MTL01-#2436220-v1A-Marine Insurance Terms and …

1 MARINE INSURANCEA PRIMERCANADIANMARITIMELAWASSOCIATIONM aritime Law SeminarVancouverMay 12, 2012P. Jeremy Bolger(Assisted by Gerry Argento)Borden Ladner Gervais LLPM ontrealTABLE OF CONTENTSPageINTRODUCTION .. 1I. GENERAL HULL CLAUSES RISKS 11. Perils of the Seas, Rivers, Lakes and Other Navigable 22. Fire, explosion .. 53. Violent Theft by Persons Outside the Vessel / 54. Jettison .. 65. Piracy .. 66. Breakdown of or Accident to Nuclear Installations or Reactors .. 77. Land Conveyance, Dock or Harbour .. 78. Additional Perils (Inchmaree) 7B. Pollution Collision Measure of indemnity Principle of Cross-Liabilities ..134. Excess General Average And General Average ..132. Salvage ..16E. Bottom Wages And GENERAL HULL CLAUSES OTHER Total Loss And Constructive Total Actual Total Losses.

2 192. Constructive Total Losses ..20D. Sue And Change Of CARGO PROTECTION AND INDEMNITY Risks Covered By P&I Loss of life, personal injury, illness of seamen ..302. Personal effects ..303. Diversion Fines ..305. Oil pollution ..316. Non-Contact Life Salvage ..329. Stowaways and Quarantine ..3211. Damage to fixed/movable property ..3312. Cargo ..3313. Unrecoverable general average Ship s proportion of general average ..3415. Towage Wreck of the entered vessel ..3417. Sue and labour The Omnibus Rule ..35B. Exceptions And Limitations To P&I Deductibles ..352. Member s wilful misconduct ..353. Damage to the entered ship or its equipment ..364. Demurrage or delay to entered Freight or Hire ..366. Cancellation of Charter.

3 367. Salvage operations ..36 APPENDIX A:LONDON INSTITUE TIME CLAUSES (HULLS) (January 10, 1983)APPENDIX B :INTERNATIONAL HULL CLAUSES (2003)APPENDIX C :AMERICAN INSTITUE HULL CLAUSES (2003)APPENDIX D:CANADIAN HULLS PACIFIC CLAUSESAPPENDIX E:CANADIAN BOARD GREAT LAKES HULLS CLAUSESAPPENDIX F:LONDON INSTITUTE CARGO CLAUSES (2009)APPENDIX G:THE RULES OF THE UNITED KINGDOM MUTUAL STEAMSHIP ASSURANCE ASSOCIATION (BERMUDA) LIMITED, 2012 ( P&I CLUB RULES).INTRODUCTIONThis paper is designed to provide the reader with a general overview of the content ofdifferent marine Insurance policies. This paper focuses on three important elements ofmarine Insurance : Hulls and machinery clauses, Cargo clauses and P & I presentation will focus is on clauses predominantly used in the North Americanmarket.

4 A selection of the main clauses contained in these policies will be discussed,shedding light on some of the particularities of each specific policy, where applicable. Ofcourse, every distinction between policies cannot be identified in this format, as to do sowould necessitate a much lengthier analysis. Nevertheless, it is hoped that this paper willserve as a useful introduction to the principal clauses contained in such HULL CLAUSES - RISKS COVEREDI ntroduction:Hull and machinery Insurance covers physical loss of or damage to the structure of and time clauses were developed in the London Insurance market for use with (Ship and Goods) form. These clauses contained terminology until 1983 when theInstitute of London Underwriters plain language time and voyage clauses for hulls wereintroduced (London Institute Time Clause (Hulls) appendix A).

5 These have been revisedin 1995 and again in 2003 (International Hull Clauses (2003) appendix B). NorthAmerican hull and machinery policies vary from one region to another, given variations inthe types of risks encountered. On the Canadian West Coast, the preferred clauses are theCanadian Hulls (Pacific) Clauses (appendix D). On the east coast, the London InstituteTime Clauses seem to be preferred. Great Lakes fleets are generally insured under theCanadian Board of Marine Underwriters Great Lakes Hull Clauses (appendix E). Ocean-going and coastal vessels are often insured under the American Institute Hull Clauses(2003 appendix C). [ITC Clause 6 / IHC Clause 2 / AIHC Lines 99 105 / CHPC Lines 1 11 /CGLHC Lines 98 103].

6 Proximate cause:The marine Insurance industry has always favoured coverage via the enumeration of perilswithin the Insurance contract. Regardless of the enumeration of the peril in question, thedoctrine of proximate cause is applicable as a condition precedent to all coverage under amarine Insurance 53(1) of the federalMarine Insurance Act(hereinafter "theAct")1stipulates:Subject to this Act and unless a marine policy otherwise provides, aninsurer is liable only for the loss that is proximately caused by a perilinsured against, including a loss that would not have occurred but for themisconduct or negligence of the master or jurisprudence, while recognizing that proximate cause is a context-specific concept, hasnevertheless, provided several general principles.

7 Lord Wright inCanada Rice Mills Ltd. Marine & (hereafterCanada Rice Mills) stated that proximate cause "doesnot necessarily mean the cause last in time but what isin substancethe "3. & Sons Ltd. v. Insurance Co. of North America et ,Justice Marceau concluded that thisdoctrine refers "..to the dominant and effective cause, the one that has really triggered thenatural sequence of causes that led to the loss." recent case law has adopted a broader approach. Finshing Ltd. v. BritishReserve Insurance ,( Finshing) the issue before the Supreme Court ofCanada was whether the fishing vesselLaPointewas a loss proximately caused by a perilof the sea. In concluding that it was, Justice McLachlin stated: In summary, it is my view that the following procedure should befollowed in determining whether a loss was proximately cause by aperil of the sea.

8 First, the cause or causes of the loss should beascertained. It should then be asked whether the loss is fortuitousin that it would not have occurred but for an accident orunforeseen event brought about by negligence or adverse orunusual conditions. [..] The question of whether Insurance appliesto a loss should not depend on metaphysical debates as to which ofvarious causes contributing to an accident was proximate. Itshould be sufficient to bring the loss within the risk if it isestablished that, viewed in the entire context of the case, the loss isshown to be fortuitous in the sense that it would not have occurredsave for an unusual event not ordinary to be expected in thenormal course of things.

9 [we underline] of the Seas, Rivers, Lakes and Other Navigable Waters[ITC Clause / IHC Clause / AIHC Line 100 / CHPC Line 2 / CGLHCLine 99].According to subsection 2(d) of the Schedule of theAct:1SC 1993, c [1941] 3 WWR 401 [1941] 1 DLR 1, 8 ILR (JCPC) [Canada Rice Mills].3 Ibidat 11, 1 [1984] 1 FC 575, 49 NR 321, leave to appeal refused (1984), 54 NR 80n (SCC).5 Ibidat 326, 49 [1990] 1 SCR 814 [ Fishing].7 Ibidat 823; see also566935 Insurance Co. of Canada,2006 BCCA 469 [Allianz].3In a marine policy, a reference to "perils of the sea" means fortuitousaccidents or casualties of the seas, but does not include ordinary action ofthe wind and jurisprudence has interpreted a peril of the seas as the presence of an accident that isincidental to a sea voyage.

10 The definition in theActencapsulates the older cases, such asThe Xanthowhere Lord Herschell said:There must be some casualty, something that could not be foreseen as oneof the necessary incidents of the adventure [..] accidents which may happen,not against events which must to Justice Lambert inCase Existological Laboratories v. Foremost Insurance Co. et al. (The BamcellII)9:The accident must be "fortuitous", first in the sense that it is not causedintentionally by the assured and second, in the sense that it is not theinevitable result of deterioration caused by normal action of wind, wavesand addition, the accident must be "of the seas" in the sense at least that thedamage is damage that would not have occurred in an accident on land,such as damage by sinking, or by foundering following a collision at seaor striking a Ritchie of the Supreme Court of Canada stated that the most widely accepted definition ofthe phrase peril of the seas as it is found in marine Insurance policies is that contained in thereasons for judgement of Lord Wright inCanada Rice Mills.