Subrogation CBMU SemiAnnual May 21, 2004 Jerry Giroux Marc Isaacs Robert Cox

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SubrogationCBMU Semi-AnnualMay 21, 2004
Jerry GirouxMarc IsaacsRobert Cox

jerry.giroux_at_subrogatewayclaims.com
SubroGateway Inc.
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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.
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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.
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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.
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Subrogation - Why Bother?

• 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.
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Subrogation
Applicable Laws

• US COGSA
• HAGUE RULES
• HAGUE-VISBY
• HAMBURG RULES

SubroGateway Inc.
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Subrogation Suit time

• VESSEL OWNER/CHARTER - ONE YEAR FROM THE DATE THE
  CARGO WAS DELIVERED OR 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.
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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 Hague-Visby 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.
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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.
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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.
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Subrogation USA

• The Bremen v. Zapata Off-Shore Co., 407 U.S. 1
  (1972
• The "Eleftheria", 1969 1 Lloyds 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.

SubroGateway Inc.
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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.
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Subrogation Freight Frwdr 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.
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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 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.
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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 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)

SubroGateway Inc.
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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.
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Subrogation Applicable Laws

• MONTREAL PROTOCOL 4
• WARSAW CONVENTION
• MONTREAL CONVENTION 1999
• EFF NOVEMBER 2003
• DEFENSE TOOK ALL REASONABLE STEPS!

SubroGateway Inc.
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Subrogation MP4 Changes

• WILFUL MISCONDUCT
• eliminated the concept of "willful misconduct"
  where air cargo is concerned. Under the original
  Warsaw Convention, a carrier stood to lose its
  US20.00 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.
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Subrogation MP4

• THE DUTY TO PROVIDE EVIDENCE
• in the past you were subjected to a legal
  presumption that cargo had 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.
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Subrogation MP4

• LEGAL TECHNICALITIES ARE DISMISSED
• 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.
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Subrogation MP4

• No more agreed stopping places"
• Tai Ping Insurance Company v. Northwest Airlines.

SubroGateway Inc.
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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.
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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.
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Subrogation Fresh Topics

• ONTARIOS NEW LIMITATIONS ACT
• 15 years?
• Economics of small files
• Package vs. pallet

SubroGateway Inc.