Niagara Gorge Jet Boating Ltd. v. AXA Canada Inc.

In Marine Insurance on (Updated )

The Plaintiff operated jet boats on the Niagara River and had protection and indemnity insurance through the Defendant on the SP23 form. On 6 July 1995 the Plaintiff received a letter from a third party putting it on notice of a claim for damages and injuries sustained as a result of the manner in which the Defendant’s vessels had been operated a few days earlier. In the letter the third party suggested the Defendant should forward the letter to its insurer. There had been no collision between the Defendant’s boats and the third party’s boats. The principal of the Defendant considered that the letter was merely a wake complaint and did not forward it or otherwise advise its insurer. Nothing further happened until 23 February 2000 when the Defendant was served with a Statement of Claim for $2.1 million in damages. The Defendant was advised on 28 February and subsequently denied coverage on the basis of the failure of the Plaintiff to give prompt notice of any claim as required by SP23. The Court had little difficulty in finding that the Plaintiff had, in fact, failed to give the required notice. The significant issues in the case were whether the Plaintiff was entitled to relief from forfeiture on the basis of s. 129 of the Insurance Act of Ontario, s. 98 of the Courts of Justice Act of Ontario or pursuant to the common law of equity. The Court held that the relief from forfeiture provision in the Insurance Act had no application to a contract of marine insurance which was expressly excluded from the Act by s.122. With respect to s.98 of the Courts of Justice Act, the Court noted that there was a constitutional issue as to applicability of that act to a contract of marine insurance but did not find it necessary to deal with that issue as the Plaintiff would not in any event have been entitled to relief having failed to act reasonably in the circumstances. Finally, the Court turned to the general law of equity and, although the point was conceded by the Defendant, held that in appropriate circumstances the court could provide equitable relief from forfeiture in marine insurance cases. The key to determining whether relief should be granted is whether the insurer had suffered or is likely to suffer prejudice as a result of the late reporting. In the circumstances of the case the Court held that the insurer had suffered prejudice in that it did not have the opportunity to retain its own counsel, conduct its own investigation or negotiate with the third party. Moreover, even though the witnesses were all still available the Court noted that memories fade over time. Additionally, the Court noted that the insurer not having been notified of the claim could not make the necessary business decisions as establishing reserves, modifying premiums or estimating its loss ratios. In result, the Plaintiff’s request for coverage was dismissed.