Marine Insurance in Canada
THE MARINE INSURANCE ACT
Although most insurance falls under provincial jurisdiction, marine insurance is governed by the Federal Marine Insurance Act. S.C. 1933, c.22. This act is based upon the English Marine Insurance Act of 1906 which was largely a codification of the common law existing to that date.
The provinces do have insurance statues which purport to apply to marine insurance. The B.C. statute is the Insurance (Marine) Act RSBC 1996. C. 226. Of the provinces which have specific legislation dealing with marine insurance, marine insurance is generally excluded from legislation dealing with other forms of insurance.
What is Marine Insurance?
S.6 of the Marine Insurance Act sets out the nature and scope of marine insurance. It is a contract of indemnity, with the exact indemnity determined by the contract.
(1) A contract of marine insurance is a contract whereby the insurer undertakes to indemnify the insured, in a manner and to the extent agreed in the contract against
(a) losses that are incidental to a marine adventure or an adventure analogous to a marine adventure, including losses arising from a land or air peril incidental to such an adventure if they are provided for in the contract or by usage of the trade;
(b) losses that are incidental to the building, repair or launch of a ship.
(2) Subject to this Act, any lawful marine adventure may be the subject of a contract.
S.2 (1) “Marine Adventure”
“Marine Adventure” means any situation where insurable property is exposed to maritime perils, and includes any situation where
(a) The earning or acquisition of any freight, commission, profit or other pecuniary benefit, or the security for any advance, loan or disbursement, is endangered by the exposure of insurable property to maritime perils, and
(b) Any liability to a third party may be incurred by the owner of, or other person interested in or responsible for, insurable property, by reason of maritime perils;
S.2 (1) “Maritime Perils”
“Maritime Perils” means the perils consequent on or incidental to navigation, including perils of the seas, fire, war perils, acts of pirates or thieves, captures, seizures, restraints, detainments of princes and peoples, jettisons, barratry and all other perils of a like kind and, in respect of a marine policy, any peril designated by the policy;
There are many Canadian cases discussing what constitutes a peril of the sea. In order to be a peril of the sea, it must be something unique to the sea. If it is peril which could occur on land, it is not a peril of the sea. The leading Canadian case on peril of the sea is Century Insurance Co. of Canada v. Case Existological Laboratories Ltd.  2 S.C.R. 47.
In this case, the insured vessel sank because an employee negligently left the valves open and flooded the vessel. Justice Ritchie gave the judgment for the SCC and wrote:
“…in order to succeed in a claim under the perils of the sea provision the insured must establish that the proximate cause of the loss was a “fortuitous accident or casualty of the seas”, and furthermore, the claim may succeed even though the loss would not have happened “but for the misconduct or negligence of the master or crew”.
In this case, there is no doubt that it was the risk of the Bamcell II sinking, and causing loss by that sinking, that made the failure to close the deck valves a negligence omission when there is a duty to act. When that negligent omission is couples with its forseeable consequences, the proximate cause of the loss in this case was a peril of the seas and, as such, covered by the policy.
In the case of C.C.R. Fishing Ltd. v. British Reserve Insurance Co.  1 S.C.R., is another case in which a vessel sank, this time because a valve was left open and water entered through corroded screws. It was argued that while negligence was involved in not closing the valve, the sinking of the ship was not a foreseeable consequence, and therefore should not be viewed as a peril of the sea. The S.C.C. rejected this argument and found that it was a peril of the sea.
Perils of the sea have been found to include striking a submerged object, the tearing of sails, fire, a vessel sinking at dock, a vessel sinking in unexpected waves and a vessel sinking while being towed.
The insured must have an insurable interest in the subject matter of the marine insurance contract. If the insured does not have an insurable interest the policy is void.
S.8 defines “insurable interest” as
(1) Subject to this Act, a person who has an interest in a marine adventure has an insurable interest,
(2) A person has an interest in a marine adventure if the person has a legal of equitable relation to the adventure, or to any insurable property at risk in the adventure, and may benefit from the safety or due arrival of insurable property, may be prejudiced by its loss, damage or detention or may incur liability in respect of it.
An insurable interest can be defeasible or contingent.
An insurable interest can be a partial interest.
The master and crew have an insurable interest in their wages.
A person who advances freight has an insurable interest
A mortgagee has an insurable interest.
Types of Marine Insurance
Marine Insurance comprises the following:
a) Hull and Machinery
c) P & I Cover
d) Other Third Party Liability Coverage
i. Towers Legal Liability
ii. Ship Builders and Repairers Legal Liability
iii. Terminal Operators Legal Liability
iv. Marinas and Dock Owners Legal Liability.
Marine insurance policies can be either for specified perils or for all risks. Most hull and machinery policies on commercial vessels are insured on a specified or named perils basis, where the insurer agrees to indemnify the assured for losses caused by specific perils which are identified in the policies.
On the other hand, most cargo policies and many yachts and pleasure craft policies are all risk policies where the insurer agrees to indemnify the assured against “all risks of loss or damage”. Items which are not covered in all risk policies must be specifically excluded in the policy.
The Marine Insurance Contract
Marine contracts are contracts of the utmost good faith and if utmost good faith is not observed by either party, the contract may be avoided by the other party.
Disclosure requirements are set out in S. 21 as follows:
(1) Subject to this section, an insured must disclose to the insurer, before the contract is concluded, every material circumstance that is known to the insured.
(2) Subject to this section, an agent who effects insurance for an insured must disclose to the insurer, before the contract is concluded,
(a) every material circumstance that is known to the agent; and
(b) every material circumstance that the insured must disclose, unless the insured learned of it too late to communicate it to the agent.
(3) A circumstance is material if it would influence the judgment of a prudent insurer in fixing the premium or determining whether to take the risk.
(4) Whether any circumstance that is not disclosed is material or not is a question of fact.
(5) In the absence of any inquiry, the following circumstances need not be disclosed:
(a) any circumstance that diminishes the risk;
(b) any circumstance that is known to the insurer;
(c) any circumstance as to which information is waived by the insurer; and
(d) any circumstance the disclosure of which is superfluous by reason of any express warranty or implied warranty.
(6) For the purposes of this section,
(a) an insured is deemed to know every circumstance that, in the ordinary course of business, ought to be known by the insured;
(b) an agent is deemed to know every circumstance that, in the ordinary course of business, ought to be known by, or to have been communicated to the agent; and
(c) an insurer is presumed to know circumstances of common notoriety and every circumstance that, in the ordinary course of an insurer's business, ought to be known by an insurer.
(7) If an insured or an agent of an insured fails to make a disclosure as required by this section, the insurer may avoid the contract.
(8) In this section, "circumstance" includes any communication made to, or information received by, the insured.
The insured must disclose every material circumstance to the insurer. A circumstance or fact is material if it would affect either the premium or the decision to accept the risk. Disclosure must be made before the contract is concluded.
Failure to disclose material facts entitles the insurer to avoid the contract. The insurer must elect to avoid it and must return the premium.
Some examples of material facts are:
i) whether the ship was missing at the time the risk was placed;
ii) that the ship had gone into port for repairs at the commencement of the voyage;
iii) that the ship had gone aground and was leaking;
iv) that the vessel was towed up and down the river;
v) that two scows were towed together, rather than singly;
vi) that the vessel was generally weak and did not have a certificate required under the Canada Shipping Act; and
vii) the unfavourable claims history of the insured.
Strathy and Moore, Law and Practice of Marine Insurance in Canada, 2003, pp. 56 - 57
Marine Insurance Act Requirements
(1) A contract of marine insurance is not admissible in evidence unless it is evidence by a marine policy.
(2) A marine policy need not be executed and issued when the contract is made but may be executed and issued afterwards.
Marine policies must specify:
i) Name of the insured
ii) The subject matter that is insured
iii) The perils insured against
iv) The voyage or period covered
v) The sum insured
vi) The name of the insurer. (Sections 26-28)
Valued and Unvalued Policies
A marine policy may be either. If it specifies the agreed value of the subject matter, it is a valued policy. If it does not specify the value, but provides a limit, it is unvalued. If the subject matter is a total loss in a valued policy, the indemnity is the agreed value, and for an unvalued policy, the amount of indemnity is calculated pursuant to s.19. For a ship, the indemnity is the value of the commencement of the risk plus the insurance charge. For cargo, the indemnity is the prime cost of the goods, plus the shipping and insurance expenses.
A marine policy can be a floating one, which leaves the name of the ship and other particulars to be provided later by a declaration or endorsement. Floating policies are used by shippers of cargo and avoid having to negotiate a new policy for every shipment. All shippers goods are covered by the policy as long as the shipper declares the goods as required by the contract. Failure to properly declare cargo will jeopardize coverage, but a good faith error can be rectified even after a loss or the arrival of the goods. If a declaration of value is not made until after a loss or arrival of the goods, the indemnity is calculated as though the policy was unvalued.
Time and Voyage Policies
States that a marine policy can be either a time or voyage policy. There are a number of rules for voyage policies found in S. 40 - 46, including that a voyage policy will not attach if the ship sails somewhere other than specified in the policy.
In marine insurance a warranty is a contractual promise that must be exactly complied with, and if it is breached, the insurer is relieved of further obligations under the policy, S.39. A warranty is different than a representation. A representation is a statement of fact, expectation or belief that occurs before the contract is made and must be “substantially correct”. A warranty must be exactly complied with.
A warranty is defined in S.32 as follows:
(1) In this section and sections 33 – 39, “warranty” means a promissory warranty by which the insured
(a) Undertakes that some particular thing will or will not be done or that some condition will be fulfilled, or
(b) Affirms or negates the existence of particular facts.
(2) A warranty may be an express warranty or an implied warranty.
There are three implied warranties:
There is an implied warranty in every marine policy that the marine adventure insured is lawful and, insofar as the insured has control, will be carried out in a lawful manner.
(1) Where in any marine policy insurable property is expressly warranted to be neutral, there is an implied condition in the policy
(a) that the property will have a neutral character at the commencement of the risk and that, insofar as the insured has control, that character will be preserved during the risk; and
(b) where the property is a ship, that, insofar as the insured has control, the papers necessary to establish the neutrality of the ship will be carried on the ship and will not be falsified or suppressed and no simulated papers will be used.
S.37 – 38 Seaworthiness
(1) There is an implied warranty in every voyage policy that, at the commencement of the voyage, the ship will be seaworthy for the purpose of the particular marine adventure insured.
(2) Where a voyage policy attaches while the ship is in port, there is an implied warranty in the policy that the ship will, at the commencement of the risk, be reasonably fit to encounter the ordinary perils of the port.
(3) Where a voyage policy relates to a voyage performed in different stages during which the ship requires different or further preparation or equipment, there is an implied warranty in the policy that, at the commencement of each stage, the ship is seaworthy for the purposes of that stage.
(4) There is no implied warranty in any time policy that the ship will be seaworthy at any stage of the marine adventure, but where, with the privity of the insured, the ship is sent to sea in an unseaworthy state, the insurer is not liable for any loss attributable to unseaworthiness.
(5) A ship is deemed to be seaworthy if it is reasonably fit in all respects to encounter the ordinary perils of the seas of the marine adventure insured.
(1) There is no implied warranty in any marine policy on insurable property, other than a ship, that the insurable property is seaworthy.
(2) There is an implied warranty in every voyage policy on insurable property, other than a ship, that, at the commencement of the voyage, the ship is seaworthy and reasonably fit to carry
(1) An express warranty may be in any form of words from which the intention to warrant may be inferred.
(2) An express warranty must be included in, or written on, the marine policy or be contained in a document incorporated by reference into the policy.
(3) An express warranty does not exclude an implied warranty, unless they are inconsistent
There are many Canadian cases dealing with whether or not something is a true warranty. Just calling something a warranty in the policy may not suffice. The wording is very important as breach of a true warranty discharges the insurer from liability from the time of the breach but a warranty that merely delimits and is part of the description of the risk, often referred to as a “suspensive condition” merely interrupts coverage during the currency of the breach. Where the words of the policy specifically provide that breach of a particular provision will discharge the insurer from liability from the date of the breach, the provision will most likely be construed as a true warranty. The consequences of the breach should be described. Common express warranties include:
- Navigation limits, limiting areas in which a vessel may operate
- Laid up and out of commission (requiring a vessel be laid up)
- Identity of Master – requiring a named person to command the vessel
- Towing warranties, prohibiting towing, except where customary or if vessel is in distress
- Warranties regarding surveys and inspections by marine surveyors
- Private pleasure use warranties prohibiting commercial use of a yacht
- “no other insurance” warranties to prevent double recovery
The consequences of a breach of warranty may only be avoided by an express provision in the policy or by a waiver of the breach by the insurer.
The Marine Insurance Act provides the statutory framework for liability of maritime matters.
Insurers Liability for Losses
(1) Subject to this Act and unless a marine policy otherwise provides, an insurer is liable only for a loss that is proximately caused by a peril insured against, including a loss that would not have occurred but for the misconduct or negligence of the master or crew.
(2) Sets out the perils which are excluded by the MIA.
Without limiting the generality of (1), an insurer is not liable for any loss attributable to the willful misconduct of the insured nor, unless the marine policy otherwise provides, for
(a) In the case of insurance on a ship or goods, any loss proximately caused by delay, including a delay caused by a peril insured against;
(b) Ordinary wear and tear, ordinary leakage or breakage or inherent vice or nature of the subject-matter insured;
(c) Any loss proximately caused by vermin; or
(d) Any loss or damage to machinery not proximately caused by marine perils.
If there are two or more independent causes of damage, one of which is covered by the policy and one which is not, the damage is recoverable. Charterhouse Properties Ltd. v. Laurentian Pacific Insurance, (1993), 75 B.C.L.R. (2d) 299
If one of the concurring causes is excluded by the terms of the policy, the damage is generally not recoverable.
S.56 Total Loss
(1) A loss is an actual total loss if the subject matter insured is destroyed or is so damaged as to cease to be a thing of the kind insured or if the insured is irretrievably deprived of the subject matter.
(2) Where a ship engaged in a marine adventure is missing and no news of the ship is received within a reasonable period, an actual total loss may be presumed.
S.57 Total Constructive Loss
This is defined in the MIA, but parties are also free to decide what will constitute a constructive total loss under their policy.
(1) Unless a marine policy otherwise provides, a loss is a constructive total loss if the subject-matter insured is reasonably abandoned because the actual total loss of the subject-matter appears unavoidable or the preservation of the subject-matter from actual total loss would entail costs exceeding its value when the costs are incurred.
SS.58- 60 Abandonment
Essentially, when there is a constructive total loss, the insured may treat it as a partial or total loss. If the insured elects to treat it as a total loss, the insured must abandon the property to its insurers by delivering a notice of abandonment. The insurer may accept or reject the notice. If accepted, the insurer must pay as though there was a total loss and it acquires the insured’s interest in the property. The exact rules are specified in these three sections.
S.61 Partial Losses
(1) A partial loss is any loss that is not a total loss.
(2) Where insured goods reach their destination in specie but cannot be identified by reason of obliteration of marks or otherwise, the loss, if any, is a partial loss.
(3) Unless a marine policy otherwise provides, an insured who brings an action for a total loss but establishes only a partial loss may recover for a partial loss.
The measure of indemnity in marine cargo insurance is usually left to general principles, subject to specific provisions in the policy itself. For Hull and Machinery insurance there are detailed provisions in the CBMY Great Lakes Hull Clauses (September 1, 1971) and the Canadian Hulls (Pacific) Clauses (September 1, 1991).
S.68 Partial Loss of Ship
Subject to any express provision in the marine policy, the measure of indemnity in respect of a partial loss of a ship is
(a) where the ship is repaired, the reasonable cost of the repairs less the customary deductions, but not exceeding the sum insured in respect of any one casualty;
(b) where the ship is partially repaired, the aggregate of the reasonable cost of the repairs, as determined under paragraph (a), and the reasonable depreciation, if any, arising from the unrepaired damage, the aggregate not exceeding the cost, as determined under paragraph (a), of repairing the whole damage; and
(c) where the ship is not repaired and is not sold in a damaged state during the risk, the reasonable depreciation arising from the unrepaired damage, but not exceeding the cost, as determined under paragraph (a), of repairing the damage.
S.70 Partial Loss of Goods or Movables
(1) Subject to any express provision in the policy, the measure of indemnity in respect of a partial loss of goods or movables is
(a) where part of the goods or movables insured by an unvalued policy is totally lost, the insurable value of the part lost, ascertained as in the case of a total loss;
(b) where part of the goods or movables insured by a valued policy is totally lost, that proportion of the value of the goods or movables specified by the policy that the insurable value of the part lost bears to the insurable value of all the goods or movables, ascertained as in the case of an unvalued policy; and
(c) where the whole or any part of the goods or movables is delivered damaged at its destination, that proportion of the insurable value of all the goods or movables, in the case of an unvalued policy, or the value of all the goods or movables specified by the policy, in the case of a valued policy, that the difference between the gross value of all the goods or movables in a sound condition at that destination and their gross value in their damaged condition at that destination bears to the gross value of all the goods or movables in a sound condition at that destination.
(2) For the purposes of paragraph (1)(c), "gross value"
(a) in the case of goods or movables customarily sold in bond, means the bonded price of the goods or movables; and
(b) in the case of any other goods or movables, means the wholesale price, or if there is no wholesale price, the estimated value, of the goods or movables, together with any freight, landing charges and duty paid in respect of them
(3) For the purposes of paragraph (1)(c), where the goods or movables are sold at their destination and all charges on the sale are paid by the sellers, their gross value in their damaged condition at that destination is the actual price obtained for them, which price is known as the gross proceeds.
S.73 Third Party Liability Insurance
Subject to any express provision in the policy, the measure of indemnity in respect of any liability to a third party that is expressly insured against by a marine policy is the amount paid or payable by the insured to the third party in respect of the liability.
S.75 Proportional Liability
Where a loss is recoverable under a marine policy, the insurer, or each insurer if there is more than one, is liable for that proportion of the measure of indemnity in respect of the loss that the amount subscribed by the insurer is of
(a) in the case of an unvalued policy, the insurable value of the subject-matter; and
(b) in the case of a valued policy, the value of the subject-matter specified by the policy.
S.78 Successive Losses
(1) Subject to this Act and unless the marine policy otherwise provides, an insurer is liable for successive losses, even if the total amount of the losses exceeds the sum insured.
(2) Where, under a marine policy, a partial loss that has not been repaired or otherwise made good is followed by a total loss, the insurer is liable only for the total loss.
(3) Nothing in subsections (1) and (2) shall be construed as affecting the liability of an insurer under a sue and labour clause.
S.79 Sue and Labour Expenses
After an accident has occurred, the insured has an obligation to take reasonable measures to minimize the resultant loss, in the technical language of Marine Insurance, to “sue and labour”. Since this usually benefits the insurer, the insurer will usually write in a clause that it will cover those expenses as well.
(1) Where a marine policy contains a sue and labour clause, the engagement thereby entered into is supplementary to the contract and the insured may recover from the insurer any expenses properly incurred under the clause, even if the insurer has paid for a total loss of the subject-matter insured or the subject-matter insured is warranted free from particular average, either wholly or under a specified percentage.
(2) General average losses, general average contributions, salvage charges, and expenses incurred for the purpose of averting or diminishing a loss by a peril not insured against are not recoverable under a sue and labour clause.
It is the duty of an insured and an insured's agent to take such measures as are reasonable for the purpose of averting or diminishing a loss under the marine policy.
There is no right of subrogation unless the policy is one of indemnity. Subrogation derives from common law and does not depend upon contractual confirmation, but many insurance contracts specifically provide for the insurer’s right of subrogation. Subrogation only arises when the insurer has paid for the insured’s loss. An ex gratia payment where liability is still denied does not result in the right of subrogation.
(1) On payment by an insurer for a total loss of the whole of the subject-matter insured or, if the subject-matter insured is goods, for any apportionable part of the subject-matter insured, the insurer becomes entitled to assume the interest of the insured in the whole or part of the subject-matter and is subrogated to all the rights and remedies of the insured in respect of that whole or part from the time of the casualty causing the loss.
(2) On payment by an insurer for a partial loss of the subject-matter insured, the insurer acquires no title to the subject-matter but is subrogated to all the rights and remedies of the insured in respect of the subject-matter from the time of the casualty causing the loss to the extent that the insured is indemnified, in accordance with this Act, by the payment for the loss.
S.86 – 88
These sections discuss under-insurance, over-insurance and double-insurance.
The MIA does not prescribe a limitation period for a claim under a marine insurance policy. The Marine Liability Act provides a limitation period of three years, but it is probably wise to consider the limitation period two years where not specified. It may be that the limitation that applies depends on which court in which the action is commenced and where the cause of action arose.
Many marine policies expressly provide for actions against insurers to be commenced within a specified period, usually a year.
Relief Against Forfeiture
The MIA sets out very strict procedures for compliance. There is very little room for a court to grant relief from forfeiture to a claimant if the claimant has not complied with the Act. It is more difficult to secure an order for relief from forfeiture under the Marine Act than under other non-marine insurance statutes.
Insurance of Particular Risks
Pleasure Craft Insurance
Under Canadian maritime law, the operator of a pleasure craft is liable for damage done to third parties as a result of negligence in the operation of the vessel. However, the owner of a yacht or motor boat is not by statute vicariously liable for the negligence of the operator. The owner may be liable of the accident was caused as a result of his or her personal negligence, i.e. if the boat was unseaworthy, or ill-equipped, or if the owner knew that the operator was unskilled to operate the vessel or impaired by alcohol or drugs.
Ship Repairers are bailees of the property of others, and as such, a ship repairer is liable if it negligently causes damage to that property. It may also be liable if its negligent workmanship subsequently causes damage to the owner of the property. Ship repairers require insurance to protect the property of others while in their custody. Ship repairers’ legal liability policies typically contain a limit of liability and a deductible.
The Association of Marine Underwriters for B.C. has approved a form of open policy of insurance for logs transported by boom or barge, known as the “Marine Insurance – Logs Form 1/1/93. This insures logs while waterborn against “all risks” for either total loss of an entire boom or log barge shipment. If the insurer agrees, it can also cover the risk for logs in storage. There is an exclusion for loss caused by sinking.
Tug and Tow Risks
Towage contracts will often place the risk of loss or damage on the towed vessel. The standard towing conditions for B.C. are those of the B.C. Tugboat Owners Association. In insuring tugs, it is important to specify what is being insured – i.e. the tug, the tow or the cargo and for whose benefit the insurance is being taken out.
Marinas provide facilities for the storage, docking, fueling and repair of pleasure vessels. Marinas act as bailees for reward of customer property and are liable for personal injuries suffered by those using or visiting its premises. Some marinas provide signage to reduce their exposure, but the best policy for a marina is to have written contracts with customers limiting liability. Some marina owners have their customers take out insurance stipulating that the marina have the benefit of the insurance.
There are many types of marina operator’s liability insurance offered in Canada.
The policy may include:
a) coverage for legal liability for loss or damage to vessels including motors and other fittings while in the care, custody and control of the insured;
b) liability for loss or damage to other property;
c) liability arising out of the use of non-owned vessels in the operation of the marina; and
d) liability for death or personal injury (although they may also have a comprehensive general liability policy.) Strathy and Moore, supra, p.307
Charterer’s Liability Insurance
Charterers can be obtained for a single voyage, or for a time period, (known as a “time charter”). Charterers will usually require “charterers liability insurance” to cover its liability for, amongst other things, loss or damage to cargo when it acts as a carrier of goods, damages to third parties, including damage to the environment, damage to the ship during loading and unloading, and the charterer’s duty to indemnify the shipowner against liability to third parties.
MARINE LIABILITY ACT AND LIMITATION OF LIABILITY
Marine Liability Act S.C. 2001 C.6
Personal Injuries and Fatalities
S.4 of the MLA sets out who can bring a claim for a fatal injury:
(a) a son, daughter, stepson, stepdaughter, grandson, granddaughter, adopted son or daughter, or an individual for whom the injured or deceased person stood in place of a parent;
(b) a spouse, or an individual who was cohabiting with the injured or deceased person in a conjugal relationship having so cohabited for a period of at least one year; or
(c) a brother, sister, father mother, grandfather, grandmother, stepfather, stepmother, adoptive father or mother, an individual who stood in the place of a parent.
S.6 allows claims by a dependent for “their loss resulting from the injury”, and under S6(3) they may also recover “an amount to compensate for the loss of guidance, care and companionship that the dependent could reasonably have expected to receive from the injured or deceased person if the injury or death had not occurred”.
Limitations of Liability
Part 3 of the MLA implements the 1976 Convention on Limitation for Liability for Marine Claims and the 1996 protocol, but with Canadian amendments and limits. These provisions were originally enacted in 1998 as Part IX of the Canada Shipping Act, and were then moved to the Marine Liability Act for convenience.
The owner of a vessel, the charterer of a vessel, the person operating a vessel and any person with an interest in or possession of a ship, are entitled to limit their liability for damage caused by the vessel in a maritime accident, unless the accident was caused by the “personal act or omission of the owner or operator committed with the intent to cause such an accident, or recklessly with the knowledge that such loss would probably result. This applies to both pleasure and commercial vessels.
S.28 of the Marine Liability Act sets out that for vessels less than 300 tons (most pleasure craft) the limitation is $1 million for claims in respect of loss of life or personal injury (except for passengers) and $500,000 for other types of claims, such as property damage.
Part 4 of the MLA implements the 1974 Athens Convention relating to the Carriage of Passengers and their Luggage by Sea and the 1990 Protocol and introduces special Canadian amendments.
S.36 sets out that the definition of ships is extended to ships of all types whether seagoing or not (will apply to passengers on lakes and rivers).
S.37 makes the Convention applicable to contracts for both domestic and international carriage of passengers.
Also, passenger on board ships (not the master or crew) used for commercial or public purposes are governed by the Convention regardless of whether or not there is a contract of carriage.
For claims by individual passengers:
Article 7 of the Athens Convention sets out that the maximum liability of the carrier for the death of or personal injury to a passenger is 175,000 SDR (approximately $270,000 Cdn).
Article 8 provides that the maximum liability for cabin luggage is limited to 1,800 SDR (approximately $2,775 Cdn) and to 10,000 SDR ($15,385.00 Cdn) for loss of or damage to a vehicle, including all luggage carried in the vehicle.
For claims by multiple passengers, the carrier may seek the right to limit liability to a global figure pursuant to part 3 of the MLA and the 1976 Convention on Limitation of Liability.
Liability and the Burden of Proof
Pursuant to Article 3, the carrier under the Athens Convention is liable for damages suffered due to the death or personal injury of the passenger or for loss or damage to the passenger’s luggage where
(1) the incident which caused the damage occurred during the course of carriage and
(2) the damage was due to the fault or neglect of the carrier or his servants or agents acting within the scope of their employment.
The burden of proof is on the claimant.
In shipwreck, collision, stranding, explosion, fire or defect in the ship, the fault or neglect of the carrier is presumed.
For claims in respect of loss or damage to luggage the fault of carrier is presumed.
For all other types of claims, the burden of proving the fault or neglect of the carrier is on the claimant.
S.14 of the MLA sets out that the time for commencing action for personal injury is two years. For a fatality an action must be commenced within two years from the date of death. This brings the time limits more in keeping with those set out in provincial non-maritime claims.
Contracting Carriers and Performing Carriers
The Athens Convention sets out the two types of carriers and makes them both liable.
Article 1 (a)
“Carrier” is defined as the person by or on behalf of whom a contract of carriage has been conducted regardless of whether the carriage is performed by him or a performing carriers.
The term “performing carrier” is defined as the person who actually performs all or part of the contract of carriage.
Where there is both a contracting and performing carrier, the contracting carrier remains liable for the entire carriage.
(1) Makes the performing carrier liable for the parts of the contract performed by him or her.
(2) The contracting carrier is made liable for the acts and omissions of the performing carrier.
Article 4(4) provides that where both the contracting and performing carriers are liable, their liability is joint and several.
Loss of Right to Limitation
Article 13 sets out that carrier will lose the right to limit liability where it is proven that the damage resulted from an act or omission done with intent to cause damage or recklessly and with the knowledge that such damage would probably result.
Article 15 requires passengers to give written notice of “apparent” damage at the time of disembarkation for cabin luggage or the time of re-delivery of other luggage.
For damage that is not “apparent” the passenger must give written notice within 15 days from the date of disembarkation or re-delivery. Without written notice, the luggage is presumed to have been received in good condition.
Article 17 sets out the jurisdictions in which a claim under the Convention may be brought:
1) the place where the defendant has his permanent residence or principal place of business;
2) the place of departure or of destination under the contract;
3) the place where the claimant is domiciled or has permanent residence providing that the defendant also has a place of business in that state; or
4) the place where the contract of carriage was made if the defendant has a place of business in that state.
Article 18 sets out that any contractual provision which sets out to relieve the carrier of its liability or to fix a lower limit of liability than that prescribed shall be null and void.
Also, any provision shifting the burden of proof which rests upon the carrier or to restrict the rights of claimants to commence proceedings in the specified jurisdictions is null and void.