566935 B.C. Ltd d.b.a West Coast Resorts v. Allianz Insurance Co. of Canada

The issue in this case was whether the sinking of a barge was due to perils of the sea. The barge had been built in 1933 and had been used as a floating sport fishing lodge since 1995. She had been laid up for the winter in September 1999 and sank in March 2000. At the time of her sinking ordinary wear and tear had opened her seams allowing the continuous ingress of substantial amounts of sea water and requiring continual pumping to keep her afloat. A PVC “diaper” had been previously fitted to control the ingress of water but this was in shreds at the time she was laid up in September of 1999. After the barge was raised it was discovered that the pump which had been keeping her afloat was working properly. The Plaintiff, the assured, alleged that the shore power to the pump must have been interrupted and that the loss was, accordingly, fortuitous and due to a peril of the sea. The Defendant underwriters alleged that the cause of the sinking was a failure in the planking of the barge due to worm infestation which allowed water to enter at a rate that overwhelmed the pump. The trial Judge agreed with the underwriters and held that the cause of the sinking was chronic leakage and the failure of a plank. As a consequence, the trial Judge held the loss was caused by ordinary wear and tear or the actions of vermin, excluded perils, and not by a peril of the sea and the case was dismissed. An appeal by the Plaintiff was dismissed by the British Columbia Court of Appeal. The British Columbia Court of Appeal noted that Anglo-Canadian law required that for a loss to be considered a peril of the sea, the actual entry of sea water must have been caused by a fortuity. Here, the fortuity alleged by the Plaintiff, the failure of the pump, was not such an antecedent fortuity and the loss was therefore not caused by a peril of the sea. It is important to note that in reaching this conclusion the British Columbia Court of Appeal referred to the leading decision of the Supreme Court of Canada in C.C.R. Fishing Ltd. v British Reserve Insurance Co., [1990] 1 S.C.R. 814, wherein it was held that where several factors combine to cause a loss, the loss will be considered to be caused by a peril of the sea if one of the causes was fortuitous. The British Columbia Court of Appeal read this case as requiring that the competing causes which combine to produce the loss must all have been operative in relation to allowing the ingress of water. The CCR Fishing case was held not to be applicable as the failure of the pump, even if a fortuity, did not cause the entry of seawater into the vessel.