Background
Canada’s Marine Liability Act[1] incorporates the provisions of international conventions that limit the financial responsibility of shipowners for incidents of death, personal injury, and property damage aboard their ships. These conventions are comprised of the London Convention on Limitation of Liability for Maritime Claims, 1976 (“LLMC 1976”), the Athens Convention relating to the Carriage of Passengers and their Luggage by Sea, 1974, and the Hague-Visby Rules from the International Convention for the Unification of Certain Rules of Law relating to Bills of Lading.[2]
The policy behind limiting the liability of shipowners for marine incidents, is that doing so promotes Canada’s maritime trade thereby supporting the Canadian economy. The limitation of liability provisions allow shipowners to maintain insurance coverage and compensate those affected by incidents on their ships. The provisions also help shipowners predict the costs they will incur in the event of a marine incident.[3]
Recent Amendments
The Marine Liability Act[4] was recently amended by Bill C-47[5] to increase the maximum liability amounts for certain claims and to introduce a limitation of liability for air cushion vehicles (also known as “hovercrafts”). These amendments came into effect on June 22, 2023.[6] No amendments were made to the limitation of liability provisions provided for in section 28 (passenger claims) and section 30 (liability of owners of docks, canals, and ports).[7]
Limitation of Liability for Maritime Claims
Pursuant to the previous section 29, other than claims for death or personal injury of passengers, for maritime claims involving a ship of less than 300 gross tonnage, the maximum liability was $1,000,000 for claims for death or personal injury and $500,000 for any other claims, such as for property damage.[8] Bill C-47[9] amended this section, raising the maximum liability amounts. Pursuant to the newly amended section 29, the maximum liability is now $1,500,000 for claims for death or personal injury and $750,000 for any other claims.[10]
How will the new limitations affect claims and insurance?
Brokers and insurers will want to consider insurance coverages for losses involving personal injury and property damage. It had been common in the industry for pleasure craft liability policies to provide $2,000,000 cover before these amendments in June 2023. However, the increased limits totalling $2,250,000 now mean that owners of pleasure craft under 300 gross tonnage should consider $3,000,000 of coverage to adequately insure for the limits plus interest and costs.
It is stressed that these limitations are considered to be virtually “unbreakable” because the only way to prevent a defendant from limiting his liability is for the plaintiff to prove that the loss resulted from the personal act or omission of the defendant “committed with the intent to cause such loss, or recklessly and with knowledge that such loss would probably result”. This is a very strict test to meet, and the limitation remains unbroken to-date in Canada after the Supreme Court of Canada reversed the decisions of the trial judge and Federal Court of Appeal on this point in Peracomo v. Telus Communications, 2014 SCC 29.
Limitation regimes for vessels under 300 gross tonnage
These new limits are important for pleasure craft owners and operators, but there can be some confusion as to whether they apply for all vessels under 300 gross tonnage. It is important to recall that the new limitations under s. 29 of the Marine Liability Act are derived from Canada’s incorporation of the LLMC 1976. These limitations therefore do not apply to claims for wreck removal of a vessel, claims for oil pollution damage, claims for nuclear damage, and claims by employees if the applicable law does not permit limitation.
The new $1,500,000 limit for claims for death or personal injury will also not apply to those claims that fall within the separate limitations set out for claims involving passengers and persons on board a vessel being operated for a commercial or public purpose in s. 28 and Part 4 of the Marine Liability Act. These provisions of the Act incorporate limitations from the LLMC 1976 and Athens Convention respectively.
In these circumstances where there is death or personal injury to the categories of persons mentioned above, underwriters and claims assessors will want to consider the application of the lower per passenger limit under Part 4 of the Marine Liability Act (Athens Convention limits). Alternatively, they may want to opt for the global limit of 2,000,000 units of account under s. 28(1)(a) of the Marine Liability Act in the appropriate circumstances where the Part 4 limits exceed this global limit.
Care must be taken to apply the correct limitation regime. If, for example, claims are brought by injured “passengers” of a vessel against that vessel’s owner and master for a collision with another ship, then their claims against the first vessel’s owner and master fall within the Athens Convention limits. However, if claims are brought against the second ship, then the claims fall under those of the LLMC 1976.
Limitation of Liability for Air Cushion Vehicles
Bill C-47[11] also introduced air cushion vehicles to the Marine Liability Act.[12] The newly added section 34.4 incorporates provisions of the London Convention on Limitation of Liability for Maritime Claims, 1976 to establish maximum liability amounts for marine incidents aboard air cushion vehicles. Air cushion vehicles are defined in the Air Cushion Vehicle Regulations[13] to the Aeronautics Act[14] as a “machine designed to derive support in the atmosphere primary from reactions against the earth’s surface of air expelled from the machine”. In other words, hover craft.
Pursuant to subsection 34.4(1), the maximum liability for claims for death or personal injury to passengers of air cushion vehicles of less than 8,000 kg is the greater of $3,500,000 and $300,000 multiplied by the number of passengers the vehicle is authorized to carry or by the number of passengers on board if no authorization is required.[15] The maximum liability amount is the same for claims for death or personal injury on board air cushion vehicles of less than 8,000 kg where there is no contract of carriage in accordance with subsection 34.4(2).[16] However, pursuant to subsection 34.4(3), subsection 34.4(2) does not apply to those who are masters and employees of air cushion vehicles, anyone on board air cushion vehicles not operated for commercial or public purposes, nor to anyone who is shipwrecked, a stowaway, or a trespasser.[17]
Subsection 34.4(4) captures all other claims for death or personal injury, the maximum liability for which is $1,500,000 for air cushion vehicles of less than 8,000 kg, $5,000,000 for vehicles between 8,000 kg and 13,000 kg, and $5,000,000 for vehicles of 13,000 kg or more, plus $40 for each kilogram exceeding 13,000 kg.[18]
Lastly, pursuant to subsection 34.4(5), the maximum liability for claims for property damage involving air cushion vehicles is $750,000 for vehicles of less than 8,000 kg, $2,500,000 for vehicles between 8,000 kg and 13,000 kg, and $2,500,000 for vehicles of 13,000 kg or more, plus $20 for each kilogram exceeding 13,000 kg.[19]
Takeaways
Given the meaningful changes to the limitations of liability under the Marine Liability Act, it is important for owners, operators, insurers, and brokers to review the relevant insurance arrangements to ensure that there is adequate coverage.
Should you have any questions, please do not hesitate to contact the Transportation Group at Whitelaw Twining.
Written by Kim Wigmore and David Fung, with contributions from articling student Emma Bozoian.
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[1] Marine Liability Act, SC 2001, c 6 [Marine Liability Act].
[2] Ibid, Parts 3—5.
[3] Transport Canada, “Marine liability and compensation: Limitation of liability for maritime claims” (13 December 2021), online: Transport Canada <tc.canada.ca/en/marine-transportation/liability-compensation-marine-incidents/marine-liability-compensation-limitation-liability-maritime-claims>.
[4] Marine Liability Act, supra note 1.
[5] Bill C-47, An Act to implement certain provisions of the budget tabled in Parliament on March 28, 2023, 1st Sess, 44th Parl, 2023 (assented to 22 June 2023) [Bill C-47].
[6] Marine Liability Act, supra note 1.
[7] Ibid, ss 28, 30.
[8] Marine Liability Act, SC 2001, c 6, s 29, as amended by Marine Liability Act, SC 2001, c 6, s 29.
[9] Bill C-47, supra note 5.
[10] Marine Liability Act, supra note 1, s 29.
[11] Bill C-47, supra note 5.
[12] Marine Liability Act, supra note 1, ss 34.2—34.7.
[13] Air Cushion Vehicle Regulations (CRC., c. 4)
[14] Aeronautics Act, RSC 1985, c. A-2
[15] Ibid, s 34.4(1).
[16] Ibid, s 34.4(2).
[17] Ibid, s 34.4(3).
[18] Ibid, s 34.4(4).
[19] Ibid, s 34.4(5).
