticipated with the added freight and the percentage of advance added is normally the policy limit. /he shipments can be reported monthly to the Company and billed at the end of each month, so unli%e property policies, the cargo policy can be issued on a Epay-as-you-goE basis. :hat is the difference between a single voyage policy and open coverU

!ingle *oyage Policy /his is the most popular form of cargo insurance cover. 8 voyage policy, as its name implies, offers coverage for a particular voyage for which is is ta%en up.

)t offers coverage from the time the cargo leaves the seller, while it is in transit and until it reaches the buyer. Often, the port of loading, transhipment and discharge are also required to be disclosed in the  proposal form. O"en over 8n open cover is not an insurance policy. )t is actually an agreement between the insured and the insurance company to insure all the shipments which fall within the terms and conditions agreed  by both parties.

/hese terms and conditions which are agreed in advance include details of voyages, maximum value of cargoes carried in any one shipment, nature of cargo and pac%aging and rates applicable. /he insured would then have to declare his shipments to the insurer on an individual or monthly  basis. 8s long as the details of the shipment comes within the terms and conditions of the open cover agreement, the shipment is automatically covered. /he insurer is also obliged to accept all declarations made by the insured under the open policy if  they come under the terms and conditions of the open cover. /he open cover is especially beneficial to those who ship goods frequently as it saves them the need to apply for cargo insurance for each of their shipments. /here would also be no need to wait for these individual policies to tbe approved because, as mentioned, all shipments are automatically approved if they come within the terms of the open cover and a declaration is made for the shipment.

)f ) buy on terms of sale where ) am not responsible to insure the goods, how can ) insure the goodsU

)f you are the buyer and are importing goods from overseas on terms of sales such as C.).>. )nvoice Cost, )nsurance plus >reight!, where you are not required to insure the goods, you may still have a EcontingentE exposure that you could cover if the seller placed coverage that was ElimitedE and not offering the broad terms available in the insurance mar%etplace in your country. :hy isn4t this EcargoE exposure covered by my other policiesU

Cargo insurance is much different than other liability or property policies, the scope is international and the extensions of coverage available are specific to the industry and broader than other lines of insurance. 8n example of an extension that is unobtainable in other lines of business is :ar 'is% Coverage. /he Ecargo insuranceE is international and all coverages have been created to give the innocent shipper or importer the broadest protection available from most external causes of loss. Institute Marine &argo &lauses # &lauses

RISKS COVERE 1. - Risks Clause 2. - General Average Clause 3. - "Both to Blame Collision" Clause E!C"#SIO$S  4. - General Exclusion Clause . - !nseaorthiness an# !n$tness Exclusion Clause %. - &ar Exclusion Clause '. - (trikes Exclusion Clause #R%&IO$ ). - *ransit Clause +. - *ermination o, Contract o, Carriage Clause 1. - Change o, o/age Clause C"%I'S 11. - 0nsurale 0nterest Clause 12. - orar#ing Charges Clause 13. - Constructive *otal oss Clause 14. - 0ncrease# alue Clause R#:&=

1. - ot to 0nure Clause 'I$I'ISI$( "OSSES 1%. - 5ut/ o, Assure# Clause 1'. - &aiver Clause %VOI%$CE O) E"%*  1). - Reasonale 5es6atch Clause "%+ %$ ,R%C&ICE 1+ - English a an# 7ractice Clause

( Institute Marine &argo &lauses 2 # &lauses ?

RISKS COVERE 4 1. - Risks Clause @ 0 /his insurance covers all ris%s of loss of or damage to the sub6ect-matter insured except as  provided in Clauses H, B, 0 and D below. A

2. - General Average Clause 7 6 /his insurance covers general average and salvage charges, ad6usted or determined according to the contract of affreightment and@or the governing law and practice, incurred to avoid or in connection with the avoidance of loss from any cause except those excluded in Clauses H, B, 0 and D or elsewhere in this insurance. 8

3. - "Both to Blame Collision" Clause ) 7 /his insurance is extended to indemnify the 8ssured against such proportion of liability under the contract of affreightment E5oth to 5lame CollisionE Clause as is in respect of a loss recoverable hereunder. )n the event of any claim by shipowners under the said Clause the 8ssured agree to notify the 9nderwriters who shall have the right, at their own cost and expense, to defend the 8ssured against such claim. (0

E!C"#SIO$S ((  4. - General Exclusion Clause (2 8 )n no case shall this insurance cover (?

890 loss damage or expense attributable to wilful misconduct of the 8ssured (4

896 ordinary lea%age, ordinary loss in weight or volume, or ordinary wear and tear of the sub6ectmatter insured (@

897 loss damage or expense caused by insufficiency or unsuitability of pac%ing or preparation of the sub6ect-matter insured for the purpose of this Clause H.G Epac%ingE shall be deemed to include stowage in a container or liftvan but only when such stowage is carried out prior to attachment of this insurance or by the 8ssured or their servants! (A

898 loss damage or expense caused by inherent vice or nature of the sub6ect-matter insured (7

89: loss damage or expense proximately caused by delay, even though the delay be caused by a ris% insured against except expenses payable under Clause A above! (8

893 loss damage or expense arising from insolvency or financial default of the owners managers charterers or operators of the vessel ()

89; loss damage or expense arising from the use of any weapon of war employing atomic or nuclear fission and@or fusion or other li%e reaction or radioactive force or matter. 20

. - !nseaorthiness an# !n$tness Exclusion Clause 2( : 22

:90 )n no case shall this insurance cover loss damage or expense arising from unseaworthiness of  vessel or craft, unfitness of vessel craft conveyance container or liftvan for the safe carriage of the sub6ect-matter insured, where the 8ssured or their servants are privy to such unseaworthiness or unfitness, at the time the sub6ect-matter insured is loaded therein. 2?

:96 /he 9nderwriters waive any breach of the implied warranties of seaworthiness of the ship and fitness of the ship to carry the sub6ect-matter insured to destination, unless the 8ssured or their servants are privy to such unseaworthiness or unfitness. 24

%. - &ar Exclusion Clause 2@ 3 )n no case shall this insurance cover loss damage or expense caused by 2A

390 war civil war revolution rebellion insurrection, or civil strife arising therefrom, or any hostile act by or against a belligerent power 27

396 capture sei2ure arrest restraint or detainment piracy excepted!, and the consequences thereof  or any attempt thereat 28

397 derelict mines torpedoes bombs or other derelict weapons of war. 2)

'. - (trikes Exclusion Clause ?0 ; )n no case shall this insurance cover loss damage or expense ?(

;90 caused by stri%ers, loc%ed-out wor%men, or persons ta%ing part in labour disturbances, riots or civil commotions ?2

;96 resulting from stri%es, loc%-outs, labour disturbances, riots or civil commotions ??

;97 caused by any terrorist or any person acting from a political motive. ?4

#R%&IO$ ?@ ). - *ransit Clause ?A