The action by an owner of a fleet of ships (“More Marine”) against its Insurers and its insurance broker was dismissed where the Court found that a deductible clause allowing a deductible to be charged for the constructive total loss of a vessel was included in the insurance contract and that More Marine knew and agreed to the inclusion of this deductible clause in the contract.
More Marine Ltd. v. Axa Pacific Insurance Co., [2010] B.C.J. No. 109, January 22, 2010, British Columbia Supreme Court, M.D. Macaulay J.
More Marine had carried insurance with the Defendant Insurers for over five years under a number of different policies. Over that time, More Marine had accumulated a loss ratio of approximately 245% indicating that it had an extremely poor loss history. As a result, the Insurers considered not renewing More Marine’s policy in 2006. After some negotiation, the Insurers agreed to renew the policies if the deductible for each loss was increased and the annual aggregate deductible was increased to $250,000. Previous versions of the policies obtained by More Marine did not include constructive total losses under the annual aggregate deductible and, consequently, such losses did not trigger that deductible. Significant negotiation occurred between the Insurers and the broker for More Marine in securing the policy for the 2006-2007 term and these negotiations specifically referred to the inclusion of the annual aggregate deductible in the policy. In June 2007, More Marine suffered a constructive total loss claim arising out of the sinking of the vessel “Glenshiel”. The Insurers contended that the applicable policy included the annual aggregate deductible amount of $250,000. More Marine contested this interpretation and sought rectification of the insurance contract to remove the deductible clause. More Marine also advanced a claim against its broker alleging that the broker ought to have explained the annual aggregate deductible clause to More Marine and ought to have obtained insurance that did not include this deductible clause. The Defendants sought summary judgment as against More Marine. The Court was satisfied that the Insurers intended to include the annual aggregate deductible clause in the policy. It noted that the Insurers had seriously considered not renewing in 2006 and only renewed the policy when More Marine, through its broker, agreed to an increase in deductibles and premium due to the poor loss history of More Marine. The cover note to the 2006-2007 policy clearly indicated that the policy was subject to the terms, conditions, exclusions and provisions contained in the policy including all endorsements. The additional premium was 20% higher than the previous premium. After reviewing the communications between the parties, the Court noted that More Marine was concerned about premium amounts and would certainly been involved in any negotiation which saw its premium increase by 20%. Therefore, the Court rejected evidence from More Marine that it was unaware of the negotiations which led to the endorsement which included the annual aggregate deductible for constructive total loss claims. The Court held that More Marine knew the specific terms of the policy prior to suffering the loss of the Glenshiel and that it had accepted and agreed to the terms that were negotiated on its behalf by its broker. Therefore, the action as against the Insurers was dismissed. In reviewing the claim against the broker, the Court found that the law relating to the standard of care of an insurance agent was clear: the agent owed a stringent duty to provide both information and advice to its client. In this case, the Court rejected More Marine’s contention that the wording of the annual aggregate deductible clause in the endorsements was unclear and should have been explained more fully by its broker. The Court found that the wording of the endorsements was clear and that the deductible applied to all claims unless specifically excluded. The broker was not obligated to explain the meaning of the clause in that regard. The Court found that it was apparent from the evidence that the parties negotiated the express terms of the annual aggregate deductible clauses so that the Insurers could continue to provide insurance at an affordable cost even when there was a poor claims history. In the circumstances, the Court concluded that More Marine must have known and agreed to the inclusion of the annual aggregate deductible clauses in the policy. The Court rejected More Marine’s argument that its broker should have obtained alternate coverage that did not include these deductibles as there was no evidence put forward by More Marine that its agent had ever agreed to obtain coverage that excluded constructive total losses from the deductibles. In fact, the Court concluded that based on the evidence, even if the broker had pursued other coverage, it would have failed to obtain such coverage based on the poor loss history of More Marine. In the result, More Marine’s claim against its broker was dismissed. This case was originally summarized by Jonathan D. Meadows of Harper Grey LLP and originally edited by David Pilley.
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