IN THE SUPREME COURT OF NOVA SCOTIA
Citation: Lunenburg Industrial Foundry v. Commercial Union Assurance Co. of Canada, 2005 NSSC 23
Date: 20050211
Docket: S.H. No. 220046
Registry: Halifax
Between:
Lunenburg Industrial Foundry and Engineering Limited,
Royal and Sun Alliance Insurance Company of Canada,
Kingsway General Insurance Company, Sovereign
General Insurance Company and Markel Insurance Company
Plaintiffs
v.
Commercial Union Assurance Company of Canada and AON Reed
Stenhouse Inc.
Defendants
LIBRARY HEADING
Judge: The Honourable Justice Gregory M. Warner
Heard: November 30 to December 1, 2004 in Halifax, N.S.
Subject: Insurance: Rules of Interpretation
Issues: Generally whether the damage to a marine railway was covered by a boiler and machinery or machinery breakdown policy (B&M Policy). Specifically applying the rules of interpretation of insurance contracts to three questions: (1) Is a marine railway an insured object and if so, is it excluded as a hoist or conveyor? (2) Was the incident an “accident”? (3) Should the B&M Policy be interpreted to avoid overlapping cover with the Property Policy?
Summary: The chain attached to a cradle on which a large vessel was being hauled out of the water by a marine railway to a shipyard suddenly came off its sprocket. The runaway cradle and vessel tore up the marine railway as it returned to the sea. The property insurers paid Lunenburg about 1.7 million dollars for its loss. This did not include business interruption coverage which was only provided in the B&M Policy. The defendant, Commercial Union, denied liability under the B&M Policy to the plaintiff insurers who sued Commercial Union to recover part of the claim paid to Lunenburg under the Property Policy and denied liability to Lunenburg for recovery of its business interruption loss (6 months loss of use).
Result: First Question: Lunenburg's marine railway was an insured object under the B&M Policy and was not excluded as a hoist or conveyor.
Second Question: The initiating event causing the loss was the chain coming off the sprocket. It was sudden and accidental; the incident was an “accident” as defined in the Policy.
Third Question: While there are policy reasons to avoid overlapping coverage if possible, these reasons do not trump the clear intent of the parties or alternatively, the rules for interpreting ambiguous contracts.
Several rules of interpretation were discussed and applied (or rejected as inapplicable) including: 1. Giving effect to the intent of the parties as expressed in the document; 2. In the event of ambiguity, interpreting coverage provisions broadly and exclusions narrowly; 3. When ambiguity exists applying the contra proferentum rule and the “reasonable expectation” rule.
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