The Nova Scotia Supreme Court has ordered Intact Insurance to pay a marine engineering firm over costs related to a Canadian Coast Guard ship that was vandalized.
Sometime between November 16 and 17, 2018, someone entered the Canadian Maritime Engineering (CME) repair yard in Sambro Head, NS. The individual then cut through two metal cables which secured a repair cradle – one that held the CCGS Corporal McLaren. When the cables were cut, the vessel ended up partially underwater leaning on one side, with water damaging the interior of the ship.
The Department of Justice later sent letters to CME, notifying the firm that it could not deliver on its contract with the Coast Guard and the government, thus breaching its responsibility.
“Given the lack of timely repair as required by the contract, Canada has no choice but to require the immediate repair of the vessel as per the terms of the contract or compensation for same,” case documents read, adding that it is “entirely incumbent” upon CME to abide by the requirements by quickly repairing the vessel.
“Canada is in the process of quantifying the damage to the vessel and reserves its right to seek compensation from CME based on the quantum Canada determines necessary to render the vessel whole again,” the demand letters read.
CME then turned to its insurer, Intact Insurance, through which the firm had a $10 million policy for third party liability. However, Intact maintained that the incident of “suspected vandalism” fell under its exclusions, because the vandalism was a “malicious act.” The engineering firm then took Intact to court.
Submissions on the case were heard in Nova Scotia Supreme Court in October, with Justice James Chipman finally releasing his written decision last week, Chronicle Herald reported.
“In my view, [CME} accordingly acted as a reasonable insured,” the judge’s decision read, explaining that after CME had received the demand letters, the firm “seriously and forthwith passed them on to Intact, requesting that their defence costs be paid.”
The judge noted that the term “vandalism” does not have a single, universal meaning and may not require malice. In his decision, Chipman concluded that the suspected vandalism is not excluded by the policy exclusion.
The judge also mentioned that the government had alleged that CME was negligent in failing to keep round-the-clock security at the yard.
“Accordingly, I am of the view that the alleged negligence gives rise to an independent duty to pay defence costs even if ‘suspected vandalism’ is excluded from coverage,” the judge pointed out.
Chipman added that the Canadian government has not launched legal action yet, but it can do so within two years of the incident.
