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DANA
MARINE
SERVICE GROUP
________________________________________________
MARINE SURVEYORS-________________________________________________
MARINE
EVALUATORS & APPRAISERS
ARTHUR
DAVID SERRY CMS
RI(BC) ret. FRIC.ret.
CONTACT:
Telephone:604-946-9405
www.acms.com
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WE
SURVEY SHIPS – ANY KIND OF SHIPS
ALL
Purposes-All Registries—ALL INSURERS—ALL BANKS
IF
YOUR BOAT FLOATS
We
WILL SURVEY IT
OR
SHOULD BE FLOATING
WE
SALVAGE AND Manage the Restoration
IF
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APPRAISE and EVALUATE MARINE REAL--PROPERTY
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AOKAM PERDANA BHD (FORMERLY AOKAM TIN BHD)Aokam Perdana, a tin mining company, was launched
into the timber business in August 1990, when Managing Director Teh Soon Seng
(left) undertook a reverse take-over of the company by injecting
timber processor Pembangunan Papan Lapis ( A major advantage for the company has been its deal with Idris Hydraulic, through which Aokam obtained access to a cheap wood supply—RM170 (US$68)/tonne compared to normal price at RM400-540 (US$160-216)/tonne—from Idris Hydraulics' Sagisan concessions in Sabah, covering 256,000 ha.188 Aokam Perdana also has a 40-year joint venture for plywood manufacturing between wholly-owned subsidiary Aokam Resources Sdn Bhd (55%) and Changchun Plywood Plant (45%) in the Chinese province of Jilin and was reported to be seeking logging concessions in China,189 although this was later refuted by the company.190 Aokam has sought joint ventures with Idris Hydraulic in Myanmar and Laos.191 The company was reportedly offered concessions in the Solomon Islands and Papua New Guinea, but turned them down due to a lack of manpower.192 The former rising star of the Kuala Lumpur Stock Exchange has been in rapid decline, showing a net loss of RM144.73 million (US$57million) for the year ending June 1996.193 According to analysts, Aokam's timber complex became severely under-used, with a number of problems including inadequate supply of logs.194 In November 1997, Teh Soon Seng, who ceased being a director in March 1997,195 was wanted by the Malaysian police in connection with RM45 million (US$11.25 million) of missing funds. The police were investigating claims of misappropriation of funds in Aokam Perdana or the transfer of money into another company's account in which Teh also had an interest. The police were also looking for another Aokam company executive, Low Thian Hoe.196 The forestry subsidiaries of Aokam Perdana are likely to be involved in current efforts to restructure the company in the face of severe financial difficulties. As part of the restructuring plan, it has been proposed that Aokam Perdana buys timber harvesting rights from Idris Hydraulic.197 At the end of May 1998, it was reported that Aokam's subsidiary PPL was being sued by a creditor for non-payment of bills and the parent company had obtained a restraining order against PPL's winding-up until restructuring has been completed.198 ASSOCIATED KAOLIN INDUSTRIES BHDIn October
1996, Associated Kaolin Industries Bhd was reported to be acquiring a total
of 104,758 ha of timber concessions in AKI
stated that this acquisition would complement the activities of another
subsidiary company, Caton Wood Industries Sdn Bhd in In April 1997, Caton Wood Industries was put into the hands of receivers due to the default on loans and banking facilities totalling RM22.5 million (US$9 million).201 In June 1998, a Memorandum of Understanding was entered into between AKI and Landzen for the acquistion of SFM to be completed within six months, taking account of the Sale and Purchase Agreement signed in October 1996 and an independent valuation of the timber concession. 202 AUSTRAL AMALGAMATED TIN BHDIn
December 1997, property-based Austral Amalgamated Tin Bhd was reported to
have secured a 10 year timber concession in BERJAYA GROUP BHDThe Berjaya Group is a large, diversified conglomerate, including seven public and about 200 private companies, involved in gambling, textiles, tourism, hotels, financial services, industrial products, real estate and consumer marketing.205 It is based in Kuala Lumpur, and is controlled by Vincent Tan Chee Yioun. The company has gained a reputation at home for planning to build tourist resorts in ecologically sensitive environments, which have prompted environmental and public interest groups to launch two campaigns since 1990 against projects on Penang Hill (the project was cancelled) and on Redang Island (the project was reduced in size after ecological damage occurred).206 Tan Sri Vincent Tan (left) has access to a number of significant political figures through some of his many companies. He took over the failed Tropical Veneer Company Bhd, which was in receivership at the time, and renamed the company Intiplus Bhd, bringing it under Berjaya's control. Datuk Haji Mohd Fatmi bin Haji Che Salleh was appointed as deputy chairman of Intiplus in March 1995, after the take-over. Salleh was a member of the Central Committee (EXCO) of UMNO Youth Malaysia,207 as well as having held various other official positions. Ramli bin Zahari, appointed as a director of Intiplus in 1995, was at the time head of UMNO Kuala Kangsar division.208 Danny Tan Chee Sing, Berjaya managing director, is one of the small group of new Chinese capitalists who are closely associated with leading Malay politicians209 and Jaffar Bin Abdul, appointed as a director in August 1997,210 is the former Inspector General of Police. In November 1994, Berjaya Textiles Bhd was taken over by Rimbunan Hijau. The Group
attempted to move into logging in several countries in 1994. In May of that
year, Berjaya's wholly owned subsidiary, Berjaya Group (Cayman) Ltd, acquired
a timber company in Solomon Islands, Star Harbour Timber Company Ltd. In
September 1994, Berjaya Group Bhd bought 60% stake of the Canadian timber
company Taiga Forest Products Ltd and aimed at expanding Taiga's operations
into the
Berjaya
Group Cayman bought Star Harbour Timber Company Ltd for US$1 million cash,
giving Berjaya access to 45,000 ha concession at the price of only US$ 22.22
(RM 58.43) per ha, inclusive of the sawmill, compared to an average of
US$1,000 (RM2,500) per ha in Malaysia (without sawmill).212 Just a few months after the deal, the Managing Director of Berjaya Group (Cayman), Mr Tony Yeong resigned over allegations of an attempt to bribe the country's Commerce, Employment and Trade Minister, Mr Joses Tuhanuku. The Minister alleged that Mr Yeong attempted to bribe him with RM8,000 (US$3,200). The Minister refused the money and immediately informed Prime Minister Billy Hilly. Mr Yeong was asked to leave the country and resigned from the company. Mr Tuhanuku also said that Yeong insisted it was an accepted practice in the South Pacific, and indeed around the world, for a large company such as Berjaya to show its appreciation to those in government who assisted the company. Berjaya Group protested against the allegations.213 Berjaya
had proposed to invest US$60 million (RM157.8 million) in the country, in
exchange for which the provincial governments of
The
Berjaya Group has sought to invest in No contract could be signed because the forest area in question was outside the State Forests and because the government—due to national and international pressure against the sell-off of the Guyanese forests—put a freeze on handing out of new logging concessions from October 1995. The moratorium is still in place. However, in 1997, despite the fact that the Guyana Forestry Commission was still weak, the State Forests were extended by 4.6 million ha in the Southern part of the country and large tracts of forests were selected to be leased out as Exploratory Leases. Berjaya signed a memorandum of understanding with the Guyanese government for an exploratory lease in April 1997 for access to 760,000 ha of allegedly pristine virgin forest,218 which are also claimed by the Macusi and Wapisiana indigenous peoples. Significantly,
Berjaya has been operating through another Malaysian company, Tenaga Khemas Sdn Bhd,
which owns 87,850 ha concession in the
As soon
as Vincent Tan put his feet in In February 1997, after the government announced that the 1 million ha deal was probably going to be cancelled, Berjaya requested a different logging concession of 150,000 ha. It now appears that Berjaya has been awarded three exploratory permits, whereby the company can conduct an inventory of forest resources and produce a management plan but is not allowed to log, totalling 300,000 ha. According to a newspaper report, Berjaya was already busily chopping down trees in 1996, despite not officially owning concessions. This was made possible through Berjaya's director Surinder Mungra, who arranged for Berjaya's equipment to be employed on concessions that had been worked for dozens of years by small-scale Surinamese companies. When journalists visited a couple of these concessions, armed men overseeing the logging operations said that they were there to protect Berjaya's property. The names of Mungra and Berjaya were repeatedly heard despite the fact that the concession belonged to someone else on paper and that under Surinamese law it is forbidden to transfer timber cutting permits to third parties, with the risk of a punishment of immediate withdrawal of the concession.220 BEST WORLD LAND BHD (FORMERLY BENTA PLANTATIONS BHD)Kenneth
Eswaran, a newcomer to the corporate scene, bought into Benta Plantations Bhd
via a reverse-takeover, acquiring 31% of this company and 28.1% of Mun Loong
Bhd. Eswaran's partner, who owned a further 30% of Benta, is Haji Ishak
Ismail, of Idris Hydraulic221.
Benta changed its name to Best World Land Bhd and, in 1994, Eswaran was
reportedly interested in a 250,000 ha timber concession in Southern Laos and
was expected to sign a deal with the Laotian authorities at the beginning of
1995 and to undertake logging activities during that year.222 The
concession would allow logging for 6 or 7 years. Eswaran was reported to be
setting up a new company, with both the listed vehicles in which he was
involved (Benta—now DAMANSARA REALTY BHD (FORMERLY KESANG CORPORATION)Damansara Realty's main business interests are in steel mills, property development, timber and oil palm plantations. In 1993, KUB acquired a 15% stake in Damansara Realty (then called Kesang Corporation).225 KUB is an UMNO members' co-operative which functions as an avenue for party members to pool their resources for investment purposes. The Johor Corporation, the Johor state government's development agency, currently owns 42% of Damansara Realty and the State-controlled Employees Provident Fund is also a shareholder.226 Damansara Realty owns 32% of the Long Huat Group.227 Damansara
has incorporated in The Papua New Guinea deal was controversial even before it was approved, with the then Forest Minister, Tim Neville, warning the Government against the project, officially called Aitape Agro-Forest Pty Ltd. The Catholic Women's Association in Aitape also condemned the deal230 and there were claims that the genuine landowners were never involved in any negotiations, and that the deal was being hurried through.231 The deal went through after Tim Neville lost his post, but local communities have been voicing opposition to the project on the grounds that they were not consulted and they were not ready to let a foreign company take over the forest. However, clearfelling started at the end of 1995 and logs were exported from Aitape in 1996.232 In July, 1998, the Papua New Guinea logging operations were halted due to "adverse market conditions", and the company plans to terminate all logging-related agreements and hopes to recover RM4.5 million (US$1.2 million) through arbitration proceedings.233 GENERAL LUMBER FABRICATORS AND BUILDERS BHDGeneral
Lumber Fabricators and Builders Bhd (GLFB) announced in early 1998 that a
company within the group, Rimyasa Development (PNG) Pty Ltd, had received
approval from the Papua New Guinea National Forest Authority regarding a
logging and marketing agreement with Basoma Holdings Pty Ltd. Under this
agreement, Rimyasa was appointed to manage and undertake logging operations
and marketing activities in respect of 9,800 ha of forest in IDRIS HYDRAULIC (
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Marine Insurance
Introduction
Marine insurance in For Frequently Asked Questions relating
to Canadian Marine Insurance click here. To review a paper entitled Warranties in Marine Insurance
click here. To review a paper entitled Additional Assureds and
Co-Assureds click here. Case Summaries
Marine Insurance – Warranties – Deviation - Waiver & Estoppel – Arbitration Agreement – Right of Appeal McAsphalt Marine Transport Limited v Liberty International Canada, 2005 ONSC 13459 This was an application for leave to appeal the decision
of an arbitrator. The Applicant was the owner of the barge “Norman
McLeod” which it had purchased in Marine Insurance – Bad Faith – Limitation Period - Pleading – Striking – Reasonable Cause of Action Forestex Management Corp. et al. v Underwriters at Lloyds et al., 2004 FC 1303 “Many years ago when small boys wore suspenders and
ships had gender...” So begins the Reasons for judgment of Prothonotary
Hargrave in this application by the Defendants to strike out the Statement of
Claim of the Plaintiff. The facts were that on 4 August 2000 the
“Texada” went aground in a passage in the Marine Insurance – Breach of Warranty Gartsman et al. v Elite Insurance et al., 2004 ONSC 11157 The Plaintiff in this matter purchased a vessel from the
Defendant marina and asked the marina about insurance. She was told that the
marina could not provide insurance but was given the name of a broker who
arranged insurance with the Defendant insurer. A temporary binder was issued
for 30 days that was conditional on the vessel being laid up at the dock
pending receipt of a completed application and survey. It was also
conditional on the vessel not being used except for instructional purposes by
the marina. Although the Plaintiff alleged she was not advised of these
conditions the Court did not believe her. In breach of the conditions the
Plaintiff took the vessel on a cruise during which it was damaged.
Predictably, the insurer denied coverage and the Court upheld the insurer's
denial. Marine Insurance – Jury Trials Nelson Marketing International v Royal and Sun Alliance Insurance, 2003 BCSC 439 The issue in this appeal was whether the Master had
correctly set aside a jury notice. The underlying facts were that a cargo of
wooden flooring carried from Marine Insurance – Sue and Labour – Proportion payable when insured and uninsured property involved North Coast Sea Products Ltd. v. ING Insurance Company of Canada, 2004 BCCA 95 affirming 2003 BCSC 592 The insured Plaintiffs incurred expenses in recovering
trays and the oysters in them from the seabed when the lines of their oyster
farm were vandalized. The Plaintiffs were insured for the loss of the trays
but not for the oysters themselves. They claimed under the sue and labour
provisions of their marine insurance policy for all the expenses incurred in
recovering the trays and oysters. Underwriters claimed that only a portion of
the expenses could be claimed and that the claim should be in rateable
proportion to the value of the insured trays to the uninsured oysters. The
policy wording included provisions for reducing recoverable sue and labour
expenses where the property was underinsured but was silent with respect to
cases where there was both insured and uninsured property. The matter was
disposed of by Special Case. The underwriters relied on English case law from
1902 (Cunard Steamship Co. Ltd. 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. However, the trial Judge
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 Appeal upheld the trial Judge holding that
the sue and labour clause of the policy only limited the insurer's obligation
in the specific circumstances identified in that clause, none of which
applied. Insurance – Direct Action Against Insurers – Interpretation of Policies – Limits of Coverage Solway v Lloyd's Underwriters, 2005 ONSC 13407 In this matter the Plaintiffs arranged for a motor
carrier to move and store their personal belongings. The truck was stolen and
the Plaintiffs' belongings were never recovered. The Plaintiffs obtained a
judgment against the carrier which was not satisfied. The Plaintiffs then
commenced this direct action against the carrier's primary and excess
liability underwriters. Both underwriters agreed that the Plaintiffs' loss
was covered but disagreed as to how the loss should be apportioned between
them. The primary underwriter argued that the limit of its policy was
$500,000 as provided for in the transportation section of its policy. The
excess underwriter argued that the applicable limit was that in the warehouse
and storage section of the primary policy of $1,000,000. The issue was then
one of interpretation of the primary policy. The 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. The Court
further noted that the general principles of interpretation of insurance
contracts include: 1) the contra proferentum rule; 2) the principle that
coverage provisions should be construed broadly and exclusion clauses
narrowly; and 3) the desirability, at least where the policy is ambiguous, of
giving effect to the reasonable expectations of the parties. The Court then
considered in detail the provisions of the primary policy and ultimately
concluded that the applicable limit depended on the proper characterization
of the claim against the carrier either as breach of a transportation
contract or breach of a storage contract. The Court held that since liability
was imposed on the carrier at the trial for breach of a term relating to
storage of the Plaintiffs' goods, the limitation of $1,000,000 for
warehousing or storage was applicable. Insurance – Interpretation – Exclusions – Delay – Deck Cargo – Concurrent Causes – Timber Trade Federation Clauses – Bad Faith – Punitive Damages Continental Insurance Co. v Almassa International Inc., 2003 ONSC 10422 This case concerned a shipment of lumber carried from Charters– Bailment – Waiver of Subrogation North King Lodge Ltd. v Gowlland Towing Ltd. et al., 2004 BCSC 460 This matter concerned liability for the sinking of the
barge “Sea Lion VI”. The barge had been hired by the owner to the
first Defendant for use as an accommodation barge at a remote logging camp.
One of the terms of the agreement was that the owner would provide a
watchman. When the logging operations had ceased the second Defendant, the
towing company, was retained to remove the log booms. In doing so the crew of
the tug untied the port side mooring lines of the “Sea Lion VI”
which had been tied to the log booms. Shortly thereafter the “Sea Lion
VI” went aground and sank. The trial Judge found as a fact that the
removal of the port lines caused the sinking. The Plaintiff, the owner of the
barge, commenced proceedings against both the hirer and the towing company. The
Plaintiff contended that the hire contract was a charter party by demise or,
alternatively a bailment and that the hirer was responsible for the
safekeeping of the barge. The hirer, on the other hand, argued that it did
not have possession of the barge and that the contract was a time charter.
The trial Judge held that it was not possible to fit the agreement between
the parties into one of the traditional forms of charterparty since the barge
was not chartered for a voyage and had no master or crew. He held that the
agreement was one of bailment but declined to imply all of the usual
obligations that a contract of bailment entails. Specifically, he held that
the owner's obligation to provide a watchman made the owner primarily
responsible for the safe moorage of the barge. (At the time of the sinking
and for some time previous there had been no watchman on the barge and this
was known to the hirer. The fact that the hirer failed to complain about the
removal of the watchman by the owner was held not to be a waiver of the
owner's obligation to provide a watchman.) The trial Judge also found that
the hirer owed an obligation to take reasonable care of the vessel and that
it breached this duty by failing to promptly advise the owner when it became
apparent that the barge was in danger. With respect to the liability of the
towing company, the trial Judge found that owner of the “Sea Lion
VI” committed an act of trespass in tying the barge to the log booms
and that the duty owed by the towing company to a trespasser is to not
intentionally harm the Plaintiff, act recklessly or without common humanity.
He held that although the towing company did not act with reasonable care it
did not breach the duties it in fact owed to the trespasser. In the result,
liability for the sinking was apportioned 80% to the owner and 20% to the
hirer. One final issue considered in the case was whether the hirer was
immune from suit by reason of clauses in the hull insurance policy including
charterers as additional assureds and waiving subrogation against charterers.
The trial Judge 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. The trial Judge
found that the owner did not exercise this option. Bad Faith - Punitive Damages Whiten v Pilot Insurance Co., 2002 SCC 18 Although not a marine insurance case, this decision by the
Supreme Court of Canada is of significant interest to marine insurers. The
facts were that the Plaintiff’s home was destroyed in a fire. The
Defendant, the Plaintiff’s 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 Defendant’s own fire investigator and
the Defendant’s initial expert all agreed that there was no evidence of
arson. At trial, the jury awarded the Plaintiff $1 million in punitive
damages against the Defendant for bad faith denial of coverage. On appeal to
the Ontario Court of Appeal the punitive damage award was reduced to
$100,000.00. On further appeal, the Supreme Court of Canada stated that
although the $1 million award of the jury was higher than the court would
have made it was within the high end of the range where juries are free to
make their assessment. Accordingly, the Supreme Court reinstated the
jury’s punitive damage award of $1 million for failure to act in good
faith. Liability Policies - Interpretation - Illegality - Pay to be Paid Conohan v The Cooperators, 2002 FCA 60 This case arose out of a collision between the "Lady
Brittany" and "Cape Light II" off Liability Policies - Exclusions - “course of transit” Garfield Container Transport Inc. v Chubb Insurance Co. of Canada, (2002) 114 A.C.W.S. (3d) 1100 The Plaintiff was a transportation company specializing
in taking cargo from ships and delivering such cargo to the customs clearance
warehouse and, eventually, to the purchaser. The Plaintiff was insured by the
Defendant under a policy which provided coverage for goods shipped under a
bill of lading and in due course of transit. In this instance the Plaintiff
delivered equipment to the customs clearance warehouse as required by the
bill of lading. While the equipment was at the warehouse the Plaintiff
contacted the purchaser and was instructed to deliver the equipment to another
trucking firm. The Plaintiff transported the equipment to another warehouse
where it had the specialized loading equipment necessary to do the task.
During the course of loading the equipment was damaged. The Defendant 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. This
argument was accepted at first instance. On appeal to the Quebec Court of
Appeal, however, the Court of Appeal 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.
The Court held that the Plaintiff was obliged to deliver the equipment to the
ultimate destination and temporary disruptions that were not unreasonable did
not break the chain of transit. Service Ex Juris - Stay of Proceedings Continental Insurance Co. v Almassa International Inc., [2002] O.J. No. 202, affirming [2001] O.J. No. 3229 This matter concerned a cargo policy taken out by a Warranties - Authority of Broker Elkhorn Developments Ltd. v Sovereign General Insurance Co. et al., 2001 BCCA 243, [2001] B.C.J. No. 630 This was an application by the Defendants for summary
dismissal of the Plaintiff’s claim for coverage under a hull and
machinery policy. The policy contained a warranty that any movements of the
barge would be subject to underwriters’ prior approval. In breach of
this warranty, the barge was moved without any notice to underwriters and
sank four days after the move had been completed. A marine surveyor was
appointed but he was unable to come to a firm opinion on the cause of the
sinking. Subsequent to the sinking, the insurers and the broker agreed to
cancel the insurance policies effective the day of the move. The 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. At first instance the motions judge held that in order for a
clause to constitute a promissory warranty there must be “a substantial
relationship between the warranty and the loss incurred”. The motions
judge further held that in order to answer this question there was a need for
further evidence concerning the cause of the sinking of the barge. The
motions judge therefore dismissed the application and ordered that the matter
proceed to trial. On appeal, the British Columbia Court of Appeal held that
the motions judge erred in requiring that a “substantial relationship”
exist between the warranty and the loss incurred. Such a test was
retrospective in nature and would be a serious practical impediment to the
marine insurance business. The Court of Appeal 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. The
Court of Appeal further held that the cancellation of the policy by agreement
between the insurers and the broker was effective as the broker had the apparent
or ostensible authority of the assured. Stay of Proceedings Waterworks Construction Ltd. v Liberty Mutual Insurance Co., 2001 NSSC 125, [2001] N.S.J. No. 355 This action arose out of the sinking of a concrete casing
which was determined to be a hazard. The Plaintiff alleged that its liability
for the cost of removal of the casing was covered by an insurance policy
issued by the Defendant. There was, however, a second action between the
Plaintiff and other parties relating to the liability for the sinking. The
Defendant insurer brought this application to stay the insurance action
pending the outcome of the liability action. The Court declined the stay
holding that there were separate issues in the two actions. Subrogation Chubb Insurance Co. of Canada v Cast Line Ltd., [2001] Q.J. No. 2363 This was a subrogated action by a cargo insurer against
an ocean carrier for damage occasioned to a container of cheese. The
Defendant carrier brought this motion arguing that the Plaintiff insurer had
no right to bring the action as it had no rights of subrogation. The
Defendant relied upon the terms of the receipt signed by the assured which
referred to the payment by the insurer as a loan. Notwithstanding 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. In result,
the Defendant’s motion was dismissed. Cargo Insurance - Cancellation - Misrepresentation Nuvo Electronics Inc. v
London Assurance et al., (2000) 49 O.R. (3d) 374( This matter arose out of the loss of 15 cartons of
integrated circuits valued at US$1,403,000.00 and carried by air from The Court next turned to the issue of whether the policy
was void ab initio by reason of the assured’s failure to disclose at
the time it applied for the policy that it had suffered prior losses. The
evidence disclosed that the assured’s broker had advised the
underwriter that there had been no losses except for one lost package (value
$300.00) three years earlier. This information was not accurate. In fact, the
assured had suffered a series of losses in the hands of its courier totalling
$18,000.00. This information did not come to the attention of the underwriter
until after the loss in issue. The underwriter submitted that these facts
were material to the risk and should have been disclosed. The 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. The Court, however, found as a fact that the
Defendant underwriter would have written the risk even if it had been advised
of the prior losses. Under these circumstances it was irrelevant what an
independent underwriter would have done. The 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 risk would have
declined the risk or required a higher premium and evidence from an
independent "prudent" underwriter to the same effect. Accordingly,
the Court held that the underwriter had failed to prove material
non-disclosure and the underwriter was held liable for the insured value of
the lost cargo. (Note: The underwriter was not without a remedy as there was
a recovery from the air carrier which is detailed below under "Carriage
of Goods".) Liability of Agents and Brokers - Material Facts - Onus of Proof 1013799 Ontario Ltd. v
Kent Line International Ltd., [2000] O.J. No. 3074, (2000) 22 C.C.L.I. (3d)
312 ( This was an action against a freight forwarder and
insurance broker for breach of contract and negligence arising out of damage
to a cargo of chocolate bars shipped to The Court next considered the question of negligence. The
Court reviewed the authorities on the duties owed by insurance agents and
brokers to their customers. These 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 skill 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. The Court held that although the Plaintiff had been advised of
the limiting conditions of the Institute Frozen Food Clauses, the Defendants
had a duty to do more. Specifically, the Court found that extended coverage
was available and that the Defendants should have advised the Plaintiff of
this coverage. The Court rejected the Defendants’ argument that the
Plaintiff had not proven that it would have been granted the extended
coverage if it had so requested. The Court held that there was no onus on the
Plaintiff to prove this. An additional argument advanced by the Defendants was
that there had been material non-disclosure on the part of the Plaintiff. The
Court rejected this argument saying that even if there had been material
non-disclosure the effect would be to make the contract of insurance voidable
and not void ab initio. As the underwriter never exercised the right to void
the policy the Defendants could not rely upon the voidability of the policy
as proof that the Plaintiff suffered no loss. Further, the Court held that
there was insufficient evidence that the facts not disclosed were material.
The Court noted that the onus was on the Defendants 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. In the result, the Defendants were liable for failing to
obtain the proper insurance coverage. Cargo Insurance - Insufficiency of Packing Rainbow Technicoloured Wood Veneer Ltd. v The "Canmar Conquest" et al., (June 28, 2000) No. T-2580-97 (F.C.T.D.), [2000] F.C.J. No. 1032 This was an action by the Plaintiff against its cargo
insurer for damage to a guillotine press in an amount in excess of
$100,000.00. The Defendant insurer argued that coverage was excluded by
clause 4.3 of the Institute Cargo Clauses (A) in that the press was
insufficiently packed and prepared for shipment. The 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. Unseaworthiness Laing v Boreal Pacific, (October 13, 2000) No. A-166-99 (F.C.A.), [2000] F.C.J. No. 1665 This was an appeal from a judgment of the Trial Division
dismissing a claim under a marine insurance policy for the loss of an excavator.
The excavator was loaded on the self-propelled barge, "Palaquin",
and was being carried across the All Risks Coverage - Wear and Tear Bevan v Gartside Marine
Engines Ltd. et al., [2000] B.C.J. No. 528 (B.C. This was an action against a repairer and an insurer
under an all risks policy for damage caused when a transmission overheated.
The Plaintiff alleged that the repairer had been negligent in performing
prior repairs to the trolling valve control linkage. The Plaintiff further
alleged that the damage was covered by his all risks policy. The 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 breakdown. The 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 Plaintiff or previous
owners. As a result, the Court held that negligence on the part of the
repairer had not been proven. With respect to the claim against the insurer,
the Court noted that there are limits to the coverage afforded by an all
risks policy and that the Plaintiff was required to prove that the cause of
the transmission failure "was due to a casualty". The Court held
that the Plaintiff had not proven that the loss was due to a casualty and
coverage was denied. Waiver of Subrogation - Additional Assureds - Privity of Contract Fraser River Pile & Dredge Ltd. v Can-Dive Services Ltd., [1999] 3 S.C.R. 108 (S.C.C.). This was an action by the owners and underwriters of the
derrick barge "Sceptre Squamish" against the charterer of the
barge. The "Sceptre Squamish" was lost in the Contribution Among Insurers Trenton Cold Storage Ltd. v St. Paul Fire & Marine Insurance Co., (1999), 11 C.C.L.I. (3d) 127, (Ont. Ct. Gen. Div.). Although not a marine insurance case this decision
relates to an issue that marine underwriters are often called upon to deal
with. The case concerned a fire at the assured's warehouse which resulted in
damage to goods belonging to one of its customers. The assured had two
liability policies; a warehouseman's legal liability policy and an umbrella
excess policy that also provided comprehensive general liability coverage.
The insurer under the warehouseman's legal liability policy settled the claim
with the assured's customer and sought a 50% contribution from the insurer
under the second policy. The court first considered whether the second policy
was a true umbrella policy and held that it was not. The court next
considered the "Other Insurance" clauses in the two policies. The
clauses were virtually identical, each providing that their own insurance was
excess. The court held that the two clauses were mutually repugnant and
cancelled each other out. In result, both underwriters were required to share
equally in the settlement. The insurer under the second policy was not,
however, required to contribute to the defence costs as these costs were excluded
in its policy. Discovery - Privilege Commercial Union Assurance Company PLC. v M.T. Fishing Co. Ltd., (1999), 162 F.T.R. 74, (F.C.T.D.), affirmed (1999) 244 N.R. 372, (F.C.A.). In this matter the Plaintiff insurers paid out a fire damage
claim. Subsequently, it was learned that the fire may have been intentionally
set. The insurers then instituted a fresh investigation into these
allegations which ultimately resulted in commencement of the present action
to recover the insurance moneys paid. At issue in this motion was whether the
reports and information subsequent to the commencement of the second
investigation were privileged from production. The 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. Indeed, the court could see no other reason for such
investigation. On appeal to the Federal Court of Appeal, it was noted that
the motions Judge did 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. The Court of Appeal noted that this was
because counsel had agreed that they could determine what documents and
information had to be disclosed if the Judge merely determined whether the
dominant purpose of the investigation was to commence an action to recover
the insurance moneys paid. In light of this agreement, the Court of Appeal
found no error in the finding of the motion Judge and dismissed the appeal. Marine Insurance - All Risks Policy Russell v Canadian General Insurance Co.,(1999), 11 C.C.L.I. (3d) 284, (Ont. Ct. Gen. Div.). In this matter the Plaintiff claimed under an all risks
marine policy for damage caused to a sailboat by the accumulation of water in
the interior of the vessel. The damage to the sailboat occurred during the
period from 1990 to 1993. The assured put the vessel into storage at the end
of the summer in 1990 and left it in storage until October 1993 when it was
discovered to be full of water. The accumulation of water had rendered the
vessel a constructive total loss. The insurer denied coverage on the basis
that there was wilful misconduct on the part of the assured, that the
Plaintiff "courted the risk" and that the damage was caused by wear
and tear, an excepted peril under the policy. There was conflicting evidence
as to whether the assured periodically inspected the vessel while it was in
storage. The assured testified that he did periodically inspect the vessel.
The 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.
The court, however, held that there was no requirement that the assured
inspect the vessel. The court also held that there was no "wilful
misconduct" on the part of the assured as he did not intend to damage
the vessel and there was no deliberate courting of the risk as the damage was
not foreseen. Additionally, 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. Breach of Warranty of Inspection Shearwater Marine Ltd. v. Guardian Insurance Co. et.al., (October 1, 1998) No.CA022988 (B.C.C.A.) The Plaintiff claimed under a marine insurance policy for
the constructive total loss of a 93 year old converted wooden fish packer.
The vessel sank while moored to a log boom breakwater. The Defendant insurers
denied coverage arguing that the assured had breached a warranty that
provided: "Vessel inspected daily basis and pumped as necessary."
The vessel was not boarded on a daily basis for the purpose of
"inspection". It was, however, observed from a distance (often of
300 yards) and pumped as necessary. The trial judge held that compliance with
the warranty did not require daily boarding of the vessel but, rather, that
daily observation by a knowledgeable observer was sufficient. The trial judge
further went on to consider whether the warranty was a "true
warranty", 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. The trial judge held that the warranty was a suspensive
condition. This was relevant as the vessel had been boarded and pumped the
day before the sinking. A final issue concerned whether the vessel was truly
a constructive total loss, i.e.. whether the cost of repair exceeded the
insured value. This, in turn, depended on whether the assured's 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. The trial
judge held that the normal charge-out rate should be used. The insurer
appealed. The British Columbia Court of Appeal stated that "the trial
judge reached the right conclusions for the right reasons" and dismissed
the appeal. Insurance - Extent of insurer's obligation to repair Lockwood v Moreira,
(April 24, 1998) No. C21444 (Ont. In this matter the insured's pleasure craft was broken
into by vandals who used citronella candles in the interior of the vessel. As
a consequence, a thick sooty substance covered the interior of the vessel.
The assured made a claim under the insurance policy and the insurers
responded by having the interior of the vessel cleaned. The assured was not
satisfied with the first cleaning so the insurers authorized a second
cleaning. The assured was still not satisfied and took the position that the
only way the vessel could be restored to its original condition was by
removing the deck and replacing the interior at a cost of $100,000. The trial
judge held that the insurer's obligation under the policy was to restore the
boat to substantially the same condition it was in before the vandalism,
which had been done. The insurer was not required to restore the boat to the
exact condition it was in before the vandalism. The trial judge further
rejected a claim of bad faith against the insurer, holding the insurer had
responded promptly to the claim and without malice. The insured appealed. The
Ontario Court of Appeal in a brief endorsement noted that they agreed with
the trial judge that the boat "was substantially repaired" and dismissed
the appeal. Cargo Insurance - Exclusions - Institute Frozen Meat Clauses Queen In this matter the Plaintiff had purchased a used
refrigeration unit from one of the defendants for use in transporting meat
and vegetables to the Plaintiff's fishing lodge in the Liability Insurance - Coverage Strangemore's Electrical
Limited v Insurance Corporation of Newfoundland Limited, [1997] I.L.R. I-3475
( This was an action under a policy of commercial insurance.
The Plaintiff was in the business of servicing and repairing vessels. One
such vessel (which incidentally was owned by the President of the Plaintiff
company) was destroyed by fire while in the possession of the Plaintiff for
servicing. The boat owner brought an action against the Plaintiff who, in
turn, requested coverage under the liability provisions of the insurance
policy. The Defendant insurer denied coverage, relying on an exclusion in the
policy that excluded coverage for "personal property in your care
custody or control". However the policy also contained a specific
exclusion for watercraft which provided that the exclusion did not apply to
"watercraft while ashore on premises you own or rent". The Court
held that clearly the boat in issue was on the premises of the assured and
therefore the policy applied. Negligence of Broker Percy v West Bay Boat
Builders and Shipyards Ltd. et.al., (October 28, 1997) No. CA021807 This was an appeal of a decision in which an insurance
broker was found liable for not obtaining the proper coverage for its client,
a yacht builder. The issue arose when the builder was sued by a customer
after the customer's yacht caught fire. The customer alleged that the boat
was negligently manufactured by the builder. The action by the customer was
settled out of court for a substantial sum. The builder sought reimbursement
of the settlement funds and of its full legal costs from the broker. The
builder alleged that the broker had enticed it away from another
broker/insurer by promising "full coverage" at better rates. As it
turned out, the policy obtained for the builder by the broker did not provide
the same coverage as was provided by the prior policy. Specifically, it did
not cover the product liability claim of the builder's customer. If the prior
policy had been in place, the builder would have been covered for this claim.
The broker was found liable both at trial and on appeal for failing to
properly review its client's prior policies and for failing to properly
advise the client of the exclusions to coverage. Late Reporting Demitri v. General
Accident Indemnity Co., (November 26, 1996) No. S031296 This is not a recent case but it is one which we have
only recently become aware of. The Plaintiff was injured and his vessel was
damaged when it was rammed by a vessel insured by the Defendant. The
Plaintiff obtained judgement against the assured but was unable to recover
from the assured and was therefore attempting to recover direct from the
insurer pursuant to statute. The 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. The accident occurred in September of 1991 but the
assured did not give notice until November of 1992. The Court held that the
assured had failed to give prompt notice and declined to give relief from
forfeiture. In result, the Plaintiff was not able to recover from the
insurer. Breach of Lay Up Warranty Marler v Royal Insurance Company et.al, (October 3, 1996) No. C12405/93(Ont. Ct. Gen. Div.) This was an action by a vessel owner against his
underwriter and insurance broker. The underwriter provided the broker with a
quotation for insurance which contemplated issuance of an All Risk policy
upon compliance with all survey recommendations and a re-survey. It also
included a warranty: "Warranted laid-up and out of commission". The
quotation was provide to the assured who instructed the broker to procure the
insurance. The assured subsequently put the vessel in the water. When the
broker learned of this she advised the assured that the warranty did not
permit the boat to be in the water. The insurer later advised the assured
that the policy was cancelled. Nine days later the vessel sank. The 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. Accordingly, the action was dismissed. Tower's Legal Liability Catherwood Towing Ltd. v.
Commercial Union Assurance Co. et.al.,(July 17, 1996) The issue in this case was whether the tug owner's
P&I policy offered coverage in respect of loss of or damage to cargo on
board a barge. The 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. The insurer denied coverage on the basis of a clause in the policy
that excluded "all liability in respect of cargo". The tug owner
relied on the wording of a Tower's Liability endorsement which extended
coverage to the "tow or the freight thereof or to the property on
board". Both the trial Judge and the Court of Appeal 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. Further, it was held that the word
"freight" in the endorsement meant goods transported in a vessel.
In result, there was coverage under the policy. Tower's Legal Liability Burrard Towing Co. v Reed
Stenhouse Limited, (April 23, 1996) This case involved the interpretation of a Tower's Legal
Liability Policy. The facts were that a barge under demise charter to a tug
company capsized while under tow and the cargo was lost. The barge was an
insured vessel under the tug company's policy. The issue in the case was
whether the tug company had legal liability coverage for the lost cargo. The
policy contained an express exclusion for "liability in respect of cargo
on board vessels insured herein". It also, however, contained an
endorsement which provided: "coverage is extended to include Legal
Liability of the Assured...in respect of loss of, or damage to...her tow...or
the property thereon...". The Tug company argued that this endorsement
extended the coverage to cargo on the barge notwithstanding the exclusion.
The Court of Appeal 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. The Court held that
the endorsement applied only to contracts of towage and not to contracts of
carriage. It further held that, as the tug and barge were both supplied by
the tug owner, the contract was one of carriage. Accordingly, the cargo
exclusion applied and the Underwriters were not liable under the
policy. Exclusion for Household Resident - Estoppel Snair v Halifax Insurance, (1995), 145 N.S.R. (2d) 132, (N.S.S.C.) In this matter the Plaintiff sought a declaration of
coverage. The Plaintiff had earlier been found 100% liable for a very serious
boating accident that rendered his former housemate a quadriplegic. The
insurer denied coverage on the grounds of an exclusion in the policy
excluding coverage to " any person residing in your household" .
The Court held that by the time of the accident the assured and the injured
party " were no longer a unit that possessed the elements of intimacy
and community" such that the exclusion could apply. In 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.
During this period, no denial of coverage was ever issued, no reservation of
rights letter was sent and the assured was never asked to sign a non-waiver
agreement. Breach of Warranty Lewis v Canada, (July 20, 1995), No. T-1028-93, (F.C.T.D.) This case concerned a total loss of a vessel due to fire.
At the time of the fire the vessel was under the command of someone other
than the assured. The 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. The Plaintiff, assured, claimed he
had sought and obtained verbal approval to substitute another as master. The insurer
denied that any approval had been sought or given. The 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. Fraud? Poirier v Laurentian Casualty Co.,(November 8, 1995), No. 65F, (Ont.Ct. Gen.Div.). This 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. The Court held that the assured and his witnesses
were not credible and concluded the assured had failed to prove his case. In
reaching its conclusion the Court took into account that the assured had
serious financial problems and the vessel was for sale at the time of the
alleged theft. |
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