Marine Insurance – Cargo All Risks

The plaintiff was the owner of a cargo of machines stowed in three containers and shipped by sea from Montreal to Europe. Two containers were stowed under deck and the third was stowed on deck. Upon delivery of the containers it was discovered that all of the units were damaged by rust. A claim by the plaintiff under its cargo policy with the defendant was denied on the grounds of insufficiency of packaging and the damage was not caused by a fortuity. Specifically, the defendant alleged that the damage occurred because the timbers used to brace the cargo had excessive water content which condensed during the voyage. The evidence established that the three containers were in good condition and that there was no ingress of water into the containers. The plaintiff relied on the fact that it had previously sent several similar shipments packed in the same way without incident. However, the Court found as a fact that the packing was insufficient in that the wood used to brace the cargo was unsuitable and the individual units should have been wrapped in some manner. The Court also accepted that an all risks policy requires that there be a “fortuity” and that the burden was on the plaintiff to prove such fortuity. That burden had not been discharged.

An appeal by the plaintiff to the Federal Court of Appeal was dismissed. The Court of appeal agreed with the trial Judge that the packing was unsuitable and was the cause of the loss. Although this was sufficient to dispose of the appeal, the court addressed at length the question of the burden of proof under an "all risks" policy. Specifically, the Court of Appeal held that the trial Judge had erred in holding the assured had the burden of proof. The Court of Appeal said that where an all risks policy contains exclusions that exclude non-fortuitous losses, such as inherent vice or wear and tear, the onus of proving lack of fortuity falls on the insurer. The insured under an all-risks policy needs only show that the cargo was in good condition when the insurance attached and that the goods were damaged while the insurance was in force.