The Nova Scotia Court of Appeal, in dismissing the appeal, held that under the Liner Negligence clause, the insurer had the burden of proving whether or not the loss or damage was the result of a want of due diligence by the insured

Secunda Marine Services Ltd. v. Liberty Mutual Insurance Co., [2006] N.S.J. No. 266, Nova Scotia Court of Appeal

The insured’s vessel lost its propeller and tail shaft while towing a barge. Under the Liner Negligence clause, coverage was excluded for loss or damage resulting from a want of due diligence by the insured and/or manager of the vessel. The insurer refused to indemnify the insured for the loss, claiming that a want of due diligence caused the tail shaft to break. The trial judge, in allowing the action, concluded that the insured had exercised due diligence. The insurer appealed.

The Nova Scotia Court of Appeal dismissed the appeal. The Liner Negligence clause is essentially an “all risks clause”. The exclusion under the Liner Negligence clause is only for want of due diligence by the insured and/or the manager of the vessel. It is well established that once an insured makes out a prima facie case of coverage under an insurance policy, the burden then shifts to the insurer to prove that an exclusion is applicable. In order to rely upon the exclusion in the Liner Negligence clause, the insurer must bear the burden of proving a want of due diligence on the part of the owner, master or manager of the vessel. The trial judge did not err in concluding that the insured had exercised due diligence.

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