The Insurer’s appeal of a decision awarding damages to the Insured relating to three shipments of laminated truck flooring damaged by moisture during transit was allowed where the Court of Appeal held that there was nothing in the evidence that would support an inference that the conditions in the holds of the three vessels that carried the cargo were in any way exceptional such as to constitute “fortuitous occurrences”

Nelson Marketing International Inc. v. Royal & Sun Alliance Insurance Co. of Canada, [2006] B.C.J. No. 1454, British Columbia Court of Appeal

The Insured made three claims on an all-risks policy of marine cargo insurance for damage to three shipments of laminated truck flooring manufactured in Malaysia and shipped first to Singapore and then to California in 1999. All three shipments were discharged in California damaged by moisture, as the flooring was cracked, delaminated and water-stained. The purchaser rejected the shipments and the Insured made claims on the policy seeking indemnity for the full sale value of the flooring. The Insurer denied all three claims. At trial, the trial judge found that, while the source of the moisture that damaged the flooring was internal to the flooring, the external environmental conditions in the holds of the three vessels caused the damage. The trial judge considered that it was fortuitous that the flooring was exposed to the conditions in the holds of the vessels and awarded damages. The Insurer appealed.

The primary issue on the appeal was whether or not the cause of the loss was fortuitous and not attributable to the inherent nature of the flooring. The Court of Appeal noted that an all-risks policy of marine insurance afforded the Insured an indemnity against loss caused by a broad range of events, but it was fundamental to the coverage that the cause of the loss be a true accident or a casualty. There was nothing in the evidence that would support an inference that the conditions in the holds of the three vessels were in any way clearly exceptional, such as to constitute fortuitous occurrences that caused the damage to the flooring. The conditions in the hold might have differed from the environmental conditions outside, but that did not mean that they were in any way exceptional in the sense of being other than what was ordinary for the carriage. There was no evidence to suggest that they were out of the ordinary. The cause of the loss was, in that sense, internal to the flooring. The Court of Appeal held that the loss had not been shown to have been caused by a fortuitous occurrence external to the flooring; rather, on the evidence adduced, it was attributable to the nature of the subject matter of the insurance.

In the result, the Insurer’s appeal was allowed and the action was dismissed.

To stay current with the new case law and emerging legal issues in this area, subscribe here.