1 Subrogation CBMU Semi-Annual May 21, 2004 SubroGateway Inc.

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SubrogationSubrogationCBMU Semi-AnnualCBMU Semi-Annual

May 21, 2004May 21, 2004

SubroGateway Inc.

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SubrogationSubrogation

DEFINITION OF SUBROGATIONDEFINITION OF SUBROGATIONAn insurance carrier may reserve the "right An insurance carrier may reserve the "right of subrogation" in the event of a loss. This of subrogation" in the event of a loss. This means that the company may choose to means that the company may choose to take action to recover the amount of a claim take action to recover the amount of a claim paid to a covered insured if the loss was paid to a covered insured if the loss was caused by a third party. After expenses, the caused by a third party. After expenses, the amount recovered must be divided amount recovered must be divided proportionately with the insured to cover proportionately with the insured to cover any deductible for which the insured was any deductible for which the insured was responsible. responsible.

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SubrogationSubrogationPorto Seguro Companhia De Seguros Gerais v Porto Seguro Companhia De Seguros Gerais v

The "Federal Danube" The "Federal Danube" (January 31, 2001) (January 31, 2001) The Defendant argued that under Canadian The Defendant argued that under Canadian

maritime law the Plaintiff ought to have maritime law the Plaintiff ought to have commenced the action in the name of the cargo commenced the action in the name of the cargo owners. owners.

Held the insurers became subrogated to the Held the insurers became subrogated to the rights of their insured upon payment and rights of their insured upon payment and were entitled to bring the action in their were entitled to bring the action in their own name.own name.

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Chubb Insurance Co. of Canada v Chubb Insurance Co. of Canada v Cast Line Ltd. Cast Line Ltd. [2001] [2001]

payment by the insurer as a loan payment by the insurer as a loan receipt. receipt.

held that the payment by the insurer held that the payment by the insurer was a true insurance indemnitywas a true insurance indemnity

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Subrogation - Why Subrogation - Why Bother?Bother?

• Claims staff “process recovery” earlyClaims staff “process recovery” early

• Improved cash flow……… How much?Improved cash flow……… How much?

• Underwriters write superior risksUnderwriters write superior risks

• Rates up! Cover cut back! Deductible up!Rates up! Cover cut back! Deductible up!

• So what? Now what? Customer Service.So what? Now what? Customer Service.

• Demands on capital Funsizing?Demands on capital Funsizing?

• Large technology investmentsLarge technology investments

• Do your people have the skill setDo your people have the skill set

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Subrogation Subrogation Applicable LawsApplicable Laws

US COGSAUS COGSA

HAGUE RULESHAGUE RULES

HAGUE-VISBYHAGUE-VISBY

HAMBURG RULESHAMBURG RULES

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Subrogation Subrogation Suit time Suit time

Vessel owner/charter Vessel owner/charter – One year from the date – One year from the date the cargo was delivered of should have been the cargo was delivered of should have been delivereddelivered

RailwayRailway – Two years from date when cargo was – Two years from date when cargo was delivered or should have been delivereddelivered or should have been delivered

TruckersTruckers – Nine months USA/two years – Nine months USA/two years Ontario/three Quebec (note 60 notice or Ontario/three Quebec (note 60 notice or barred), from the date the cargo was delivered barred), from the date the cargo was delivered or should have been deliveredor should have been delivered

WarehousemenWarehousemen – Two years in Ontario – Two years in OntarioStevedoresStevedores – Two years in Ontario – Two years in OntarioFreight forwarders Freight forwarders – Nine months or conditions,– Nine months or conditions,Quebec three yeQuebec three years SubroGateway Inc.

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SubrogationSubrogation Marine Liability Marine Liability

ActAct(Formerly the Carriage of Goods by Water (Formerly the Carriage of Goods by Water Act) Governs the carriage of goods by sea to Act) Governs the carriage of goods by sea to or from Canada and within Canada. The Act or from Canada and within Canada. The Act implements the Hague-Visby Rules and implements the Hague-Visby Rules and provides for the possible future provides for the possible future implementation of the Hamburg Rules. implementation of the Hamburg Rules. Pursuant to the Hague-Visby Rules the Pursuant to the Hague-Visby Rules the carrier of the cargo is liable for any loss of or carrier of the cargo is liable for any loss of or damage to the cargo unless the loss or damage to the cargo unless the loss or damage is caused by an excepted peril. damage is caused by an excepted peril.

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Subrogation Subrogation Forum Forum

SelectionSelectionThe Marine Liability Act The Marine Liability Act 8 August 2001 8 August 2001 • Allows cargo claimants to commence proceedings in Allows cargo claimants to commence proceedings in

Canada notwithstanding the existence of a Canada notwithstanding the existence of a jurisdiction or arbitration clause in a bill of lading jurisdiction or arbitration clause in a bill of lading provided one of three conditions are met:provided one of three conditions are met:

• A claimant may institute judicial or arbitral A claimant may institute judicial or arbitral proceedings in a court or arbitral tribunal in Canada proceedings in a court or arbitral tribunal in Canada that would be competent to determine the claim if that would be competent to determine the claim if the contract had referred the claim to Canada, wherethe contract had referred the claim to Canada, where– ((aa) the actual port of loading or discharge, or the ) the actual port of loading or discharge, or the

intended port of loading or discharge under the intended port of loading or discharge under the contract, is in Canada; contract, is in Canada;

– ((bb) the person against whom the claim is made resides ) the person against whom the claim is made resides or has a place of business, branch or agency in Canada; or has a place of business, branch or agency in Canada;

– ((cc) the contract was made in Canada. ) the contract was made in Canada.

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Ecu-line N.V. v Z.I. Pompey Industrie,Ecu-line N.V. v Z.I. Pompey Industrie,(January 25, 2001) No. A-29-00 (F.C.A.), [2000] F.C.J. No. 96(January 25, 2001) No. A-29-00 (F.C.A.), [2000] F.C.J. No. 96-- Held that the Defendant was not entitled to rely upon the Held that the Defendant was not entitled to rely upon the

jurisdiction clause in the bill of lading jurisdiction clause in the bill of lading -- On appeal, held did not err by taking into the account the On appeal, held did not err by taking into the account the

breach of contract by the Defendant breach of contract by the Defendant -- On further appeal the Court of Appeal upheld On further appeal the Court of Appeal upheld -- The Court of Appeal held that the proper test to apply in The Court of Appeal held that the proper test to apply in

stay applications is the tripartite test employed stay applications is the tripartite test employed -- Requires the court to consider; first, is there a serious issue Requires the court to consider; first, is there a serious issue

to be tried; second, whether the party seeking the to be tried; second, whether the party seeking the injunction (or stay) would suffer irreparable harm if the injunction (or stay) would suffer irreparable harm if the injunction (or stay) was not granted; and third, which party injunction (or stay) was not granted; and third, which party would suffer the greater harm as a result of the granting or would suffer the greater harm as a result of the granting or refusal of the injunction (or stay) refusal of the injunction (or stay)

SEE MAGIC SPORTSWEARSEE MAGIC SPORTSWEARSubroGateway Inc.

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Subrogation USASubrogation USAThe Bremen v. Zapata Off-Shore Co., 407 U.S. 1 (1972The Bremen v. Zapata Off-Shore Co., 407 U.S. 1 (1972The "Eleftheria", [1969] 1 Lloyd’s L.R. 237The "Eleftheria", [1969] 1 Lloyd’s L.R. 237• The US Supreme Court in the SKY REEFER decided The US Supreme Court in the SKY REEFER decided

that forum selection clauses were presumptively valid. that forum selection clauses were presumptively valid. This decision created concern about potential abuse This decision created concern about potential abuse by carriers who could rely on jurisdiction clauses to by carriers who could rely on jurisdiction clauses to refuse to settle smaller legitimate claims.refuse to settle smaller legitimate claims.

• Under the AMLA Rules a forum selection clause is Under the AMLA Rules a forum selection clause is invalid if goods are loaded or discharged in a US port, invalid if goods are loaded or discharged in a US port, or if the carrier receives or delivers the goods in the or if the carrier receives or delivers the goods in the US. US.

• The American International Marine Underwriters The American International Marine Underwriters Association supported the AMLA Rules as too often Association supported the AMLA Rules as too often recoveries against carriers were not pursued because recoveries against carriers were not pursued because of expenses of suit in a foreign jurisdiction. AIMU of expenses of suit in a foreign jurisdiction. AIMU stated that insurers were closing substantial claims of stated that insurers were closing substantial claims of the order of $100,000 without subrogation attempts. the order of $100,000 without subrogation attempts.

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Subrogation US Subrogation US Forum SelectionForum Selection

““Sky Reefer”Sky Reefer”

Clause must be:Clause must be:– Exclusive and mandatoryExclusive and mandatory– Reasonable and enforceableReasonable and enforceable– Not conflict with a clause Not conflict with a clause

paramountparamount

Be careful!Be careful!SubroGateway Inc.

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Subrogation Freight Subrogation Freight Frwd’r LiabilityFrwd’r Liability

Liability of Freight Forwarder Liability of Freight Forwarder

Canusa Systems Ltd. v The “Canmar Canusa Systems Ltd. v The “Canmar Ambassador” Ambassador” 19981998

issued a issued a "Combined Transport Bill of Lading“"Combined Transport Bill of Lading“

Prima USA Vs. Panalpina US (no B/L issued)Prima USA Vs. Panalpina US (no B/L issued)

A Freight Forwarder Which Makes A Freight Forwarder Which Makes Arrangements For Cargo Is Not Arrangements For Cargo Is Not Responsible For Loss Or DamageResponsible For Loss Or Damage

The staff of Cargo Law first coined the term The staff of Cargo Law first coined the term ""travel agent for freighttravel agent for freight" "

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Ocean Cargo Limits of LiabilityOcean Cargo Limits of Liability • Damage Limit U.S. COGSA: Damage Limit U.S. COGSA: $500 per package or $500 per package or

customary freight unit for shipments to/from the U.S. customary freight unit for shipments to/from the U.S. • Damage Limit Hague-Visby RulesDamage Limit Hague-Visby Rules: (Modification of : (Modification of

Hague not adopted in U.S.) Notice of loss or damage must Hague not adopted in U.S.) Notice of loss or damage must be given at port of discharge before or at the time of be given at port of discharge before or at the time of removal of the goods unless loss or damage is not removal of the goods unless loss or damage is not apparent, in which case it must be given within 3 days of apparent, in which case it must be given within 3 days of delivery. Limit is 666.7 SDR per package or unit or 2 SDR delivery. Limit is 666.7 SDR per package or unit or 2 SDR per kilo of weight, whichever is higher.per kilo of weight, whichever is higher.

• Hamburg RulesHamburg Rules: Limit of 835 SDR per package or 2.5 SDR : Limit of 835 SDR per package or 2.5 SDR per kilo of gross weight for damage. In the case of delay, 2 per kilo of gross weight for damage. In the case of delay, 2 and 1/2 times the freight charges for delayed goods. and 1/2 times the freight charges for delayed goods. Adopted by only about 2% of the world.Adopted by only about 2% of the world.

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Subrogation Proper Subrogation Proper Issuance of B/L Issuance of B/L

Road Carriage $4.41 per kg?Road Carriage $4.41 per kg?Paine Machine Tool Inc. v Can-am West Carriers Inc. Paine Machine Tool Inc. v Can-am West Carriers Inc.

2001 2001 • The Defendant argued that its liability was limited to $4.41 The Defendant argued that its liability was limited to $4.41

per kilogram (Motor Vehicle Act)per kilogram (Motor Vehicle Act)• Held that the Defendant was not entitled to avail itself of the Held that the Defendant was not entitled to avail itself of the

limitation provisions since the bill of lading did not limitation provisions since the bill of lading did not substantially comply with the requirements of the substantially comply with the requirements of the Regulations and, therefore, was never “issued”Regulations and, therefore, was never “issued”

SeeSee Arnold Bros. Transport Ltd. v Western Greenhouse Arnold Bros. Transport Ltd. v Western Greenhouse Growers Cooperative Growers Cooperative (1992) and (1992) and Corcoran v Ehrlick Corcoran v Ehrlick TransportTransport (1984) (1984)

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CouriersCouriersBoutchev v D.H.L. International Ltd., 2000 Boutchev v D.H.L. International Ltd., 2000 (Alta. Prov. Ct.)(Alta. Prov. Ct.)

• Small claimsSmall claims matter was whether the Defendant matter was whether the Defendant courier could rely upon terms in its waybill courier could rely upon terms in its waybill limiting its liability limiting its liability

• The Court found that the terms on the waybill had The Court found that the terms on the waybill had not been properly brought to the attention of the not been properly brought to the attention of the Plaintiff and that the totality of the terms and Plaintiff and that the totality of the terms and conditions were "neither plain nor unambiguous" conditions were "neither plain nor unambiguous" and were "quite simply legal gobbledygook"and were "quite simply legal gobbledygook"

• In result, the Plaintiff was awarded judgmentIn result, the Plaintiff was awarded judgment

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Subrogation Subrogation Applicable LawsApplicable Laws

MONTREAL PROTOCOL # 4MONTREAL PROTOCOL # 4

WARSAW CONVENTIONWARSAW CONVENTION

MONTREAL CONVENTION 1999MONTREAL CONVENTION 1999– EFF NOVEMBER 2003EFF NOVEMBER 2003– DEFENSE TOOK ALL REASONABLE DEFENSE TOOK ALL REASONABLE

STEPS!STEPS!

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Subrogation MP4 Subrogation MP4 ChangesChanges

WILLFUL MISCONDUCT:WILLFUL MISCONDUCT:• Eliminated the concept of "willful misconduct" where air Eliminated the concept of "willful misconduct" where air

cargo is concerned. Under the original Warsaw Convention, a cargo is concerned. Under the original Warsaw Convention, a carrier stood to lose its US$20.00 per kilo damage limitation if carrier stood to lose its US$20.00 per kilo damage limitation if found responsible for such things as fraud, misrepresentation found responsible for such things as fraud, misrepresentation or intentional misconduct. The drafters of MP4 removed all or intentional misconduct. The drafters of MP4 removed all such considerations.such considerations.

• Potential moral risk of there being no consequences Potential moral risk of there being no consequences whatsoever for intentional misconduct. whatsoever for intentional misconduct.

• Even setting fire to cargo intentionally would not result in a Even setting fire to cargo intentionally would not result in a loss of the damage limitation protection under Montreal loss of the damage limitation protection under Montreal Protocol 4.Protocol 4.

"The limit may not be exceeded whatever the "The limit may not be exceeded whatever the circumstances which gave rise to liability".circumstances which gave rise to liability".

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Subrogation MP4Subrogation MP4

THE DUTY TO PROVIDE EVIDENCE: THE DUTY TO PROVIDE EVIDENCE:

• In the past you were subjected to a legal presumption that cargo In the past you were subjected to a legal presumption that cargo had been received in good order and condition, just because the had been received in good order and condition, just because the air waybill said so., it was the carrier's obligation to prove it did air waybill said so., it was the carrier's obligation to prove it did not damage the cargo. not damage the cargo.

• Under MP4, the rule is reversed.Under MP4, the rule is reversed.• Only exception to this rule is where the air waybill specifically Only exception to this rule is where the air waybill specifically

says that the freight has been says that the freight has been "CHECKED BY THE CARRIER IN "CHECKED BY THE CARRIER IN THE PRESENCE OF THE CONSIGNOR"THE PRESENCE OF THE CONSIGNOR"

• So, sealed ULD's "said to contain" certain goods which then So, sealed ULD's "said to contain" certain goods which then arrive "short" at destination without any obvious record of arrive "short" at destination without any obvious record of tampering. . . it will be the obligation of the claimant to prove tampering. . . it will be the obligation of the claimant to prove that the cargo was actually delivered to you in good order and that the cargo was actually delivered to you in good order and condition.condition.

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LEGAL TECHNICALITIES ARE DISMISSED:LEGAL TECHNICALITIES ARE DISMISSED:Article 8 of the Warsaw Convention Article 8 of the Warsaw Convention required that the air waybill contain:required that the air waybill contain:

• Names and addresses of shipper and Names and addresses of shipper and consigneeconsignee

• Number of packagesNumber of packages• Weight - dimensionsWeight - dimensions• Nature of goods being shippedNature of goods being shipped• Type of packagingType of packaging• Marks and numbersMarks and numbers

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““No more agreed stopping No more agreed stopping placesplaces""

Tai Ping Insurance Company v. Northwest Tai Ping Insurance Company v. Northwest AirlinesAirlines. .

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Subrogation MP4 Subrogation MP4 Damaged Weight?Damaged Weight?

Article 22.Article 22.

". . . when the loss, damage or delay of a ". . . when the loss, damage or delay of a part of the registered baggage or cargo, part of the registered baggage or cargo, or of an object contained therein, affects or of an object contained therein, affects the value of the other packages covered the value of the other packages covered by the same . . . air waybill, the total by the same . . . air waybill, the total weight of such package or packages shall weight of such package or packages shall also be taken into consideration in also be taken into consideration in determining the limit of liability."determining the limit of liability."

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Subrogation LinksSubrogation Links

http://www.imf.org/http://www.imf.org/

http://www.insurance-marine.com/http://www.insurance-marine.com/

http://www.cargolaw.com/http://www.cargolaw.com/cases_mp4.htmLcases_mp4.htmL

http://tetley.law.mcgill.ca/http://tetley.law.mcgill.ca/

http://lp.findlaw.com/http://lp.findlaw.com/

http://www.admiraltylaw.com/http://www.admiraltylaw.com/http://www.insurance-marine.com/

http://www.forwarderlaw.comhttp://www.forwarderlaw.comSubroGateway Inc.

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SubrogationSubrogation Fresh TopicsFresh Topics

ONTARIO’S NEW ONTARIO’S NEW LIMITATIONS LIMITATIONS ACTACT– 15 years?15 years?

Economics of small filesEconomics of small files

Package vs. palletPackage vs. pallet

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1 Subrogation CBMU Semi-Annual May 21, 2004 SubroGateway Inc.

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Transcript of 1 Subrogation CBMU Semi-Annual May 21, 2004 SubroGateway Inc.