Supreme Court of Canada
Pickford Black Ltd. v. Canadian General Insurance Co., [1977] 1 S.C.R. 261
Date: 1976-01-30
Pickford Black Limited (Plaintiff) Appellant;
and
Canadian General Insurance Company (Defendant) Respondent.
1975: November 25, 26; 1976: January 30.
Present: Laskin C.J. and Martland, Judson, Ritchie, Spence, Pigeon, Dickson, Beetz and de Grandpré JJ.
ON APPEAL FROM THE SUPREME COURT OF NOVA SCOTIA, APPEAL DIVISION
Insurance—Liability insurance—Exclusionary clauses—“Accident occuring outside Canada”—“Risk at sea”—Negligent storage of cargo—Nature of “accident”—Occurence of “accident” as opposed to “origination” of accident.
Employees of the appellant, engaged in stevedoring in the Port of Halifax, were responsible for loading a ship with cargo which included heavy electrical equipment. After two days at sea in rough, but not unseasonable weather, the cargo shifted damaging the electrical equipment. The appellant was found liable for the damage done and thereafter claimed against its insurer, the respondent, the amount which it had been obligated to pay together with interest, costs and legal expenses. The respondent insurer denied liability from the outset. The policy provided that the respondent would indemnify, within the stipulated limits, the appellant for damage caused by an accident while at or about the work of “general stevedoring” in Nova Scotia but was subject to exclusions viz. of claims arising from accident occurring outside Canada and the U.S.A. and of risk at sea. The trial judge interpreted ‘risk at sea’ as used in the exclusion as meaning ‘perils of the sea’ and held that as the accident did not arise from such perils the exclusion did not apply. The Appeal Division however viewed ‘risk at sea’ as meaning ‘the danger, peril or event insured against’ and as the accident occurred at sea held the appellant’s claim excluded from the policy coverage.
Held: The appeal should be dismissed.
The appellant’s claim resulted from a negligent act or omission of one or more of its employees at the Halifax dockside and would have been covered but for the
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exclusions stipulated in the policy. The exclusions applied to the endorsement as well as to the main part of policy. Neither the language in the preamble to the endorsement (“Subject to all its statements, limitations, exclusions, conditions and other terms and provisions, this Policy is endorsed—”) nor the terms of the exclusion read in conjunction with the Endorsement were ambiguous. The application of the contra proferentem rule so as to construe the exclusion against the insurer was therefore not justified. The accident was the shifting of the cargo at sea outside Canada and the U.S.A., the dockside negligence was merely the cause of it. The phrase ‘risk at sea’ was properly construed by the Appeal Division and as the accident occurred “at sea outside Halifax Harbour Limits” the appellant’s claim was also excluded from the policy coverage on that ground.
The Canadian Indemnity Company and Walkem Machinery & Equipment Ltd., [1976] 1 S.C.R. 309; Marshall Wells of Canada Limited v. Winnipeg Supply and Fuel Company Limited (1964), 49 W.W.R. 664 referred to.
APPEAL from a judgment of the Supreme Court of Nova Scotia, Appeal Division[1] allowing an appeal from a judgment of Dubinsky J.[2] at trial in favour of the plaintiff, appellant, in an action on an insurance policy. Appeal dismissed.
K.E. Eaton, Q.C., and D.D. Anderson, Q.C., for the plaintiff, appellant.
J.H. Dickey, Q.C., and J.M. Davison, for the defendant, respondent.
The judgment of the Court was delivered by
RITCHIE J.—The circumstances giving rise to this action can be stated briefly.
The appellant is engaged in the stevedoring business in the Port of Halifax and in that capacity its employees loaded the S.S. LAKE BOSOMTWE between the 20th and 26th of February, 1965, with cargo which included certain heavy electrical equipment belonging to Canadian General Electric Company Limited. After two days at sea in rough but not unseasonable weather,
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the cargo shifted doing extensive damage to this equipment and in due course Canadian General Electric brought action against Pickford and Black Limited on the ground that the damage was caused by the negligence of its employees in stowing the cargo. When the action was appealed to this Court it was decided that the negligence of the Pickford Black employees had indeed been the cause of the mishap and that company was found to be liable for the damage done.
In the present action the appellant claims against its insurer (the respondent) under a policy entitled “Contractors Public Liability Policy” for the amount which it was obligated to pay to Canadian General Electric Company Limited together with interest, costs and legal expenses, and for the amount of $7,000 which it agreed to pay to the owners of the ship in compensation for the sum which had been paid to Canadian General Electric Company Limited in settlement of that company’s claim against the ship.
From the outset the Canadian General Insurance Company had denied liability under the terms of its policy and it took no part in the action brought by Canadian General Electric Company Limited. At the trial of the present action, however, Mr. Justice Dubinsky, in a detailed judgment extending over 68 pages of the printed record, made an extensive review of the facts and of the cases which he considered applicable and concluded that properly construed, the insurance policy in question was expressly designed to indemnify the insured in respect of the liability imposed upon it.
The Appeal Division of the Supreme Court of Nova Scotia allowed the appeal from this judgment and dismissed the appellant’s action on the ground that the terms of the insurance policy, and particularly the exclusions therein specified, did not extend to afford coverage to the appellant in the circumstances and it is from this judgment that the present appeal is taken.
The policy of insurance in question is composed of a patchwork of agreements and endorsements,
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and as the differences between the learned trial judge and the Court of Appeal turn in large measure on the interpretation to be placed upon it, it is perhaps as well at the outset to indicate the relevant portions of that policy.
The main insuring agreements, which are a part of the printed form of the policy, provide that the insurer will pay Pickford and Black Limited and its subsidiary companies, within the stipulated limits, for sums which it or they shall be legally obligated to pay for bodily injury, sickness or disease including death sustained by one or more persons and caused by an accident while at or about the work of “general stevedoring” anywhere in the Province of Nova Scotia. This part of the policy is subject to an exclusion (hereinafter referred to as Exclusion No. 1) which provides that it shall have no application with respect to and shall not extend to nor cover any claim arising or existing by reason of “accident occurring outside the Dominion of Canada and the United States of America.” Standing alone the main insuring agreement to which I have referred only applies to claims for bodily injury, sickness or disease including death, but the character of the policy was changed so as to include property damage by the addition of Endorsement No. 1 which is described in the course of the reasons delivered by Chief Justice MacKeigan on behalf of the Court of Appeal as follows:
The coverage of the policy was extended, without extra premium, to include liability for damages to property by Endorsement No. 1 to a limit of $1,000,000.00 for damages ‘resulting from one accident’ and with a deduction of $250.00 ‘from the amount of each accident’. The principal parts of this key endorsement read [emphasis added]:
Subject to all its statements, limitations, exclusions, conditions and other terms and provisions, this Policy is endorsed as hereinafter set forth:
In consideration of the premium provided it is hereby stated and agreed that this Policy is extended to pay on behalf of the Insured all sums which the Insured shall become obligated to pay by reason of the liability imposed by law upon the Insured for damages because of injury to or destruction of prop-
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erty of any or every description resulting solely and directly from an accident due to the operations of the Insured as stated in the Statements of the Policy to which this Endorsement is attached, providing such injury to or destruction of property occurs within the Policy Period and while this Endorsement is in force.
It is further stated and agreed that the insurance provided under this Endorsement shall have no application with respect to and shall not extend to nor cover any claims arising or existing by reason of any of the following matters:
A. Injury to or destruction of property owned or occupied by the Insured or, except with respect to stevedoring equipment, property rented to the Insured.
B. Risk at sea outside Halifax Harbour Limits.
Endorsement No. 1 also provided that ‘in the event of accidents irrespective of the amount of injury to or destruction of property’ the insured shall give ‘notice thereof… in accordance with the details of the policy.’
I agree with MacKeigan, C.J.N.S. that although the exact cause of the shifting of the cargo cannot be determined, it can be assumed that it resulted from an undetermined negligent act or omission of one or more of the appellant’s employees at dockside in Halifax and was therefore “due to the operations of the insured” in the performance of general stevedoring work at Halifax N.S., within the meaning of the policy. I am therefore of opinion that the appellant’s claim would come within the express provisions of the first paragraph of Endorsement No. 1 and the appellant would be entitled to succeed in this action if it were not for the exclusions stipulated in the policy.
In this latter regard I should say first that Endorsement No. 1, affording coverage for property damage, is expressly stated to be subject to all the statements, limitations, exclusions, conditions and other terms and provisions of the policy on which it is endorsed and one of the exclusions to which it is therefore subject, is that which provides that the policy shall have no application to “accident occurring outside the Dominion of Canada
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and the United States of America.” In my view accordingly, Endorsement No. 1 must be read as if the first exclusion in the main policy were a part of the Endorsement and the word “accident” as used in that exclusion is to be read in the context of Endorsement No. 1 and must therefore mean “an accident due to the operations of the insured as stated in the Statements of the Policy.” It follows, in my opinion, that any claim “arising or existing” by reason of such an “accident occurring outside the Dominion of Canada and the United States of America” is not covered by the policy.
Unlike the learned trial judge, I do not find, in the language employed in the preamble to Endorsement No. 1 making it subject to the exclusions in the policy, any ambiguity which would justify invoking the principle of contra proferentem so as to construe it against the interests of the insurer, nor do I think that the terms of Exclusion No. 1, when read as a part of the Endorsement, are capable of more than one meaning so as to make it necessary to resort to that principle in construing this part of the policy.
The Court of Appeal expressly adopted the finding made by the learned trial judge that the “accident” was the shifting of the cargo at sea and not the stowage at Halifax. In this regard, Dubinsky J. said:
…there is not a title of evidence to indicate that an accident occurred while the stowage work was in progress and, accordingly, I find as a fact that no accident took place at that time… The only event or occurrence or mishap in this case, which one might describe as accidental was the shifting of the cargo while the ‘Lake Bosomtwe’ was at sea and beyond the territory of Canada and the United States.
The learned trial judge, however, was of opinion that Exclusion No. 1 did not apply to the property damage claim for the following reasons:
1. It is embodied in the printed form or main body of the policy which deals only with bodily injury, etc., and is not applicable to Endorsement No. 1 which deals with property damage.
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2. If applicable to Endorsement No. 1, it speaks only of ‘accident’ and it cannot be inferred that ‘accident’ means one ‘due to the operations of the insured.’
3. If applicable to Endorsement No. 1 and the words ‘due to the operations of the insured’ can be inferred, the ‘accident’ or happening cannot be considered by itself but in conjunction with the origin of the chain of causation leading to the ‘accident’, and that origin was in the Port of Halifax.
I think I have indicated my reasons for not agreeing with the first two propositions in this passage, but it is perhaps well to dwell briefly on the third as it incorporates the learned trial judge’s view that the meaning to be attributed to the word “accident” as it is employed in the policy is primarily governed by where the chain of causation began which led to the accident. In this regard he said:
The accident here was unquestionably the shifting of the cargo. However, when one is required to interpret the word ‘accident’ as it appears in an insurance policy, it is my view and I think that the cases bear me out, that one must primarily be governed by where or when the chain of causation began. In this case, I must not consider the happening or event, i.e., the shifting of the cargo, by itself but rather, I must consider it in conjunction with the causation thereof, namely, the negligent act of stowage. In other words, where did the chain of causation begin which led to the happening?
Like the Court of Appeal, I agree with the learned trial judge’s finding that the “accident” was the shifting of the cargo which took place at sea beyond the territory of Canada and the United States, but I am, with the greatest respect, unable to conclude that the accident at sea was so bound up with the negligence at the dockside as to transform the latter from being an originating cause into being the event of which it was causative. Such a construction appears to me to rob the word “accident” as used in the policy of its natural and ordinary meaning by interpreting it as connoting not the “accident” but the cause of the accident. What is at issue is the true construction to be placed on Exclusion No. 1 and in my view in relation to the facts of this case, the most striking feature of that exclusion is that it is not concerned
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with the “cause” of the accident at all but is related exclusively to the area where the accident “occurred”.
The meaning to be attached to the word “accident” as employed in the body of an insurance policy was thoroughly explored by Mr. Justice Pigeon in the reasons for judgment which he delivered on behalf of the majority of this Court in The Canadian Indemnity Company and Walkem Machinery & Equipment Ltd.[3] In the course of these reasons at p. 314 he adopted the views expressed by Freedman J.A., in a dissenting opinion in the Court of Appeal of Manitoba in Marshall Wells of Canada Limited v. Winnipeg Supply and Fuel, R. Litz & Sons Company Limited v. Canadian General Insurance Co.[4] at p. 665 where that learned judge said:
With respect, I am of the view that what occurred here was an accident. One must avoid the danger of construing that term as if it were equivalent to ‘inevitable accident.’ That a mishap might have been avoided by the exercise of greater care and diligence does not automatically take it out of the range of accident. Expressed another way, ‘negligence’ and ‘accident’ as here used are not mutually exclusive terms. They may co-exist.
After expressing the view that even an occurrence which is the result of a calculated risk or of a dangerous operation may come within the meaning of the word “accident,” Mr. Justice Pigeon went on to say at pp. 315-16:
While it is true that the word ‘accident’ is sometimes used to describe unanticipated or unavoidable occurrences, no dictionary need be cited to show that in every day use, the word is applied as Halsbury says…, to any unlooked for mishap or occurrence… this is the proper test…
In that case cl. 10 of the insuring agreement provided that the coverage applied “only to accidents or occurrences arising out of and incidental to the business operations of the Insured and originating during the policy period.” The emphasis is my own. In light of this provision, Mr. Justice Pigeon found it necessary to draw a clear distinc-
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tion between the “origin” and the “occurrence” of the accident, and at p. 5 he said:
As noted in the Courts below, the wording of cl. 10 of the policy, which clause governs recovery herein, covers accidents ‘originating’ during the policy period. Elsewhere reference is made to accidents ‘occurring’ during the policy period. This difference must be deemed intentional and must be given full effect. No reason appears for departing from this clear wording.
In the present case, however, it is not disputed that the shifting of the cargo at sea was an accident within the meaning of the policy. If the mishap had occurred, as it might have done, before the ship had gone outside the waters of the Dominion of Canada and the United States of America, Exclusion No. 1 would have no application, but the S.S. BOSOMTWE sailed for two days and reached a point beyond those waters before the shifting occurred which occasioned the damage, and on this branch of the case the sole question is whether it can be said that the “unlooked for mishap” “occurred” at the place where the negligence which caused it originated.
No doubt the defective stowage was due to an act or omission which reasonably competent stevedores should have foreseen would have been likely to damage the cargo, but the fact that this negligence was causative of the accident which later occurred does not serve to translate the locale where the accident itself “occurred” from the broad Atlantic to the dockside at Halifax.
It will be seen that I agree with the Court of Appeal that the accident in the present case occurred outside of the waters of the Dominion of Canada and the United States of America and that the claim in respect of it is excluded from coverage by Exclusion No. 1.
Consideration must also be given to the provisions of Exclusion B which is a part of Endorsement No. 1 and which provides that the insurance provided under this Endorsement shall have no
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application with respect to “any claims arising or existing by reason of… B. Risk at sea outside Halifax Harbour Limits.”
The learned trial judge took the view that the phrase “risk at sea” as used in this Exclusion should be given the same meaning as “perils of the sea” and that as the accident did not arise from such perils, the exclusion was irrelevant. I am, however, in agreement with Chief Justice MacKeigan for the reasons which he has stated, that the phrase “risk at sea” as here employed, means “the danger, peril or event insured against”. The coverage afforded by Endorsement No. 1 insures against the risk of an accident occurring due to the stevedoring operations of the appellant, and as I have indicated, the accident here at issue occurred due to that cause when the ship was “at sea outside Halifax Harbour Limits”, and I am therefore of opinion that the appellant’s claim is also excluded from the policy’s coverage on this ground.
For all these reasons I would dismiss this appeal with costs.
Appeal dismissed with costs.
Solicitor for the appellant: Donald D. Anderson, Dartmouth.
Solicitor for the respondent: John M. Davison, Halifax.