Subrogation
CBMU Semi-Annual
May 21, 2004
SubroGateway Inc.1
Subrogation
DEFINITION OF SUBROGATION
An insurance carrier may reserve the "right of
subrogation" in the event of a loss. This means
that the company may choose to take action to
recover the amount of a claim paid to a covered
insured if the loss was caused by a third party.
After expenses, the amount recovered must be
divided proportionately with the insured to cover
any deductible for which the insured was
responsible.
SubroGateway Inc.2
Subrogation
Subrogation
Porto Seguro Companhia De Seguros Gerais v The
"Federal Danube" (January 31, 2001)
The Defendant argued that under Canadian maritime law
the Plaintiff ought to have commenced the action in the
name of the cargo owners.
Held the insurers became subrogated to the rights
of their insured upon payment and were entitled
to bring the action in their own name.
SubroGateway Inc.3
Subrogation
Subrogation
Chubb Insurance Co. of Canada v Cast
Line Ltd. [2001]
payment by the insurer as a loan receipt.
held that the payment by the insurer was a
true insurance indemnity
SubroGateway Inc. 4
Subrogation - Why
Bother?
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Claims staff “process recovery” early
Improved cash flow……… How much?
Underwriters write superior risks
Rates up! Cover cut back! Deductible up!
So what? Now what? Customer Service.
Demands on capital Funsizing?
Large technology investments
Do your people have the skill set
SubroGateway Inc. 5
Subrogation
Applicable Laws
US COGSA
HAGUE RULES
HAGUE-VISBY
HAMBURG RULES
SubroGateway Inc.6
Subrogation
Suit time
Vessel owner/charter – One year from the date the
cargo was delivered of should have been delivered
Railway – Two years from date when cargo was
delivered or should have been delivered
Truckers – Nine months USA/two years Ontario/three
Quebec (note 60 notice or barred), from the date
the cargo was delivered or should have been
delivered
Warehousemen – Two years in Ontario
Stevedores – Two years in Ontario
Freight forwarders – Nine months or conditions,
Quebec three years
SubroGateway Inc.7
Subrogation
Marine Liability Act
(Formerly the Carriage of Goods by Water Act)
Governs the carriage of goods by sea to or
from Canada and within Canada. The Act
implements the Hague-Visby Rules and
provides for the possible future implementation
of the Hamburg Rules. Pursuant to the HagueVisby Rules the carrier of the cargo is liable for
any loss of or damage to the cargo unless the
loss or damage is caused by an excepted peril.
SubroGateway Inc.8
Subrogation
Forum Selection
The Marine Liability Act
8 August 2001
• Allows cargo claimants to commence proceedings in Canada
notwithstanding the existence of a jurisdiction or arbitration
clause in a bill of lading provided one of three conditions are
met:
• A claimant may institute judicial or arbitral proceedings in a
court or arbitral tribunal in Canada that would be competent to
determine the claim if the contract had referred the claim to
Canada, where
– (a) the actual port of loading or discharge, or the intended port of
loading or discharge under the contract, is in Canada;
– (b) the person against whom the claim is made resides or has a
place of business, branch or agency in Canada;
– (c) the contract was made in Canada.
SubroGateway Inc.9
Subrogation
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
- Held that the Defendant was not entitled to rely upon the
jurisdiction clause in the bill of lading
- On appeal, held did not err by taking into the account the breach of
contract by the Defendant
- On further appeal the Court of Appeal upheld
- The Court of Appeal held that the proper test to apply in stay
applications is the tripartite test employed
- Requires the court to consider; first, is there a serious issue to be
tried; second, whether the party seeking the injunction (or stay)
would suffer irreparable harm if the injunction (or stay) was not
granted; and third, which party would suffer the greater harm as a
result of the granting or refusal of the injunction (or stay)
SEE MAGIC SPORTSWEAR
SubroGateway Inc.10
Subrogation USA
The Bremen v. Zapata Off-Shore Co., 407 U.S. 1 (1972
The "Eleftheria", [1969] 1 Lloyd’s L.R. 237
• The US Supreme Court in the SKY REEFER decided that
forum selection clauses were presumptively valid. This
decision created concern about potential abuse by
carriers who could rely on jurisdiction clauses to refuse
to settle smaller legitimate claims.
• Under the AMLA Rules a forum selection clause is invalid
if goods are loaded or discharged in a US port, or if the
carrier receives or delivers the goods in the US.
• The American International Marine Underwriters
Association supported the AMLA Rules as too often
recoveries against carriers were not pursued because of
expenses of suit in a foreign jurisdiction. AIMU stated
that insurers were closing substantial claims of the order
of $100,000 without subrogation attempts.
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SubroGateway Inc.
Subrogation US
Forum Selection
“Sky Reefer”
Clause must be:
– Exclusive and mandatory
– Reasonable and enforceable
– Not conflict with a clause paramount
Be careful!
SubroGateway Inc.12
Subrogation Freight
Frwd’r Liability
Liability of Freight Forwarder
Canusa Systems Ltd. v The “Canmar Ambassador” 1998
issued a "Combined Transport Bill of Lading“
Prima USA Vs. Panalpina US (no B/L issued)
A Freight Forwarder Which Makes
Arrangements For Cargo Is Not Responsible For
Loss Or Damage
The staff of Cargo Law first coined the term "travel
agent for freight"
SubroGateway Inc.13
Subrogation
Ocean Cargo Limits of Liability
• Damage Limit U.S. COGSA: $500 per package or customary
freight unit for shipments to/from the U.S.
• Damage Limit Hague-Visby Rules: (Modification of Hague not
adopted in U.S.) Notice of loss or damage must be given at port of
discharge before or at the time of removal of the goods unless loss
or damage is not 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
per kilo of weight, whichever is higher.
• Hamburg Rules: Limit of 835 SDR per package or 2.5 SDR per
kilo of gross weight for damage. In the case of delay, 2 and 1/2
times the freight charges for delayed goods. Adopted by only about
2% of the world.
SubroGateway Inc.14
Subrogation Proper
Issuance of B/L
Road Carriage $4.41 per kg?
Paine Machine Tool Inc. v Can-am West Carriers Inc. 2001
• The Defendant argued that its liability was limited to $4.41 per
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kilogram (Motor Vehicle Act)
Held that the Defendant was not entitled to avail itself of the
limitation provisions since the bill of lading did not substantially
comply with the requirements of the Regulations and,
therefore, was never “issued”
See Arnold Bros. Transport Ltd. v Western Greenhouse Growers
Cooperative (1992) and Corcoran v Ehrlick Transport (1984)
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SubroGateway Inc.
Subrogation
Couriers
Boutchev v D.H.L. International Ltd., 2000 (Alta.
Prov. Ct.)
• Small claims matter was whether the Defendant courier
could rely upon terms in its waybill limiting its liability
• The Court found that the terms on the waybill had not
been properly brought to the attention of the Plaintiff
and that the totality of the terms and conditions were
"neither plain nor unambiguous" and were "quite simply
legal gobbledygook"
• In result, the Plaintiff was awarded judgment
SubroGateway Inc.16
Subrogation
Applicable Laws
MONTREAL PROTOCOL # 4
WARSAW CONVENTION
MONTREAL CONVENTION 1999
– EFF NOVEMBER 2003
– DEFENSE TOOK ALL REASONABLE STEPS!
SubroGateway Inc.17
Subrogation MP4
Changes
WILLFUL MISCONDUCT:
• Eliminated the concept of "willful misconduct" where air cargo is
concerned. Under the original Warsaw Convention, a carrier stood
to lose its US$20.00 per kilo damage limitation if found responsible
for such things as fraud, misrepresentation or intentional
misconduct. The drafters of MP4 removed all such considerations.
• Potential moral risk of there being no consequences whatsoever for
intentional misconduct.
• Even setting fire to cargo intentionally would not result in a loss of
the damage limitation protection under Montreal Protocol 4.
"The limit may not be exceeded whatever the circumstances
which gave rise to liability".
SubroGateway Inc.18
Subrogation MP4
THE DUTY TO PROVIDE EVIDENCE:
• In the past you were subjected to a legal presumption that cargo had
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been received in good order and condition, just because the air waybill
said so., it was the carrier's obligation to prove it did not damage the
cargo.
Under MP4, the rule is reversed.
Only exception to this rule is where the air waybill specifically says that
the freight has been "CHECKED BY THE CARRIER IN THE
PRESENCE OF THE CONSIGNOR"
• So, sealed ULD's "said to contain" certain goods which then arrive "short"
at destination without any obvious record of tampering. . . it will be the
obligation of the claimant to prove that the cargo was actually delivered
to you in good order and condition.
SubroGateway Inc.19
Subrogation MP4
LEGAL TECHNICALITIES ARE DISMISSED:
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Article 8 of the Warsaw Convention
required that the air waybill contain:
Names and addresses of shipper and consignee
Number of packages
Weight - dimensions
Nature of goods being shipped
Type of packaging
Marks and numbers
SubroGateway Inc.20
Subrogation MP4
“No more agreed stopping places"
Tai Ping Insurance Company v. Northwest Airlines.
SubroGateway Inc.21
Subrogation MP4
Damaged Weight?
Article 22.
". . . when the loss, damage or delay of a part of
the registered baggage or cargo, or of an
object contained therein, affects the value of
the other packages covered by the same . . .
air waybill, the total weight of such package or
packages shall also be taken into consideration
in determining the limit of liability."
SubroGateway Inc.22
Subrogation Links
http://www.imf.org/
http://www.insurance-marine.com/
http://www.cargolaw.com/cases_mp4.htmL
http://tetley.law.mcgill.ca/
http://lp.findlaw.com/
http://www.admiraltylaw.com/
http://www.insurance-marine.com/
http://www.forwarderlaw.com
SubroGateway Inc.23
Subrogation
Fresh Topics
ONTARIO’S NEW LIMITATIONS ACT
– 15 years?
Economics of small files
Package vs. pallet
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SubroGateway Inc.