Burrard Towing Co. v. Reed Stenhouse Limited

In Tug and Tow on (Updated )

This case involved the interpretation of a Tower’s Legal Liability Policy. The facts were that a barge under demise charter to a tug company capsized while under tow and the cargo was lost. The barge was an insured vessel under the tug company’s policy. The issue in the case was whether the tug company had legal liability coverage for the lost cargo. The policy contained an express exclusion for "liability in respect of cargo on board vessels insured herein ". It also, however, contained an endorsement which provided: "coverage is extended to include Legal Liability of the Assured…in respect of loss of, or damage to…her tow…or the property thereon… ". The Tug company argued that this endorsement extended the coverage to cargo on the barge notwithstanding the exclusion. The Court of Appeal held, however, that in interpreting the insurance policy it was necessary to distinguish between liabilities arising out of contracts of towage and those arising out of contracts of carriage. The Court held that the endorsement applied only to contracts of towage and not to contracts of carriage. It further held that, as the tug and barge were both supplied by the tug owner, the contract was one of carriage. Accordingly, the cargo exclusion applied and the Underwriters were not liable under the policy.