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MARINE INSURANCE LEGISLATION IN CANADA
Federal, Provincial or Both? What Direction are we headed?
THE INDUSTRY VIEW
JOHN A. CANTELLO Osborn & Lange Inc.
360 St. James St. W. Suite 2000
Montreal, Quebec H2Y 1PS
It is a pleasure for me to be speaking to you this
afternoon, particularly as I am sharing the platform with an
old friend in Sean Harrington. Sean and I have been comparing
notes on our subject. As I know the thorough job he will do on
the legal side of the presentation, and as I am not a lawyer, I
emph~sise that this is not a legal paper as so many others here
are. I feel confident that in the end Sean and I will reach
the same conclusions, even though we reach them by different
routes.
The decision in the case of Zavarova Skupnost Triglav
vs Terrasses Jewellers Inc. et al in the Supreme Court of
Canada on March 1st, 1983, sparked a great deal of re.newed
interest in the subject of the 'law applicable to Marine
Insurance. One result was that the question was passed to the
Marine Insurance Sub Committee of the CMLA in 1984, and I was
asked by Maitre Jean Brisset, Q.C., then President of the CHLA,
to be Chairman of that Sub Committee.
The first step was to form a sub committee as
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representative of the various parts of Canada as possible. I
was very pleased, therefore, to have as initial members, John
Joy from Newfoundland and Barry Oland from British Columbia.
Other members were Pierre Cote, Doug MacRae, Jr., Graham Deere
and Bill Tetley from Montreal, and from Ottawa, Peter Troop and
Jerry Rysanek. These basic members of the sub committee have
been meeting and corresponding as necessary since 1984, but in
the meantime the following members have been added: Bob Jette
of New Brunswick, West Telling, a Marine underwriter, Jean
Bernier, John Cunningham and Jim Moore. Our past President,
,Jean Brisset and Secretary, Bart Malott, have been kept
lnformed throughout. It is only now, looking at the list of
I realize that we have not had a representative members, that
from Ontar10. As Toronto is the undoubted centre of marine
insurance underwriting in Canada, perhaps our close
relatlonship with the Canadian Board of Marine Underwriters has
filled this gap satisfactorily.
Our sub committee from its first meeting has been
interpsted in a Federal statute governing marine insurance.
This is not a legal presentation so I shall tread warily, but
it would seem that the Federal courts have jurisdiction over
all cases of Marine insurance as a part of navigation and
shipping. There may be an exception if goods or a vessel are
moving within the boundaries of one Province only. Our
understanding at present is that such intraprovincial movements
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(e.g. cargo from Seven Islands to Montreal) are subject to the
appropriate Provincial law. This mayor may not continue to be
so when a Federal Act is brought in, depending on its scope of
application. I shall return to this question later on.
It has been said, and I believe it is true, that
businessmen do not mind so much what a particular law says
provided that what is said is quite clear. Businessmen,
therefore, have a common interest with the CMLA and its parent
body, the Comite Maritime Nationale, in uniformity of maritime
law.
The outstanding piece of legislation in our world of
marine insurance is the Marine Insurance Act 1906 of Great
Britain. It is important to remark that the provinces of
Brltish Columbia, Manitoba, Ontario, New Brunswick and Nova
Scotia all have legislation based closely on this Marine
Insurance Act of 1906. It should be noted, too, that the
important exceptions to these Marine provinces are Quebec and
Newfoundland. Newfoundland really has no detailed statute
governing marine insurance. Quebec has a number of sections in
the Quebec Civil Code which apply. These sections, or
articles, are based in part on the Napoleonic Code and do not
have the same connection with the Marine Insurance Act. In the
case of Newfoundland, there is little doubt that British Law
would apply so that the Marine Insurance Act would come into
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play in most situations.
In the 1970's, the then Liberal Government in power
in the Province of Quebec wanted to bring the law on marine
insurance in Quebec up to date, so appointed a committee to
ach1eve this. Included on
Brisset and Pierre Cote.
the committee were Maitres Jean
Also some of us in the Industry
itself were consulted. The result was avery serious and
lengthy work, in French and English, on a new proposed wording
based closely on the Marine Insurance Act of 1906. This
attempt to modernize the terms of the old statute was received
with sympathy by many of us and we felt we understood the
meaning of the lengthy provisions. In 1984 therefore many of
us thought in terms of the Quebec 1976 wording as being the
basis for proposed federal legislation. The Marine Insurance
Act of 1906 is now 83 years old and there are those who feel
that its wording is antiquated.
It was clear to us that the proposal for federal
legislation by the CMLA would be received seriously by the
Canadian Government.
Marine Underwriters
At the same time, the Canadian Board of
represents pretty well all the Marine
insurers in Canada and The Risk and Insurance Management
SOclety represents a very substantial number of buyers of
marine insurance in Canada. Consequently, it became our aim to
be able to make a combined resolution to the Federal Government
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Wh1Ch was supported by the Canadian Board of Marine
Underwriters, the Canadian Chapter of The Risk and Insurance
Management Society and the Canadian Maritime Law Association.
As soon as we tried to achieve this end, it became quite clear
that the Underwriters represented by the CBMU, wanted very much
to have the Marine Insurance Act of 1906 in its original
wording and no amendment would be acceptable to them. This
would even exclude a simple attempt to modernize the
phraseology.
One or two critics have suggested that this point of
view is entirely due to the fact that Marine Underwriters in
Canada are a group of "fuddy duddies" wishing to bask in the
glow of the words of the last century. This, I suggest, is far
from the truth. The Marine Insurance industry in Canada is an
entirely competent one. It is not as large as the industries
in London or New York, but does see all types of vessel and
merchandise requiring prompt evaluation of the risks involved
and the appropriate terms of cover which will apply.
The principal reason that Underwriters would like to
see the adoption of the wording of the Marine Insurance Act of
1906 in full is in the interests of uniformity, but, more
importantly, 1S because
that Act has been tested
almost every part of the wording of
in the Courts since 1906. This in
addition to the fact that the Act itself was merely a
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Codlficalion of BrItish Common Law as it was at the time the
legislation was enacted.
It should be said here that after considerable
discussion in the sub-committee of the CMLA, it was agreed
without serious dissent to recommend to the Federal Government
that an Act be passed in the terms of the Marine Insurance Act
of 1906. Also, I am pleased to say that this recommendation
went forward in the names of the Canadian Board of Ma~ine
Underwriters, the Canadian Chapter
Maritime Law Association. We feel
of RIMS and the Canadian
that the opinions of the
sellers and buyers of marine insurance, together with the body
representIng the large majority of marine legal opinion, should
carry considerable weight. This was borne out when Transport
Canada's Discussion Paper was issued in May 1988.
Having said that this was our policy, with which I
totally agree, It might be as well to look a little more
closely at the Marine Insurance Act, 1906. As stated, it was
precisely an Act to I~odify British Common Law as it existed at
that tIme. The prime draftsman was Sir McKenzie D. Chalmers,
the District Judge In the area of Birmingham, England. The
eXIsting law was not completely clear on every point so the
drafters had, where necessary, to state the law as they thought
it to be. However, there were more than 2000 recorded cases
concerning marine insurance upon which the committee could
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draw. It is lnteresting to note that the Bill was in fact
introduced In the House of Lords in 1894, 1895, 1896 and 1899
so it certainly did not receive a cursory look or a hurried
passage. It is also interesting to note that the Bill was
introduced by the Lord Chancellor, Lord Herschell and such
namE'S as Messrs. Glover and Melbourne representing the
of Commerce, Mr. shipowners, Charles McArthur from the Chamber
Hogg representing Average AdJusters, Mr. Street, the Deputy
Chairman of Lloyds, Mr. Douglas Owen of the Alliance Maritime
and General Insurance Company and the local advisor to Lloyd's,
amongst others appeared before the Committee.
I am trying here to make two points. There was a
tremendous amount of
2,000 cases. I notice
legal
that
precedent available in more than
the earliest such case may be
Sadler's Company vs. Babcock of 1743 and many, many others go
right up to the date of legislation. In some of the more
Interesting cases, decisions were handed down which affected as
many as six, seven or eight sections of the Act. 2) There has
also been a tremendous volume of legislation in the 80 odd
years since 1906 testing the precise meaning of the various
sections. So it can be shown that more than 250 years of court
decisions in the country which has always been the leader in
the industry of marine insurance have contributed to the Marine
Insurance Act of 1906. It could be that Canada can benefit
from this wealth of experience by adopting into its own marine
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legIslatIon the MarIne Insurance Act of 1906.
The history of marine insurance in Canada has
primarily been one of British and American insurance companies
setting up branches in Canada to service the local scene.
American and British companIes still playa very important part
in CanadIan Marine insurance, but there IS today a separate and
efficient local industry. Nonetheless, in the three principal
nations in the market, we have English speaking people with a
common herItage. Adopting the same Marine Insurance Act in
Canada as eXIsts in Britain would be a
uniformity and clarity to the law.
logical step to give
As stated prevIously, five of our ten Canadian
PrOVInces have a Marine
with the British Act.
Insurance wording which corresponds
It would be much more logical to enact
Federal legislation In accordance with the law in those five
provinces than to adopt something new and expect that the
Provinces would follow suit. Even if the desire was there,
this would be a lengthy process. Clearly Federal legislation,
in keepIng wIth most of the Provincial law,
step forward for uniformity.
would be a great
Reference was made earlier to new wording produced in
Quebec in 1976. Unfortunately (in the context of the proposed
legIslation) this was the year that the Parti Quebecois, under
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Mr. Rene Levesque, defeated the L1beral Government and assumed
power in the Province. Perhaps it is not surprising that the
Marine Insurance wording got lost in the shuffle.
At this time I would like to mention the useful book
written by Rui M. Fernandes of Toronto called Marine Insurance
Law of Canada publ1shed by Butterworths in 1987. The book is
particularly relevant in that it contains a comparison of the
sections of the British Marine Insurance Act and the five
Provincial Acts of Ontario, British Columbia, Manitoba, New
Brunswick and Nova Scotia. The comparison highlights how very
mur.h alike they all are. The Provincial Acts took effect over
the per10d 1967 and 1980 and thls book focuses on the Marine
Insurance Act of Ontario.
In Appendix H. Mr. Fernandes refers to the draft Act
prepared for the Liberal Government of Quebec by various
experienced practitioners in 1976, notably Jean Brisset and
Pierre Cote. Th1s draft was given very useful consideration by
the sub committee. However. it is not true to say that in the
end the CMLA recommended its use as the basis for Federal
legislation. Hopefully it 1S clear the sub committee has
recommpnded the adoption of the Marine Insurance Act 1906.
Now the Province of Quebec has a Liberal Government
once again and has established a committee to work on
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amendment.s t.O the Civil Code on the subject of marine
insuranCE>. Several of our members in the CMLA have been
appolnted to advise thls committee and they share the view of
the CMLA that uniformlty lS the major concern. This means
wlthout doubt incorporation of the Marine Insurance Act of 1906
and we have a
the Province
letter from Quebec's committee telling us that
intends to follow closely the wording of the
Marine Insurance Act.
At the beginning, I said that businessmen are more
concerned that the law is clear rather than any other aspect.
consider the Marine Insurance Act of 1906, having been
carefully drafted, has since been tested many times so that in
general. practitioners feel confident that they know what the
law says and means. Apart from uniformity as mentioned
prevlously, this is a principal reason for our strong support
of the Mar ine Insurance Act as the model for Federal
le,]islation.
It may be worth saying that three questions were
ralsed, following our support
varIOUS people, as follows:
of the Marine Insurance Act, by
1) There was some feeling that there should be some amendments
to Sections 19 to 20 regarding disclosure and representa-
tions made by the broker in negotiating a contract of
Marine insurance. It was suggested that failure by the
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2>
broker to make disclosure of necessary facts could lead to
denial of a claim by the Insurer. We do not agree that
The broker has to thjs is a reasonable proposition.
dIsclose all material changes known by himself as well as
by the Insured. In a contract based on the utmost good
faith, this is a necessary provision.
Attention was drawn to Sections 40 to 49 which deal with
warranties and the various
Insurer can avoid the policy.
are discriminatory sections.
or no control over the major
circumstances in which an
Some people said that these
Shippers of cargo have little
features of a voyage. This
fact is well known to insurers so that in practice clauses
in the policy eliminate situations which could prejudice
the cargo, so that we do not think it is necessary to
attempt to amend a well written Act in this area.
3) There are those who feel that a new Marine Insurance Act
should provide for direct action against the Insurer.
There will be, I expect, some discussion on this point at
thIS Seminar because recent British case law affects the P
and I Clubs.
In the United Kingdom, there is a special Act being
the Third Parties (Rights Against Insurers> Act of 1930, which
deals with this matter as it affects all types of insurances.
We believe that provision for direct action against Insurers
should be considered as a proper subject for another Act as
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distinct from the MarIne Insurance Act.
Following the considerable work which the Marine
Insurance sub committee has done since 1984 in considering the
subject of Federal legislation and ptessing the Canadian
Government in this regard, we were very pleased to receive
copies in the middle of last year of a discussion paper
entitled "Canadian Marine Insurance Act" from Transport Canada.
You will not be surprised to learn that a joint resolution was
sent on behalf of the Canadian Board of Marine Underwriters,
the Canadian Chapter of RIMS and the Canadian Maritime Law
Association in August, 1988, as follows:
a) we are appreciative of the progress being made toward
b)
Since
the ~nactment of Federal legislation on Marine insurance
we support the proposal that the British Marine
Insurance Act of 1906 should serve as the model for the
proposed Canadian Marine Insurance Act.
submitting that resolution, we have received some
encour~gement that progress is being made. I mentioned earlier
that Messrs. Peter Troop and Jerry Rysanek were original
members of our sub committee. Subsequently they both continued
to serve as observers.
spheres. We are stIll
Recently Peter Troop moved on to other
most happy to cooperate with Jerry
Rysanek and are pleased that Mr. Alfred Popp has agreed to take
the place of Peter Troop. As members of the sub committee,
closely allied with the practice of marine insurance, we are
all ready to help in any way that we can.
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In April a group of us from the Canadian Maritime Law
Association, being David Angus, Edgar Gold, Johanne Gauthier,
Guy Vaillancourt, Norman Hall, Bart Malott and me, met with
various representatives of Government, on a variety of
subjects, in Ottawa. Jerry Rysanek introduced the subject of
the Marine Insurance Act at the meeting in a helpful and
optimistic way. He reviewed progress to date and lold us it
should not be long before a paper is put before Cabinet. Mr.
Alfred Popp also was at the meeting.
Attention was drawn to the question of Application of
the proposed Act. Reference to this question is made in Clause
49 on page 16 of Transport Canada's Discussion Paper on Marine
Insurance which says:
The
In the light of the Supreme Court judgment
In Triglav et aI, it is proposed that the
Canadian Act apply to marine insurance contracts
related to interprovincial and international
navigation and shipping"
corollary being that the various Provincial Acts would
continue to apply to intraprovincial contracts.
Advice has been received from the Department of
Justice that no restriction should be placed on the proposed
Act's scope of application because
It is unusual for Federal Acts to include any such
restrictions,
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2) The decision ln the Buenos Aires Maru case makes marine
lnsurance the exclusive responsibility of Parliament, and
3) It may be that in the future, therefore, all Provincial
Acts will be considered to be ultra vires.
to all
At first sight it seems that having the new Act apply
situations would again raise doubts as to the
appropriate law to apply in specific cases. It had been
thought that on the basis that Provincial legislation would
apply to intraprovincial movements the navigation limits clause
in the policy could be the determining factor. If a new
Federal Act could apply to all policies then it might be
necessary for Underwriters to state in the policies which law
would apply.
policies.
This would require a new special clause in the
The opinion of some lawyers is that such a clause
would be lnvalid. In particular it has been stated that in
Quebec a POI1Cy clause requesting Federal law to be applied to
a contract covering act.ivity confined to the Province would not
be valld in the terms of the Civil Code.
In the long run, it is probably desirable to have one
Act governing all marine insurance situations real
uniformity. In the shorter run, the Provinces will probably
not favour their authority being taken away. It is important
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to know what form the Provinces' reactions to the Federal Act
will take. As there 1S general concensus that a new Federal
Marine Insurance Act should be in the form of the Marine
Insurance Act 1906, 1t should proceed satisfactorily subject to
re-action from the Provinces. Here also the legislation in
fIve major provinces. plus representations by several of our
members in Quebec, should ensure smooth sailing. However, the
question of
hiccough.
the scope of application could cause quite a
We shall have to see what transpires between
Transport Canada, the Department of Justice and the various
Provinces. To date, the Provinces have had very little to say
but we understand this is usual until such time as
actual Bill to study.
there is an
As to whether the Federal Act should apply to
intraprovincial matters, I am not so sure. Suggest we keep an
open mind until we have heard the debate in full.
I hope the preceding words have made my position as a
staunch supporter of new Federal legislation based on the
Marine Insurance Act of 1906 quite clear. This is also the
official policy of the Canadian Board of Marine Underwriters,
the Canadian Chapter of The Risk and Insurance Management
Society and the Canadian Maritime Law Association. I hope that
we may see such legislation enacted in the near future.
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