The Appellant Insurer was not entitled to rely on a ratability clause pertaining to “sue and labour” expenditures as the application of that clause was limited by the policy to specific circumstances which were not present on the facts. Nor did section 79(2) of the Marine Insurance Act apply to reduce the recovery of the Insured since the loss arose from a peril insured against, namely vandalism.

01. March 2004 0

North Coast Sea Products Ltd. v. ING Insurance Co. of Canada, [2004] B.C.J. No. 375, British Columbia Court of Appeal

The Insured was a company engaged in the business of growing shellfish. In November 2002, persons unknown vandalized the Insured’s property, causing 15,500 trays, to which oysters were affixed, to sink to the bottom of the ocean. The trays, valued at approximately $116,000, were insured but the oysters, valued at approximately $100,000, were not. The insurance policy for the trays contained a sue and labour clause which obliged the Insured to minimize its loss by recovering the trays, which it did at an expense of $56,032. The Insured in fact recovered almost all of the trays to which the oysters remained affixed. The Insured sought its full recovery expenditure, less a small deductible, while the Insurer asserted that it should only pay the portion of the recovery expenditures that bore the same proportion to the whole expenditures as the value of the trays recovered bore to the total value of the trays and oysters recovered. The trial judge held for the Insured.

On appeal, the Court held that the paragraph of the sue and labour clause which allowed the Insurer to pay only a rateable portion of the sue and labour expenditures was specifically limited to the circumstances set forth in the other sections of the clause, none of which were applicable on the facts. The Court also held that s.79(2) of the Marine Insurance Act, S.C. 1993 c. 22, which would potentially reduce the recovery of the Insured if any part of the sue and labour expenditures had been “for the purpose of diminishing a loss by a peril not insured against” did not apply for two reasons: (1) because the purpose of the sue and labour expenditures was to recover the trays and was therefore limited to the recovery of insured property, and (2) because, while the loss of oysters was a loss not insured against, it arose from a peril insured against, namely vandalism.

The Insurer’s appeal was therefore dismissed.

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