Nelson Marketing International Inc. v. Royal & Sun Alliance Insurance Company of Canada

This matter concerned damage to three separate shipments of laminated wood flooring carried on three different vessels from Singapore to Long Beach. Upon arrival all three shipments were found to be damaged by moisture. The major issue in the case was whether the damage was due to a fortuity, and therefore covered by the all risks cargo policy, or whether it was due to ” inherent vice or nature of the subject matter”, an excluded peril. At the trial the Plaintiff led expert evidence that the moisture was from exposure to rainfall during transshipment and storage and the Defendant underwriters led expert evidence that the moisture had been absorbed by the cargo while at the mills awaiting shipment and that the absorbed moisture was released in the holds of the vessels and subsequently condensed onto the cargo. The trial Judge agreed with the underwriter’s expert and found as a fact that the moisture came from the cargo in the holds of the vessels. However, he further found that “the environments the cargoes interacted with were abnormally and unnaturally amplified in the hold by conditions, the causes of which, although not addressed by evidence, manifestly had nothing to do with the inherent characteristics of the cargoes”. The trial Judge therefore held that “the damage leading to the loss claim was not due to the inherent vice or nature of the cargoes, as pleaded by the defendants, but rather was caused by the fortuity of being put in holds which substantially altered the normal environment”. The underwriters appealed. On appeal, the British Columbia Court of Appeal stated that in order for the loss to be considered fortuitous the Plaintiff was required to prove that the conditions in the holds of the three vessels was other than what might have been expected as part of the ordinary incidents of carriage. The British Columbia Court of Appeal reviewed the evidence and found that there was no evidence that the conditions in the holds were exceptional such as to constitute a fortuity. The loss was accordingly held to be “attributable to the nature of the subject matter of the insurance”. The appeal was allowed and the claim against the underwriters was dismissed.