Insurance firm must pay costs: court
A Nova Scotia Supreme Court judge has ruled in favour of a marine engineering firm in its dispute with its insurance company over costs related to vandalism that left a Canadian Coast Guard ship half submerged at its Sambro Head repair yard.
Some time overnight Nov. 16 and 17, 2018, someone entered the Canadian Maritime Engineering (CME) property and cut through two metal cables securing a repair cradle holding CCGS Corporal McLaren in place. The vessel, which was at the slip for regular maintenance, ended up partially underwater, listing on one side and damaged from water incursion.
As a result of the damage, CME could not deliver on its contract with the Canadian Coast Guard and the government, listed in legal documents as "the Department of Justice on behalf of Her Majesty the Queen in right of Canada (Canada)," sent letters to the Dartmouth-based firm notifying them of breach of their 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 said. "It is entirely incumbent upon CME to abide by the above noted requirements by immediately repairing and restoring the vessel to the state it was in prior to the damage to the vessel on or about November 17, 2018.
"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."
CME notified its insurer, Intact Insurance, which includes up to $10 million coverage for third party liability, that the yard had suffered an incident of "suspected vandalism." But Intact invoked an exclusion clause, writing that the vandalism was a "malicious act," which would be specifically excluded from coverage.
That's when CME took Intact to court, seeking an order against Intact for legal defence costs, a declaration that CME has the right to its own legal counsel to defend itself from Canada's claim and whatever further costs the court decides.
Justice James Chipman heard submissions on the case in October, with his written decision released on Thursday.
Chipman points out that Canada has not launched legal action yet, but can do so within two years of the original incident. Upon receipt of "demand letters," the judge wrote, CME "seriously and forthwith passed them on to Intact, requesting that their defence costs be paid.
"In my view, they accordingly acted as a reasonable insured," his decision said.
He also wrote that from his research, the term "vandalism" does not have a single, universal meaning and may not require malice.
"Accordingly, in all of the circumstances, I must conclude that the suspected vandalism is not excluded by the Policy exclusion."
Canada also alleged that CME was negligent in failing to maintain 24-hour security at the site, said the judge.
"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."
Meanwhile, the identity of the person or persons who cut the cables is still a mystery.
Court documents included the first email CME sent to Intact about the incident, including the information that the company had "no former employees that are disgruntled; but this was a job done by someone familiar with vessels and how a marine rail operates."
On Thursday, Halifax Regional Police spokesman Const. John McLeod said investigators have not been able to identify a suspect.
Paddy Gray, Sambro's Harbourmaster, said rumours are flying in the community as to who was responsible.
"You know what they're saying? And this is what I've seen because I let her tie up to my wharf for a couple weeks and helped them out all I could, but it looks like it boils down to either a fisherman did it but no one will point the finger because if you can't prove it then you'll get the blame. Then I heard that maybe a past CME employee done it. Could have been one of the two, but there's no names on the street. But that's what everybody's saying."
The day after the incident, Ray Gallant, CME's vice-president of operations, would not comment on whether there was video surveillance on site.
Neither Gallant nor company president Tony Kennedy responded to requests for comment on Thursday.