Shearwater Marine Ltd. v. Guardian Insurance Co.

In Marine Insurance on (Updated )

The Plaintiff claimed under a marine insurance policy for the constructive total loss of a 93 year old converted wooden fish packer. The vessel sank while moored to a log boom breakwater. The Defendant insurers denied coverage arguing that the assured had breached a warranty that provided: "Vessel inspected daily basis and pumped as necessary". The vessel was not boarded on a daily basis for the purpose of "inspection". It was, however, observed from a distance (often of 300 yards) and pumped as necessary. The trial judge held that compliance with the warranty did not require daily boarding of the vessel but, rather, that daily observation by a knowledgeable observer was sufficient. The trial judge further went on to consider whether the warranty was a "true warranty ", the breach of which would void the policy, or merely a suspensive condition, the breach of which merely suspends the policy while the breach continues. The trial judge held that the warranty was a suspensive condition. This was relevant as the vessel had been boarded and pumped the day before the sinking. A final issue concerned whether the vessel was truly a constructive total loss, i.e.. whether the cost of repair exceeded the insured value. This, in turn, depended on whether the assured’s normal labour charge-out rate was used to calculate the repair cost or whether the actual cost to the assured (i.e.. without a profit element) was used. The trial judge held that the normal charge-out rate should be used. The insurer appealed. The British Columbia Court of Appeal stated that "the trial judge reached the right conclusions for the right reasons " and dismissed the appeal.