Secunda Marine Services Ltd. v. Liberty Mutual Insurance Co.

The Plaintiff’s vessel lost its propeller when its tail shaft broke while towing a barge. The cost of salvage and repairs was approximately $700,000. The vessel was insured at the material times by the Defendant pursuant to a policy that incorporated the Institute Time Clauses (Hulls) amended to include a Liner Negligence clause in place of the standard Inchmaree clause. The policy covered, inter alia, damage caused by “breakage of shafts” provided there was no “want of due diligence by the Assured”. The underwriters denied the claim alleging there had been a lack of due diligence. The issues in the case were first, who had the burden of proving want of due diligence and, second, was the loss caused by want of due diligence. The Nova Scotia Court of Appeal first considered the nature of the Liner Negligence clause and held that it was essentially an “all risks clause” covering all damage to the vessel by accidents unless caused by want of due diligence. The Nova Scotia Court of Appeal then extensively reviewed the authorities and held that want of due diligence was an affirmative defence, the burden of which was on the underwriters to prove. The Nova Scotia Court of Appeal then turned to the question of whether want of due diligence had been proven. The Nova Scotia Court of Appeal noted that the trial Judge had found that all statutory requirements had been met and that reasonable care had been exercised in the maintenance of the vessel and further noted that an appellate court will exercise a high degree of deference to findings of fact at trial. The Nova Scotia Court of Appeal found no reason to interfere with these findings of the trial Judge and dismissed the appeal.