Secunda Marine Services Limited v. Fabco Industries Limited

The Plaintiff in this matter hired the Defendant to perform welding and other work on its vessel “Burin Sea”. During the course of the work there was a fire that the Plaintiff alleged was caused by the negligence of the Defendant. The Defendant disputed the allegations of negligence and also defended arguing that the action was a subrogated action brought by the Plaintiff’s insurers pursuant to a builder’s risk policy of insurance and that as a matter of law subrogation under such policies against subcontractors was prohibited. The Defendant brought this application for summary judgment to determine the subrogation issue. The Judge reviewed the construction contract between the parties and noted that it was completely silent with respect to obligations to insure. He then reviewed the builder’s risk insurance policy and noted that it contained a clause entitled “Additional Assureds and Waiver of Subrogation” which permitted the assured to name others as additional assureds and to obtain a waiver of subrogation against those parties provided it did so prior to a loss. The Judge noted that the contract between the parties did not require the Plaintiff to name the Defendant as an additional assured or to obtain a waiver of subrogation against it. The Judge then reviewed the various authorities relied upon by the Defendant for the proposition that subrogation under a builder’s risk policy was not permitted as a matter of law. The Judge held that these cases did not stand for the proposition alleged. The Judge held that the issue was determined by the language used in the construction contract and the insurance policy. The Judge further held that even if there was such a rule of law in respect of land based construction projects subject to provincial law, such a rule would not form part of marine insurance where rights of subrogation are specifically dealt with in the Marine Insurance Act. Finally, the Judge considered that the decisions of the Supreme Court of Canada in London Drugs Ltd. v Kuehne & Nagel International Ltd., [1992] 3 SCR 299 and Fraser River Pile & Dredge Ltd. v Can-Dive Services Ltd., [1999] 3 SCR 108 established the appropriate principled approach to privity of contract issues and reinforce the holding that there was no rule of maritime law barring subrogation.