In this issue:
1. Firm News
2. Athens Convention Limitation
3. Duty to Defend and Reservation of Rights Letters Revisited
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
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
On January 11, 2008 Gordon Hearn presented
a paper "The Motor Carrier Liability Regime in Effect in
Canada" at the annual Chicago meeting of the Transportation
Lawyers Association. Over 200 attorneys from across the United States
were in attendance.
Rui Fernandes will be speaking on
Maritime Law in Canada and the U.S.A. at the University of Denver
Law School on February 11th, 2008.
2. Athens Convention Limitation
The New Brunswick Court of Appeal recently reversed
a trial judge's decision extending the time for a claimant to file
a claim against a commercial marine operator. In MacKay v. Russell
et al.,  NBQB 350 (N.B.Q.B.), reversed on appeal 
NBCA 55 (N.B.C.A.) a passenger on a whale-watching boat at sea off
Grand Manan, New Brunswick was injured on August 3, 2003. While
leaving the washroom she stumbled and fell upon a cooler. She fractured
a bone in her leg. The cooler was the type used in camping, not
a permanent structure on the vessel. The claimant commenced an action
against the tour operator three years after the accident. At issue
was whether the action was time barred under the Marine Liability
Act (and the Athens Convention therein). The claimant argued
that the relevant limitation period was six years under the provincial
legislation, the Limitation of Actions Act (N.B.).
Counsel for the claimant argued that a slip and fall
on a boat should be treated like any other slip and fall case and
be dealt with under provincial law. He cited a slip and fall case
on a boat where provincial law was applied: Peters v. A.B.C.
Boat Charters Ltd. (1993), 98 D.L.R.(4th) 316 (B.C.S.C.).
In Peters the plaintiff fell through an open
hatch in a boat that had been recently launched, was still under
construction and was tied up at Granville Island in Vancouver. The
boat was not at sea or in the course of navigation. The trial judge
distinguished the Peters case. "In my view the plaintiff in Peters was not a "passenger" making a passage in
that vessel; she was a guest at a construction site in the province
that happened to be a boat."
The trial judge also referred to the recent decision
of the Supreme Court of Canada in Isen v. Simms, [2006[ S.C.J.
No. 41 [See our newsletter of October 2006]. In Isen, Dr.
Stephen Simms suffered personal injuries when the metal hook at
the end of a bungee cord struck him in the eye. The incident occurred
while the respondent Isen was using the bungee cord to secure a
part of his boat prior to towing it on the highway. The Supreme
Court of Canada held that the action of placing a bungee cord was
not an action involving navigation and shipping and provincial law
The trial judge applied the principles stated in Isen and stated:
"In my opinion the safety of arrangements
for the plaintiff as a passenger to move to and from the washroom
of a vessel at sea in the course of navigation and the safe stowage
aboard of items like coolers are matters involving a "standard
unique to the maritime context" on which a "uniform
is practically necessary
Applying the principles of cases such as Isen v. Simms, I conclude
that the plaintiff's claim in pith and substance is in relation
to navigation and shipping and is to be decided according to federal
In applying federal law the trial judge then reviewed
the application of the Maritime Liability Act.
Section 37 of the Marine Liability Act, S.C.
2001, c. 6 gives "the force of law in Canada" to the Athens
Convention. Article 16 of the Athens Convention includes a two year
limitation period for an "action for damages arising out of
the death or personal injury of a passenger."
The trial judge then proceeded with a complex analysis
of prior legislation, case law and concluded that he had jurisdiction
to extend the limitation period in this case. It was this latter
decision that the Court of Appeal for New Brunswick reversed. The
Court of Appeal held that the trial judge lacked jurisdiction to
extend the two-year limitation period set by Article 16(1) and that
he erred in law in deeming the running of that period "suspended
or interrupted". The Court of Appeal concluded that "That
being so, and having regard to the uncontested facts, I find that
Ms. MacKay's action is time-barred."
In finding the action time barred the Court of Appeal
commented on the ability of a court to extend the limitation period
under Article 16 of the Athens Convention:
"Similarly [to the Highway Traffic
Act and the Professional Engineers Act of Ontario], Article 16 of
the Athens Convention makes no provision for any court-ordered extension
of the limitation period that it prescribes. That state of affairs
is revealing of Parliament's intention, particularly when one considers
that, as noted, another provision of the Marine Liability Act, s.
23, does make express provision for extending the limitation period
that it describes. Another indicator of a parliamentary intention
at odds with the decision in the court below emerges from Article
16(4). That provision addresses the issue of extending the limitation
period set by Article 16(1) and identifies only two means by which
such an extension can be effected: (1) a written declaration by
the carrier; or (2) an agreement in writing executed by the parties
after the cause of action has arisen."
3. Duty to Defend and Reservation of Rights Letters
Case Comment on Russell Metals Inc. v. Ball Construction
Inc.  O.J. No. 4673.
This case involved a review of whether a duty to defend
was triggered and whether a Reservation of Rights letter was appropriately
issued and acted upon.
Russel Metals Inc. sued Ball Construction Inc. ("Ball")
for damages for the cost of correcting deficiencies in the structure
of a building, lost productivity and the costs incurred in investigating
the building deficiencies totaling $5,000,000.00. The action made
allegations against Ball, the general contractor, and its subcontractors.
There was some question as to whether one subcontractor had a separate
contract from Ball's contract. Ball added Aviva Insurance ("Aviva")
as a third party alleging that Aviva owed indemnity and a defence
for Ball. Aviva brought the within motion before Justice Allen to
determine the issue of whether it owed a duty to defend and, if
not, to strike the third party claim. Aviva appointed defence counsel
for Ball pursuant to a Reservation of Rights letter. The CGL policy,
in this case, would only respond if the damage done was to work
other than Ball's, which was excluded under the policy.
Regarding the duty to defend, Justice Allen applied
the test from Nichols v. American Home Assurance Co. (1990)
1 S.C.R. 801 which provided that a duty to defend was much broader
than a duty to indemnify and that "the mere possibility that
a claim within the policy might succeed suffices". The CGL
policy at issue would have to include no applicable exclusion and
the claim need only raise a possibility that the incident resulting
in damage was to work other than that of Ball.
Justice Allen held that this was not a case to review
extrinsic evidence to determine whether there was a duty to defend
as had been permitted in Monenco Ltd. v. Commonweath Insurance  2 S.C.R. 699. Justice Allen held that any examination of
whether one subcontractor had an independent contract with the plaintiff
including any review of associated reports in that regard would
require factual findings and were contentious issues. As such, it
was appropriate for the court to look only at the Statement of Claim
and not pleadings filed by other parties as same would again advance
other contentious facts and issues. Allen J. found that the allegations
in the Statement of Claim were clearly directed against the work
of Ball and its subcontractors.
Ball also claimed prejudice resulting from Aviva's
Reservation of Rights letter pursuant to which Aviva had appointed
defence counsel but also had delineated coverage issues and asserted
a need for further investigation.
Justice Allen considered the elements delineated in
the Rosenblood Estate v Law Society of Upper Canada (1989)
37 C.C.L.I. 142 (Ont. H.C.) affirmed Ont. CA (1992) 16 C.C.L.I.
(2d) 226 which required timely advice and action by insurers issuing
Reservation of Rights letters. Justice Allen examined Aviva's use
of the Reservation of Rights letter and found that Aviva had retained
counsel for Ball very quickly. Aviva had issued a Reservation of
Rights letter shortly thereafter that clearly informed Ball of Aviva's
concerns regarding coverage and that investigation was required.
Justice Allen further dismissed Ball's claims of prejudice
that service by Aviva's appointed defence counsel of a Response
to Demand for Particulars failed to address key property damage
issues (which could have established whether the policy was triggered)
and that such failure stymied Ball's ability to serve a second such
Demand. Justice Allen found that Ball could not have relied to its
detriment on Aviva in this regard as Ball knew it could retain its
own counsel in light of the Reservation Rights letter. Further,
there was no rule or substantive law to preclude Ball from further
serving another Demand.
Justice Allen ordered that Aviva's policy did not
have to respond.
Insurers should always keep timely issuance and action
in mind regarding Reservation of Rights letters. Such letters should
be issued as soon as coverage issues arise and should not be forgotten.
Waiting too long to take an off coverage position may very well
result in a finding of prejudice and the insurer may be estopped
from doing so.
This newsletter is published to keep our clients and friends informed
of new and important legal developments. It is intended for information
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