February 2008

In this issue:
1. Firm News
2. Vessel Sold Resulting in No Insurance Coverage

1. Firm News

Fernandes Hearn LLP's 2008 Trucking and Logistics Seminar will be held on April 17, 2008 in Toronto, Ontario. Details are on our firm's News and Upcoming Events page at http://www.fernandeshearn.com/news_&_upcoming_events.htm.

Tentative Agenda:
9am - So You Didn't Issue a Bill of Lading!
930 - Freight Forwarders & Load Brokers
10 - Unwanted and Undeliverable Goods
1045 - Workers Compensation
1115 - Transportation to and from the USA
1145 - Freight Claims: Getting Paid
12 - Lunch

Location: Royal & Sunalliance Lecture Theatre, 10 Wellington St. East. For registration email info@fernandeshearn.com

2. Vessel Sold Resulting in No Insurance Coverage

In Arand v. Baynham, 2008 CanLII 6420 (Ontario Supreme Court) Lloyd's of London brought an application for a declaration that its policy of insurance was not required to indemnify the named insured on its policy, John Eaton.

The action arose out of an accident that occurred on Wildwood Lake near St. Mary's, Ontario on June 9, 2002. On that day, the defendant, Baynham, was operating his 14 foot Sea Rayder inboard motor boat on the lake with Madeline Arand on board. They had been "tubing" behind the boat and they were heading back to the dock when the hook attaching the tow rope to the tube failed. As a result, the tow rope snapped back towards the boat and the hook struck Madeline Arand, fatally injuring her. Her husband and children brought an action for damages against the defendant Baynham, who was the owner and operator of the boat.

The defendant brought a third party action against John Eaton who he got the boat from and John Eaton fourth partied ING his home insurer and Lloyd's which had a marine policy on the boat at the time of the accident. The parties agreed at the hearing that John Eaton sold the Sea Rayder motor boat to the defendant, Baynham on or about April 18, 2002.

Lloyd's took the position that its policy which was taken out by Mr. Eaton when he purchased the Sea Rayder boat did not indemnify Mr. Eaton as the policy lapsed when Mr. Eaton sold the boat to Mr. Baynham.

Unfortunately Mr. Eaton sold the boat to the defendant, Baynham in April of 2002 which was approximately two months before the accident. The parties agreed at the hearing that Lloyd's was not notified of the sale prior to the accident and consequently, it did not agree to continue coverage.

The general conditions in the Lloyds' policy included the following provision relating to transfer of an interest in the boat:

If you sell, transfer, mortgage or pledge your vessel or this policy all coverages herein will cease without further notice to you unless such change is accepted by us in writing.

The judge was satisfied that there was no ambiguity in that general condition. Lloyd's intentions were stated clearly and unequivocally. The judge concluded that:

Lloyds clearly stated in the general condition that it did not want to provide coverage for any "long tailed liability". Its intention was to provide coverage during the period when Mr. Eaton owned the boat. That coverage ceased when Mr. Eaton sold the boat to the defendant, Baynham. I therefore find that the Lloyd's policy does not afford any coverage to Mr. Eaton for the allegations made in the third party claim.

Gordon Hearn of our office represented Lloyd's at the hearing.

Rui M. Fernandes