[2007]

INSURANCE AND REINSURANCE

BCCA]

566935 BC Ltd v Allianz Insurance Co of Canada

BRITISH COLUMBIA COURT OF

APPEAL
2; 24 October 2006

566935 BC LTD
v
ALLIANZ INSURANCE CO OF CANADA
[2006] BCJ No 2754
Before Chief Justice FINCH,
Justice SMITH and
Justice LOWRY
Insurance (marine) Barge sunk at its moorings due
to ingress of water Insurance against perils of the
sea Hull of barge rotten Water ingress controlled by pump Whether loss of vessel was fortuitous Whether power supply to pump had been
interrupted.

This was an appeal by the claimant assured

against the decision of Parrett J, 2005 BCSC
1408, dismissing a claim by the assured under a
marine policy for the loss of a vessel.
The vessel PWD No 315 was a creosotetreated timber plank-construction barge built in
1933. Accommodation facilities were constructed on her deck in 1995 and she was thereafter operated as a sport fishing lodge. From
September 1999 she was laid up for the winter,
secured to a dock in a bay used as a log storage
ground. Maintenance of the hull was minimal.
Ordinary wear and tear on the hull had opened
her seams and some of the planking was seriously worm-eaten and rotten, and a PVC diaper
which had been fitted to the hull in 1999 to
minimise leakage was essentially useless. There
was a continuous ingress of water which necessitated regular pumping to keep her afloat. The
pumping was carried out by an electric bilge
pump positioned in the aft part of the hull on the
starboard side operated by shore power to which
it was connected. It was activated by a float
switch when the level of the water in that part of
the hull reached perhaps 18 inches. The capacity
of the pump was in the order of 3,000 US gallons
per hour and it was running for about half an
hour every three to four hours during the time the
barge was laid up. The barge would not float
without being pumped.
On the afternoon of 2 March the barge was
observed to be floating normally with nothing
apparently untoward, and the pump had been
seen to be operating that morning. The following
morning, 3 March, the barge was observed, at
0800, to be listing hard to starboard and she sank

503
PART 7

at her moorings about 90 minutes later. After the

barge had been re-floated, the bilge pump was
tested and found to be working properly.
The barge was insured by the defendant insurers under a marine policy covering losses caused
by perils of the sea. The assureds claim was
denied on the ground that loss did not fall within
the scope of the cover. It was not disputed that
the loss was of the sea, but the insurers denied
that the loss was fortuitous and was caused by the
condition of the barge. The assured contended
that there must have been an interruption to the
power supply to the pump, which was a fortuity.
Parrett J dismissed the assureds claim on the
policy. He held that a hole in the planks through
which the water had entered had occurred during
the night of 2 March, and that this was the result
of worm infestation. The judge concluded that
the loss was not caused by a peril of the sea but
rather by the inherent weakness of the deteriorated hull of the barge attributable to wear and
tear aggravated by worm infestation.
On appeal the assured contended that the trial
judge had misconstrued or failed to consider evidence which showed that the hole in the planks
had not added significantly to the ingress of
water, and that the only explanation for the sinking was the interruption of shore power to the
pump, which was fortuitous. The insurers argued
that the judge had been correct in finding that the
pump had been overwhelmed by water, but that
even if the shore power had been interrupted
there was nothing fortuitous about the ingress of
water which had led to the sinking of the barge so
that there was no peril of the sea.
Held, by British Colombia Court of
Appeal (FINCH CJ, SMITH and LOWRY JJ) that the
appeal would be dismissed. A loss attributable to
the ingress of seawater was not caused by a peril
of the sea in the absence of an antecedent fortuity
that caused the entry of the water. The nonfortuitous ingress of seawater that caused a sinking was not a loss by a peril of the sea because
the sinking would not have occurred if the circumstances had been different, for instance, if
the water had been pumped out, or some other
preventative action taken. Were it otherwise,
even if the barge could not float at all of its own
accord and its buoyancy was entirely dependent
on the pump continuously discharging the seawater as fast as it flowed into the hull, the failure
of the pump resulting from an interruption in the
shore power, eg by a falling tree, would mean
that the sinking was nonetheless caused by a peril
of the sea. It was unnecessary to consider

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504
LOWRY J]

whether the trial judge had erred in his consideration of the evidence (see paras 20, 22 and 34);
Rhesa Shipping Co SA v Edmunds (The
Popi M) [1985] 2 Lloyds Rep 1, Century Insurance Co of Canada v Case Existological Laboratories Ltd (The Bamcell) [1986] 2 Lloyds Rep
524, applied; CCR Fishing Ltd v British Reserve
Insurance Co [1990] 1 SCR 814, considered and
applied; Parkhill-Goodloe Co Inc v Home Insurance Co 1976 AMC 951, Neptune Lines v Hudson Valley Lightweight Aggregate Corporation
1973 AMC 125, Russell Mining Co v Northwestern Fire & Marine Insurance Co 332 F 2d
440 (6th Cir 1963), distinguished.

The following cases were referred to in the

judgment:
Canada Rice Mills Ltd v Union Marine and General Insurance Co Ltd (PC) (1940) 67 Ll L Rep
549;
CCR Fishing Ltd v British Reserve Insurance Co
[1990] 1 SCR 814;
Century Insurance Co of Canada v Case Existological Laboratories Ltd (The Bamcell) [1986] 2
Lloyds Rep 524;
Cohen, Sons & Co v National Benefit Assurance Co
Ltd (1924) 18 Ll L Rep 199;
Hamilton, Fraser & Co v Pandorf & Co (HL)
(1887) 12 App Cas 518;
Neptune Lines Inc v Hudson Valley Lightweight
Aggregate Corporation 1973 AMC 125;
Parkhill-Goodloe Co Inc v Home Insurance Co
1976 AMC 951;
Rhesa Shipping Co SA v Edmunds (The Popi M)
[1983] 2 Lloyds Rep 235, affirmed (CA) [1984]
2 Lloyds Rep 555, reversed (HL) [1985] 2
Lloyds Rep 1;
Russell Mining Co v Northwestern Fire & Marine
Insurance Co 207 F Supp 162 (ED Tenn 1962);
reversed 332 F 2d 440 (6th Cir 1963);
Thames and Mersey Marine Insurance Co v Hamilton, Fraser & Co (The Inchmaree) (1887) 12
App Cas 484.

W G Wharton and A P Mayer, for the assured;

D F McEwen, QC, for the insurers.
Tuesday, 24 October 2006

JUDGMENT
Justice LOWRY:
1. The question to which this appeal gives rise is
whether the loss resulting from the sinking of a
barge at her mooring in calm water was a loss
caused by perils of the sea within the meaning of
that term as employed in marine insurance policies
for over two centuries.
The sinking
2. PWD No 315 is a creosote-treated timber (4
inch 12 inch) plank-construction barge built in
1933. She is approximately 88 feet in length, 28
feet wide, and almost 7 feet high, raked bow and
stern. Three longitudinal bulkheads divide the hull
into four compartments with access between each.
Accommodation facilities were constructed on her
deck in 1995 and she was thereafter operated as a
sport fishing lodge. During September 1999 she
was laid up, as she had been in previous winters,
secured to a dock in a bay used as a log storage
ground, and it was there that she sank on the morning of 3 March 2000.
3. Maintenance of the hull was minimal. At the
time of the sinking, the barge had not been docked
for ten years. Ordinary wear and tear on the hull
had opened her seams, permitting the continuous
ingress of water which necessitated regular pumping to keep her afloat. Some of her planking was
seriously worm-eaten and rotten. For some years, a
polyvinylchloride (PVC) diaper had been fitted
to the hull to minimise the leakage and worm infestation, but by the time the barge was laid up in the
fall of 1999, the diaper was in shreds and was
essentially useless.
4. The barge was trimmed by the stern with some
list to starboard. While there were various pumps
on board, there was only one bilge pump that was
operating automatically. It was an electric pump
positioned in the aft part of the hull on the starboard
side operated by shore power to which it was connected. It was activated by a float switch when the
level of the water in that part of the hull reached
perhaps 18 inches. The capacity of the pump was in
the order of 3,000 US gallons per hour and it was
running for about half an hour every three to four
hours during the time the barge was laid up. The
volume of seawater continuously entering the hull,
which ultimately sank the barge, was certainly well
beyond anything that might be described as minor
leakage as might be expected in a well-found vessel. The ingress was ongoing and it was substantial.
It is evident that, at the time the barge sank, the
ingress of water was so great that she would not
float for 24 hours without being pumped.

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INSURANCE AND REINSURANCE

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5. The barge was observed to be floating normally with nothing apparently untoward on the
afternoon of 2 March 2000. The pump had been
seen to be operating during that morning. The following morning, 3 March, the barge was observed,
at 0800, to be listing hard to starboard and she sank
about 90 minutes later.
6. After the barge had been re-floated, the bilge
pump was tested and found to be working
properly.

The claim
7. The owner and operator of the barge, numbered companies doing business as West Coast
Resorts, insured the hull and machinery of the
barge under a policy that was underwritten by or
through Allianz Insurance Co of Canada. The policy contained the standard form of wording affording coverage for losses caused by perils of the sea.
They made a claim on the policy for the cost of
raising and repairing the barge, which was denied
on the basis that the loss did not fall within the
scope of the coverage. This action was then commenced. It was tried before Mr Justice Parrett in
2004 and dismissed (28 CCLI (4th) 177, 2005
BCSC 1408).
8. It is well recognised that to constitute a loss
caused by a peril of the sea, the loss must be
peculiar to a marine activity in the sense that it
could not have occurred on land and the cause of
the loss must have been fortuitous; that is, it must
be something that might have occurred, not something that was bound to occur: CCR Fishing Ltd v
British Reserve Insurance Co [1990] 1 SCR 814,
and Century Insurance Co of Canada v Case Existological Laboratories Ltd [1986] 2 Lloyds Rep
524. It has long been accepted that the fortuity may
lie in a negligent act, but, where it does, the act
need not amount to negligence in the legal sense.
For example, it is not necessary that the consequence of the act be reasonably foreseeable: CCR
Fishing at pages 824 and 825. An act which is
inadvertent or careless will be fortuitous.
9. At trial, there was no question that the sinking
of the barge was a loss of the sea. The point on
which the parties joined issue was whether the loss
was fortuitous. The insureds contended there, as
they do now, that the shore power to the pump must
have been interrupted, causing it to fail such that
the water entering the barge was not pumped out as,
in the normal course, would have prevented the
barge from sinking. The failure of the pump was
then said to have been fortuitous, thereby rendering
the loss one that was caused by a peril of the sea.
10. The insureds sought to support their contention with the evidence of an employee who testified

505
[LOWRY J

that, on the afternoon of 2 March, he told the

operator of a boat moored at the dock that the
operator could unplug the power cord for the pump
and use the electrical outlet for a short time. The
employee said that he forgot to ensure that the cord
had been reconnected before he left the barge for
the night and that he found the cord unplugged
shortly after the barge sank. He said he concealed
what had happened from his employers for about
three years. The judge rejected this evidence as
being completely unreliable. The insureds place no
reliance upon it on this appeal. They maintain simply that, because the pump was found to be working
properly after the barge was re-floated, the shore
power must in some way have been interrupted.
11. At trial, the underwriter contended that the
rate at which water was entering the barge was
greater than the rate at which the pump could discharge it even if it had been operating, because of a
hole in the planking that was found by a diver
during the course of the barge being re-floated. The
suggestion was that the hole, which was caused by
worm infestation, had opened up on the night of
2 March, with the result that significantly more
water was thereafter entering the hull than had been
the case. Much then turned on the rate of ingress of
water through the hole. Various conflicting descriptions or opinions were offered on both sides from
those who were present when the hole was first
discovered, and by others who much later tested the
decayed piece of the planking after it was cut out of
the hull, or made independent calculations about
the rate of water flow in circumstances they were
asked to assume.
12. The judge resolved the conflict in this evidence in favour of the underwriter. He reasoned that
the pump had been overwhelmed by the amount of
water flowing into the hull of the barge. He took the
view that the hole in one of the planks through
which water entered had indeed occurred during the
night of 2 March. He accepted that it was the result
of worm infestation of a kind that has long been
recognised to be one of the natural and certain
effects of an unprotected wooden vessel operating
in some waters: Hamilton, Fraser & Co v Pandorf
& Co (1887) 12 App Cas 518 at page 524, per Lord
Halsbury LC. The trial judge found that the barge
was susceptible to such infestation because it was
laid up for the winter over a period of years in a bay
used as a log storage ground where shipworms are
known to breed. He concluded:
[90] I accept, and find as a fact, that the cause
of the sinking in this case was the ingress of sea
water into the hull
(a) from existing chronic leakage in the hull;
and

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(b) from a failure of a plank in the barges

stern rake which allowed a sudden and substantial flow of water.
It was the second of these two causes which led
to the rapid settling and sinking of the barge
described by the witnesses.
13. On the trial judges findings, the loss was not
caused by a peril of the sea but rather by the
inherent weakness of the deteriorated hull of the
barge, attributable to ordinary wear and tear aggravated by worm infestation over the passage of time,
and years of neglect. The ingress of the seawater
that sank the barge was in no way fortuitous. It was
to be expected; it was bound to occur.
14. The insureds contention on this appeal is
that the judge made a fundamental error of fact in
concluding as he did that the rate at which the
seawater was flowing into the barge was greater
than the capacity of the pump. They say that the
judge misconstrued or failed to consider significant
evidence which bore on the rate of the flow of water
through the hole that was found in one of the
planks. The insureds maintain that the evidence
actually establishes that the flow through the hole
did not add significantly to the ingress of seawater,
which was at all times well within the capacity of
the pump, such that the only explanation for the
sinking must be the interruption of the shore power.
They say that, whatever might have caused that to
occur, the failure of the pump was fortuitous.
15. The underwriter says that, on the evidence
adduced, it was entirely open to the judge to find
that the pump had been overwhelmed by the water,
but it says that it is not necessary to consider
whether that is so because, even if the shore power
was interrupted so that the water entering the vessel
was not being pumped out, the loss was not caused
by a peril of the sea. Shortly put, the underwriter
says there was nothing fortuitous about the ingress
of the seawater that sank the barge and that the loss
cannot be said to have been caused by a peril of the
sea where such ingress has not been fortuitous.
16. I proceed to consider as the first issue
whether, on the facts for which the insureds contend, the loss was caused by a peril of the sea.
Peril of the sea
17. The insureds contend that, while the ingress
of the seawater that sank the barge was attributable
to the deteriorated condition of the hull, the cause
of the sinking (and the loss resulting therefrom) was
nonetheless fortuitous because of the accidental
failure of the electric bilge pump. They maintain
that seawater was expected to flow into the hull
until the level of accumulated water reached the
point at which the pump would be automatically

activated. This they refer to as the trigger point

and say that the level of the water was never
expected to rise above that point because, as long as
the shore power remained available, the pump
would engage and reduce the level of the accumulated water to the low point of the pumping cycle,
thereby maintaining the buoyancy of the barge.
Thus, they argue that the unintended ingress of
water beyond the trigger point, caused by the interruption of the shore power, renders the sinking a
loss that was caused by a fortuitous event and,
because it could not have occurred on land, it was
then a loss caused by a peril of the sea.
18. The insureds say there is support for this
analysis in CCR Fishing in particular. In that case,
the sinking of a laid-up vessel at her berth resulted
from two causes. The first was the failure of cap
screw fastenings that were susceptible to corrosion,
which repairers had wrongly used to secure a seawater intake line to the heat exchanger on the vessels engine. The second was the failure of the crew
to close the valve on the through-hull intake to
which the line was connected, when the vessel was
laid up, as they should have done. The insured
maintained that either cause, or both, was fortuitous. The underwriters contended that the proximate cause of the sinking was the failure of the cap
screws which they attributed to ordinary wear and
tear. That failure was held to be fortuitous, which
was sufficient to dispose of the appeal in favour of
the insured, but consideration was given to a
broader approach to determining whether there has
been a loss by a peril of the sea where there is more
than one cause of the loss. After quoting section 56
of the Insurance (Marine) Act, RSBC 1979, chapter
203 (now RSBC 1996, chapter 230), which provides that an insurer is liable for any loss that is
proximately caused by a peril insured against,
McLachlin J (now CJ), writing for the court, said, at
pages 822 and 823:
I have approached the matter thus far on the
assumption made in the Court of Appeal below
that there can only be one proximate cause of the
loss, concluding that even on that basis, there is
coverage. However, I am of the view that it is
wrong to place too much emphasis on the distinction between proximate and remote cause in construing policies such as this. Generally speaking,
the authorities do not follow such a course. I do
not read s 56 of the Insurance (Marine) Act as
limiting the cause of the loss to a single peril.
Realistically speaking, it must be recognised that
several factors may combine to result in a loss at
sea. It is unrealistic to exclude from consideration any one of them, provided it has contributed
to the loss. What is essential in order to establish
that the loss is fortuitous is an accident caused
by the intervention of negligence, or adverse or

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INSURANCE AND REINSURANCE

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566935 BC Ltd v Allianz Insurance Co of Canada

unusual conditions without which the loss would

not have occurred. This is the shared idea which
underlies the exclusion from coverage of damage
due to ordinary wear and tear or inherent vice.
The cases and the textbook writers confirm
this approach. Thus Arnoulds (page 655) suggests that a ship which founders in fair and calm
seas due to unseaworthiness caused by an earlier
fortuitous event will be covered, stating that In
such cases it is the entry of the sea water, fortuitous by reason of the earlier happenings which
gave rise to that occurrence, which constitutes
the operation of a peril of the seas. The authors
go on to state:
The position is otherwise if the loss is due
to unseaworthiness at the start of the voyage,
and no adverse or unusual conditions
occurred thereafter. [Emphasis of McLachlin
J.]
On this reasoning, it does not matter if one of the
causes of the loss is ordinary wear and tear or
inherent vice, provided that an efficient or effective cause of the loss one without which the
loss would not have occurred was fortuitous.
That is certainly so in the case at bar. It is not
disputed that had the valve been closed, as it
should have been, the vessel would not have
sunk. Thus the loss, viewed in all the circumstances of the case, was fortuitous. The trial
judge was right to take the view that he need not
analyse which of the two causes of the loss was
proximate, given that it was clear on his findings
that the sinking of the ship would not have
occurred but for the unusual and fortuitous event
of the valve being negligently left open.
This broader approach has much to recommend it, in my view. The question of whether
insurance applies to a loss should not depend on
metaphysical debates as to which of various
causes contributing to the accident was proximate. Apart from the apparent injustice of making indemnity dependent on such fine and
contestable reasoning, such a test is calculated to
produce disputed claims and litigation. It should
be sufficient to bring the loss within the risk if it
is established that, viewed in the entire context of
the case, the loss is shown to be fortuitous in the
sense that it would not have occurred save for an
unusual event not ordinarily to be expected in the
normal course of things.
19. However, what was said there was said in the
context of a case where the causes being considered
were both events that permitted the ingress of the
water that sank the vessel. The ingress was fortuitous. That is clearly not this case. Here the insureds contend in effect that, while the ingress of the
seawater was caused by the deteriorated condition

507
[LOWRY J

of the hull and was therefore not fortuitous, the

sinking can nonetheless be said to have been fortuitous because the interruption in the shore power,
which was fortuitous, resulted in the water not
being pumped out, so the level of accumulated
water in the hull rose beyond the level it would
have reached had the pump remained powered.
20. Followed to its logical conclusion, the insureds contention would mean that even if the barge
would not float at all of its own accord and its
buoyancy was entirely dependent on the pump continuously discharging the seawater as fast as it
flowed into the hull, the failure of the pump resulting from an interruption in the shore power would
mean that the sinking was nonetheless caused by a
peril of the sea. This would be so whether the
interruption of the shore power for which they contend was attributable to a power failure caused by a
tree falling on a power line in a storm some miles
away or a fuse being blown because too much
power was being drawn by those who may have
been using the power on the dock. I am unable to
accept that a loss caused in that way could be said
to have been caused by a peril of the sea.
21. Further, I have difficulty seeing how the
insureds contention would be different if, instead
of the pump operating automatically on a float
switch, it was necessary for the insureds employees to attend at the barge regularly to operate the
pump. If the employees were to have become confused as to whose turn it was to pump the barge,
resulting in it filling with water and sinking, I do
not consider that the insureds could point to the
confusion and the resulting failure to pump as the
fortuity that caused the sinking such that it could be
said to be a loss by a peril of the sea.
22. As the underwriter points out, it appears that,
in the whole course of Anglo-Canadian marine
insurance law, a loss attributable to the ingress of
seawater has never been held to have been caused
by a peril of the sea in the absence of an antecedent
fortuity that caused the entry of the water. The nonfortuitous ingress of seawater that has caused a
sinking has not been held to have been rendered a
loss by a peril of the sea because the sinking would
not have occurred if the circumstances had been
different, for instance, if the water had been
pumped out, or some other preventative action
taken.
23. The point is illustrated in Rhesa Shipping Co
SA v Edmunds (The Popi M) [1983] 2 Lloyds Rep
235 (QB), affirmed [1984] 2 Lloyds Rep 555 (CA),
reversed [1985] 2 Lloyds Rep 1. There a claim was
made on a policy of marine insurance for the total
loss of an older vessel that sank in calm seas following a sudden rush of seawater into the engine
room through shell-plating where there had been

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more than average wastage of the metal but not

more than was considered to be within permissible
limits given the age of the vessel. The crew had left
repairs to bilge valves in the shaft tunnel unfinished
and they neglected to secure the shaft-tunnel door
before abandoning the ship. Had they completed
the work on the valves, or secured the door as they
ought to have done, the ingress of water would not
have entered the vessels holds and the vessel
would not have been lost. The cause of the inrush of
seawater was not known but the insured claimed
that something, most probably a submarine, had
collided with the hull. At trial, the insureds contention was accepted and the judgment in its favour
was upheld by the Court of Appeal. But the underwriters further appeal to the House of Lords succeeded on the basis that the insured had failed to
discharge the onus it bore of proving that the sinking was caused by a peril of the sea, because the
cause of the entry of the seawater was in doubt.
24. At trial the insured advanced an alternative
claim under what is referred to as the Inchmaree
clause (Thames and Mersey Marine Insurance Co
v Hamilton, Fraser & Co (The Inchmaree) (1887)
12 App Cas 484). An Inchmaree clause affords
coverage for the negligence of a vessels master and
crew, provided there has been no causative want of
due diligence on the part of the vessels owner. The
insureds contention was that the loss was caused
by the negligence of the crew in failing to secure
the shaft-tunnel door. The trial judge, Bingham J
(now Lord Bingham), considered and rejected the
alternative claim on the basis that it was the inrush
of seawater that sank the ship, not the failure to
secure the shaft-tunnel door, and that the Inchmaree
claim was not pursued before the House of Lords.
Bingham J drew on the principle that governs the
determination of the proximate cause of a loss as
articulated in Leyland Shipping Co Ltd v Norwich
Union Fire Insurance Society Ltd [1918] AC 350,
and at pages 249 and 250, Bingham J said:
With these principles in mind I turn to the
present case. To the blunt question, What
caused the vessel to sink? there can in my view
be only one common sense answer: Whatever
caused the sudden entry of water. Without that
entry the negligence of the crew would have had
no effect at all and certainly would not have led
to the loss of the vessel. It is true that without the
negligence of the crew the vessel would not in all
probability have been lost because the aftermost
compartments of the vessel would not have been
flooded. I nonetheless regard that negligence not
as a novus actus interveniens but as a circumstance which aggravated, or more properly precipitated, the result, being an incident flowing
from the injury and receiving from it an operative
and disastrous power, the vessel being all the

time in the grip of the casualty. This is most

obviously true of the failure fully to close the
shaft-tunnel door, an omission which may well
have been attributable to the panic and hurry
caused by the sudden entry of water. But for that
omission, the absence of the bilge valves would
not in all probability have mattered. The loss of
the vessel was caused by the entry of water. The
failure fully to close the shaft-tunnel door
allowed a larger area of the vessel to be flooded,
but was not an independent cause of the loss. The
removal of the valves prevented the ship being
saved, but it also was not an independent cause
of the loss; it was an unhappy event which permitted the original entry of water to have an
effect far more disastrous than it need or should
have done.
25. Similarly, here it was the seawater that sank
the barge. What caused the water to enter was the
deteriorated condition of the hull. Had the interruption in the shore power, for which the insureds
contend, not occurred, the bilge pump could have
prevented the sinking, but it was the ingress of the
water that sank the barge.
26. I do not read what was said in CCR Fishing
as a determination that a sinking can be caused by
a peril of the sea where there is no antecedent
fortuity that causes the water to enter a vessel. I
consider what was said to be directed toward the
approach to be taken where there are two or more
antecedent events that result in the ingress of the
water that takes the vessel down, as there were in
that case. As McLachlin J stated at the outset of her
judgment at page 819:
The sinking of a ship as a result of the ingress
of sea water due to a fortuitous act has without
exception been considered to be an accident
which is of the sea: The Bamcell II [Century
Insurance]; Thames and Mersey Marine Insurance Co v Hamilton, Fraser & Co (1887) 12 App
Cas 484 (HL).
27. In Century Insurance, a barge, which had no
bottom but floated on a cushion of air, sank when
the operator inadvertently bled too much air out of
the hull by leaving an exhaust valve open too long.
One question on the appeal which was resolved in
favour of the insured was whether the loss was
caused by a peril of the sea. In writing for the court,
at page 526 col 1, Ritchie J quoted what he said was
the most widely accepted definition of what constitutes a peril of the sea, from the judgment of Lord
Wright in Canada Rice Mills Ltd v Union Marine
and General Insurance Co Ltd (1940) 67 Ll L Rep
549 at page 557 col 1:
Where there is an accidental incursion of seawater into a vessel at a part of the vessel, and in
a manner, where seawater is not expected to enter

[2007]

INSURANCE AND REINSURANCE

BCCA]

566935 BC Ltd v Allianz Insurance Co of Canada

in the ordinary course of things, and there is

consequent damage to the thing insured, there is
prima facie a loss by perils of the sea. The
accident may consist in some negligent act, such
as improper opening of a valve, or a hole made in
a pipe by mischance, or it may be that seawater
is admitted by stress of weather or some like
cause bringing the sea over openings ordinarily
not exposed to the sea or, even without stress of
weather, by the vessel heeling over owing to
some accident, or by the breaking of hatches or
other coverings. These are merely a few amongst
many possible instances in which there may be a
fortuitous incursion of seawater. It is the fortuitous entry of the seawater which is the peril of
the sea in such cases. Whether in any particular
case there is such a loss is a question of fact for
the jury.
28. Ritchie J, at page 526 col 1, also quoted and
subscribed to the following statement in Cohen,
Sons & Co v National Benefit Assurance Co Ltd
(1924) 18 Ll L Rep 199 at page 202 col 1:
In my view, the unintentional admission of sea
water into a ship, whereby the ship sinks, is a
peril of the sea. There is no warranty in this
policy against negligence; there is no exception
of negligence; and the fact that the unintentional
admission of water into the ship is due to negligence is, in my opinion, totally and absolutely
immaterial. There is a peril of the sea whenever
a ship is afloat in the sea, and water from the sea
is unintentionally admitted into her which causes
a loss, either to the cargo or to the ship.
29. It appears clear that, in respect of losses of
the kind described, it is the fortuitous ingress of
seawater that causes damage that is a peril of the
sea. Nothing to the contrary is evident in any of the
many cases where the meaning of a peril of the sea
has been considered that are reviewed by the editors
of Arnoulds Law of Marine Insurance and Average, 16th Edition (London: Stevens & Sons, 1981)
in the comprehensive discussion of the authorities
found in volume II, chapter 23, Marine Risks.
30. The insureds cite two trial decisions in American marine insurance cases where they say support
for their contention is to be found. However, in the
first, Parkhill-Goodloe Co Inc v Home Insurance
Co 1976 AMC 951 (MD Fla 1975), the sinking of
a seaworthy dredger at her berth was held to have
been caused by the fortuitous incursion of river
water, but there was no determination of what the
cause of the sinking was, and I find the case of little
assistance. In the second, Neptune Lines Inc v Hudson Valley Lightweight Aggregate Corporation
1973 AMC 125 (SDNY 1972), it was held that the
sinking of an old leaking wooden barge that was not
pumped out as required because of a lack of due

509
[LOWRY J

care and proper maintenance was caused by a peril

of the sea. But the opinion contains little analysis
and again is not particularly helpful.
31. A third American case to which reference is
made, Russell Mining Co v Northwestern Fire &
Marine Insurance Co, 207 F Supp 162 (ED Tenn
1962), reversed 332 F 2d 440 (6th Cir 1963), was a
case where a barge sank when electrical pumps
required to keep her afloat were turned off and not
restarted as they should have been. However, the
claim was not advanced on the basis that the loss
was caused by a peril of the sea but, rather, under an
Inchmaree clause. The opinions contain no discussion that I find helpful in considering whether
the sinking of the barge in this case can be said to
have been caused by a peril of the sea. The extent
of the coverage afforded by an Inchmaree clause to
a loss which is of the sea may be open to question (see Arnould at 831, Negligence of master,
etc). In any event, the insureds must accept, as I
understand they do, that the absence of evidence
that would establish negligence in the interruption
of the shore power on the part of what might be said
to be members of the crew of the barge, if indeed
she had any crew, and the fact that the deteriorated condition of the barge would seem to preclude
any suggestion that her sinking was in no way
caused by want of due diligence on the part of her
owners, forecloses any consideration of the applicability of the Inchmaree clause in the subject
policy.
Conclusion
32. There was here no accidental or unintentional
ingress of seawater at a part of the barge and in a
manner where seawater was not expected to enter in
the normal course of things. The water that entered
did so because, as the judge found, the deterioration
of the hull led to chronic leakage and a hole opened
up as a consequence of worm infestation. The water
that sank the barge entered through a part of the hull
in a manner that was to be expected given the
condition of the planking. It was not fortuitous. I
conclude that, because the ingress of seawater that
sank the barge was not fortuitous, the sinking was
not caused by a peril of the sea.
33. On the facts for which the insureds contend,
it may well be that, had the shore power for the
bilge pump not been interrupted, the barge would
not have sunk when it did. But a policy of marine
insurance affording coverage for perils of the sea
cannot amount to a guarantee that shore power that
may be used to run pumps on a vessel at any given
location on the coast will not be interrupted. Insurance for damage attributable to the loss of shore
power may be found under the broader coverage of
an all risks policy (for which a greater premium

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LLOYDS LAW REPORTS

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566935 BC Ltd v Allianz Insurance Co of Canada

[BCCA

would no doubt be paid), but it is not, in my view,

to be found under the circumscribed coverage
afforded for losses caused by perils of the sea.
34. This conclusion resolves the first issue in
favour of the underwriter and it becomes unnecessary to consider whether, as the insureds contend,
the judge made a fundamental error of fact in deter-

mining that the pump had continued to operate but

had been overwhelmed by the volume of water
flowing into the hull of the barge.
Disposition
35. I would dismiss the appeal.