An operator of a jet boat company (“Whirlpool”) was not entitled to a defence or indemnity under its policy with AXA where the Court found that Whirlpool had failed to give proper notice of a potential claim

Niagara Gorge Jet Boating Ltd. (c.o.b. Whirlpool Jet) v. AXA Canada Inc., [2006] O.J. No. 640 Ontario Superior Court of Justice

Whirlpool was engaged in the business of providing jet boat tours of the Niagara River. On July 2, 1995, Patrick McCarthy anchored his motor yacht directly in the route that the jet boat operated by Whirlpool typically used. According to the employees of Whirlpool, they were able to manoeuvre around the moored boat without any incident and no accident or collision occurred on that date. On July 6, 1995, Whirlpool received a registered letter from Mr. McCarthy giving notice of his claim for damages and injuries he sustained as a result of the manner in which the Whirlpool vessels were operated on July 2, 1995. McCarthy requested that Whirlpool forward the claim letter to its insurers. The letter was reviewed by one of the principals of Whirlpool who viewed the allegations as unfounded and decided not to forward the claim letter to Whirlpool’s insurers, AXA.

On February 23, 2000, Whirlpool was served with a Statement of Claim by McCarthy claiming damages of over $2,000,000 for personal injury. Notice was provided to AXA on February 28, 2000, approximately four years and eight months after the alleged incident.

The Court reviewed the terms of the policy issued by AXA to Whirlpool and noted that one of the insuring conditions under the policy was that “all claims for loss or damage falling under this policy be reported immediately to the broker …”. The Court agreed that it was clear that Whirlpool was obliged to report immediately to the broker all claims for loss or damage and to use due diligence in giving prompt notice of any occurrence which may result in loss, damage or expense. In the circumstances of this case, Whirlpool failed to give proper notice of the occurrence as required by the policy conditions.

Whirlpool argued that the Court should grant relief from forfeiture for Whirlpool’s failure to report in a timely manner under section 129 of the Insurance Act, R.S.O. 1990, c. I-8. The Court did not agree, finding that this was a contract for marine insurance and, therefore, subject to the Canadian Marine Insurance Act, rather than the Insurance Act of Ontario.

The Court agreed that the power to grant relief against forfeiture was an equitable remedy and purely discretionary, which could be exercised by the Court in appropriate cases. However, in all the circumstances of the case at bar, the Court did not find the conduct of the Whirlpool to be reasonable. Whirlpool received a claim threatening legal action and used its own discretion in deciding whether or not to report this claim to its insurers. This was not a reasonable decision.

In the result, the Court was not satisfied that this was an appropriate case to grant relief from forfeiture and Whirlpool’s action was dismissed with costs.

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