Compulsory Insurance for Passenger Vessels

On December 24,^th 2016 the Federal Department of Transport introduced draft regulations to implement compulsory insurance for ships carrying passengers.

Interested persons may make representations to the Minister of Transport concerning the proposed Regulations within 60 days after the date of publication of this notice. All such representations must be in writing and cite the Canada Gazette, Part I, and the date of publication of this notice, and be sent to Doug O’Keefe, Chief, International Marine Policy, Marine Policy Directorate, Department of Transport, Place de Ville, Tower C, 330 Sparks Street, Ottawa, Ontario K1A 0N5 (tel.: 613-608-8904; fax: 613-998-1845; email: doug.okeefe@tc.gc.ca).

Below is an executive summary provided by the Department of Transport:

Background 

Part 4 of the Marine Liability Act (the Act) introduced a comprehensive liability regime for passengers carried on commercial or public purpose ships. The liability regime is based on the International Maritime Organization’s Athens Convention relating to the Carriage of Passengers and their Luggage by Sea, 1974 as amended by the Protocol of 1990 (1990 Athens Convention).

The 1990 Athens Convention presumes the carrier to be liable for injuries resulting from shipwreck, collisions, stranding, explosion, fire and any defect of the ship. As a trade-off, carriers can limit their liability to each passenger to 175 000 Special Drawing Rights (SDR). [Special Drawing Rights are a special unit of account of the International Monetary Fund which fluctuates and was equivalent to $1.80 (1.80*175 000 = $315,000) on June 13, 2016.]. For this trade-off to work, carriers must have the financial resources to cover this liability. The 1990 Athens Convention does not require carriers to insure this liability; however, section 39 of the Act provides authority to make regulations requiring carriers to maintain insurance to cover their liability to passengers up to the maximum limit of liability.

On June 16, 2000, the tour boat True North II sank in 15 m of water in Georgian Bay resulting in the drowning of two children. The inquest found that the owner-operator was not insured and recommended compulsory insurance for commercial ships carrying passengers. Following this incident, the Minister of Transport made a commitment in 2001 to the House of Commons Standing Committee on Transport and Government Operations to enact regulations requiring compulsory insurance for ships carrying passengers.

The Minister publicly announced the Government’s plans to proceed with these Regulations in 2003. The Department of Transport (the Department) undertook a comprehensive implementation study (Mariport Report) in 2002 and extensive consultations with marine stakeholders and marine insurers in 2003–2004.

However, the Department was unable to proceed with the Regulations because the adventure tourism industry (e.g. white water rafting) could not acquire insurance without “waivers of liability” that are invalid under Part 4 of the Act. The Act was amended in 2009 to exclude adventure tourism activities (subsection 37.1(1) of Part 4 of the Act). Liability for these activities now falls under Part 3 of the Act.

Issues

While the Act contains a liability regime for passengers carried on board commercial or public purpose ships, carriers are not required to maintain liability insurance towards their liability to passengers.

Objectives 

The objective is to ensure the financial security of compensation due to passengers or their dependents in the event of a marine accident involving personal injury or loss of life by requiring marine carriers to maintain appropriate insurance.

Description

The proposed Regulations would require ships carrying passengers to maintain liability insurance for death or personal injury. More specifically, they would

- apply to commercial and public purpose ships engaged in the domestic carriage of passengers;

­­- require any carrier who performs any part of the carriage to maintain liability insurance for death or personal injury in an amount not less than $250,000 multiplied by the passenger capacity of the ship;

- include a provision for fleet policies where the amount of insurance would be determined by the passenger capacity of each ship. However, should an incident occur involving two or more ships in the fleet, each ship would be deemed separately insured;

- require carriers to carry proof of liability insurance on board the ship where feasible, or to produce it within 24 hours after a designated officer has boarded the ship; and

- include a provision where failure to provide a proof of appropriate liability insurance could result in either the detention of the ship or a fine not exceeding $100,000 upon summary conviction.

The proposed Regulations would not apply to

- an adventure tourism activity that meets the following conditions specified in subsection 37.1(1) of the Act:

(a) it exposes participants to an aquatic environment,

(b) it normally requires safety equipment and procedures beyond those normally used in the carriage of passengers,

(c) participants are exposed to greater risks than passengers are normally exposed to in the carriage of passengers,

(d) its risks have been presented to the participants and they have accepted in writing to be exposed to them, and

(e) any condition prescribed under paragraph 39(c) of the Act [ Under paragraph 39(d) of the Act, the Governor in Council can make regulations prescribing classes of persons for the purpose of subsection 37.1(2). Currently, the only classes of persons in the Act are the ones mentioned in subsection 37.1(2) of the Act as defined above];

- the carriage of a sail trainee or a person who is a member of a class of persons prescribed in paragraph 39(d) of the Act;

- a carriage by pleasure craft as defined in section 2 of the Canada Shipping Act, 2001;

- an international carriage (e.g. ferries operating between a port in Canada and a port in the United States;

- a carriage operated by the federal, provincial or territorial governments, or by an entity entitled to indemnification by government for liability under Part 4 of the Act; and

- a carriage undertaking for search and rescue operations that are carried out by the Canadian Coast Guard Auxiliary.

To facilitate compliance, the proposed Regulations provide for implementation in two stages.

Existing insurance policies 

Carriers who hold an insurance policy for liability to passengers when the proposed Regulations come into force would need to comply with them upon the renewal, modification or cancellation of the policy.

New insurance policies 

Carriers who hold no insurance policy for liability to passengers when the proposed Regulations come into force would be required to comply with them 60 days after they come into force.

Some stakeholders were concerned with the determination of passenger capacity. For example, some stakeholders noted that fishing vessels would not have a passenger capacity, while others noted that a ship may have a capacity of nine passengers but never carry more than four passengers.

The proposed Regulations are not prescriptive as to how an operator must determine the ship’s passenger capacity. All operators of vessels used to carry passengers, including fishing vessels, need to comply with the Canada Shipping Act, 2001 regulations on the carriage of passengers. In doing so, they need to determine the number of passengers that the vessel has been outfitted to carry (e.g. number of life jackets). This determination should inform their insurance policy requirements.

Fernandes Hearn LLP will keep you advised of any changes to the draft regulations after stakeholders provide comments to the government.

Boating Accident Litigation Issues Highlighted

The recent decision of Banford v. Mitchelson 2016 SKQB 328 illustrates how important it is for parties to have competent counsel as soon as possible after an accident, how witness testimony is important to a case, and the effects on a civil case of pleading guilty to a criminal charge.

Connie Banford (“Connie”), was injured in a boating accident.  Robert Mitchelson (“Mitchelson”), denied that he was the operator of the boat that caused the injuries to Ms. Banford. 

The Facts

The Banfords owned a cottage on Saskatchewan Beach along Long Lake, in Saskatchewan. On Canada Day each year a fireworks display is put on at the village of Regina Beach. People watch the display from the water in their boats. It is not unusual to have some 200 boats in the water during the display. 

On July 1, 2005 the Banford family went to watch the fireworks. They left their cottage in their 18.5 foot Bayliner inboard boat. The Banford boat travelled to the Regina Beach Yacht club area and sat in a convoy of boats to watch the fireworks. Once the fireworks were over, the Banfords proceeded to the north side of the lake and trolled their way eastward to return to their cottage. The local cottage owners were putting on their own fireworks displays and the occupants of the Banford boat were going slow to take in these individual displays. 

When they were approximately one-half of the way home, another boat came up behind them, overtaking them. The other boat came up over the top of the Banford boat from right to left. In the process, Connie testified that the hull of the other boat collided with her and caused her to fall into the walkway of the Banford boat. As the boat came over the back of the Banford boat, a passenger on the Banford testified he was able to identify the name of the other boat on the side as a “Baja” boat with a white stripe. 

As a result of the collision, Connie suffered injuries. The other boat then left the scene. It was chased. The Banford boat caught up with the Baja vessel. Words were exchanged and the Baja vessel took off again.

The following day, Banford boat operator Rhory Banford (“Rhory”) contacted the RCMP to report the incident. He had surmised the offending boat was from the cottage area immediately to the east of Saskatchewan Beach. He arrived at this supposition because the Banford cottage was at the very end of Saskatchewan Beach and the other boat was headed east. The Kannata Valley cottage area is immediately to the east of Saskatchewan Beach. 

In furtherance of this conclusion, Rhory and Connie proceeded to contact friends who had property in Kannata Valley to ask if they knew of anyone who owned a Baja boat in that area. They were told about Mitchelson, as he owned such a boat. A few days after the accident, Rhory drove his boat to the Kannata Valley area where he saw a Baja boat in a boatlift on the water. He indicated it had the same type of stripe on the side. He also indicated there was a mark on the hull of the boat that seemed consistent with the damage that would have been caused by the collision. 

Rhory testified this was the same man he had seen on the night of the accident. Rhory immediately went to the RCMP detachment in Lumsden to report what he had discovered. The man was Mitchelson. 

The RCMP charged Mitchelson with a violation of the Canada Shipping Act, 2001, SC 2001, c 26 and provided him with an appearance notice with a court date of August 22, 2005. 

Mitchelson testified that on the evening of July 1, 2005, he and his wife had travelled by boat from their cottage in Kannata Valley to watch the fireworks at Regina Beach. Following the fireworks display, he was proceeding back to their cottage. He was travelling at a slow speed. He was operating a Baja boat. While he was travelling, a boat came up to his boat and the occupants were yelling and swearing at he and his wife. He could not make out what they were saying. He thought the occupants might have been intoxicated. He left the area and proceeded home. 

During the trial the court also heard that Mitchelson had appeared in Provincial Court and entered a guilty plea to the CSA violation, dangerous operation of a boat. The prosecutor had read into the record the following: 

With respect to the facts, Your Honour, this occurred on July first at Regina Beach after the fireworks on Last Mountain Lake. An individual by the name of Banford was operating a boatload of people and was involved in a hit and run. He indicated to the police that a 21-foot Baja boat with a male as the driver and a female companion struck his boat, basically a glancing blow to his boat. His wife was in the boat. She fell down, received some minor injuries with respect to it. Your Honour, it is a charge of dangerous operation of a boat obviously. We’re suggesting a fine of $250. We discussed that with Mr. Michelson and he’s indicated that he’s in agreement with that, ... 

Mitchelson was served with the statement of claim the civil action. He responded with a letter to the then lawyer for the plaintiffs and indicated he had not been in a collision. He took no further steps and the action was noted for default. Some years later, in 2012, the plaintiffs applied for judgment and MItchelson applied to dismiss the action, or, in the alternative, to set aside the noting for default. The court set aside the noting for default and allowed MItchelson to file a statement of defence. 

The Issues

Some of the issues during the trial were as follows:

1. What is the standard of proof in this civil proceeding? 

2. What is the effect of the failure to call certain witnesses? 

3. What is the effect of the defendant’s finding of guilt on the charge pursuant the Canada Shipping Act? 

4. Has the plaintiff satisfied the standard of proof to establish the defendant was the operator of the boat? 

Analysis

1. What is the standard of proof in this civil proceeding? 

The court concluded that the plaintiff must place before the court clear and cogent evidence to show the allegation is more likely than not to have occurred; that is, on a balance of probabilities.

2. What is the effect of the failure to call certain witnesses? 

Mitchelson denied he was the operator of the boat involved in the collision. He did not call his wife as a witness. 

The court may draw an adverse inference from a party’s failure to call a witness in a civil proceeding. A party is expected to call that evidence which will assist the court in determining the question in issue. 

Mitchelson denied an event occurred, in the face of the fact of an accident, by a Baja boat, and with two people positively identifying Mitchelson as the operator of the offending boat. Those witnesses identified Mitchelson and a woman as being the occupants of the offending boat. They indicated that the woman had dark hair. 

At trial Mitchelson confirmed his wife was on the boat the evening of July 1, 2005. The court noted:

She would have been able to then testify as to all of the events of the night including the absence of an accident. On a perhaps smaller point, the defendant testified his wife has always had blond hair and denied her hair was dark on July 1, 2005. She could have testified to both confirm his point and thereby call into question the Banford’s powers of observation. 

There was no explanation provided for why Mitchelson’s wife was not called as a witness. It was established that at the time of trial, Mitchelson remained married to his wife and she was present at their home located immediately outside of Regina. There was nothing to suggest she was suffering from any disability that would have prevented her from testifying. 

The court held:

I am compelled to draw an adverse inference from the defendant’s failure to call his wife to testify. I conclude there is evidence of Mrs. Mitchelson, concerning the boating accident, which would be unfavourable to the defendant. It is for this reason she was not called to testify. 

3. What is the effect of the defendant finding of guilt on the charge pursuant the Canada Shipping Act? 

A prior conviction is to be considered as prima facie proof that the facts, which form part of the conviction, did occur. The opposite party is then provided with an opportunity to rebut those facts in the subsequent civil proceeding. 

In this case the judge held that in the circumstances it was appropriate to allow Mr. Mitchelson to dispute responsibility for the accident. It was not an abuse of process to permit that to occur. There was no evidence called at the criminal proceeding and accordingly, the finding of guilt was not as a result of the court reviewing any sworn testimony. The judge held that Mitchelson’s explanation for why he entered the guilty plea was an explanation that has been specifically recognized by the Supreme Court of Canada.

In this case, Mitchelson testified he entered a guilty plea due to his economic circumstances. Essentially, he said it was cheaper to plead guilty, get a minimal fine and not have to take additional time off work to deal with the matter. There was no evidence tendered in the Provincial Court proceeding. 

4. Has the plaintiff satisfied the standard of proof to establish the defendant was the operator of the boat? 

The court noted:

“Rhory and Shelly Banford positively identified Mr. Mitchelson as the operator of the offending boat. On July 1, 2005, Mr. Mitchelson was in his Baja boat on Long Lake. The Banfords, together with Blaine Huber, testified the Baja boat came to a stop following the collision. It was a number of feet from the Banford boat. It remained stopped for a minute or two and then left. Shelley and Rhory testified they were able to see and positively identify the operator.” 

Both of these individuals were cross-examined on previous affidavits they had filed in this proceeding which were inconsistent with their current testimony. On the previous occasion, Rhory swore the other boat immediately left the scene following the collision. He explained that this statement was not accurate and the boat did stop for a minute or two. 

The court also noted that civil courts can take some direction for the factors routinely considered by criminal courts in assessing the evidence of a witness who is seeking to identify another party. Criminal courts regularly consider the following types of factors in determining the weight to be given to eyewitness identification of a party: 

a. Opportunity to observe; 

b. Light conditions; 

c. Distance from witness to suspect; 

d. Eyesight of the witness; 

e. Previous acquaintance with the suspect; 

f. Focus or attention or distraction; 

g. Presence or absence of distinctive features of the suspect. 

The court reviewed the evidence on the identification:

Both Rhory and Shelley had an opportunity to observe the defendant on two occasions and Rhory saw him on a third occasion outside the cottage. Conditions for the first two observations were less than ideal: it was nighttime and there was limited illumination by lighting. However, there was some illumination by the rear mast lighting on the defendant’s boat. On the first occasion, the boats may have been 20 to 40 feet apart. In either case, this is not a great distance and it would be possible to make an identification. On the second occasion, the boats were directly side by side and it would have been even more possible to make an identification. While time was limited on each occasion, it may have been as much as two minutes, but appears to have been around the minute mark. I do not view this as an insignificant amount of time. 

Coupled with this, the defendant was operating a Baja boat. He was in the vicinity that evening. His actions in “just leaving” following the confrontation with the Banford boat appear odd in the circumstances. 

Interestingly, the court noted that the plea of guilt, while not forestalling Mitchelson disputing liability in the civil proceedings, was additional evidence confirming his involvement. The judge found that Mitchelson held a master’s degree in industrial psychology. Over the years Mitchelson had successfully operated his own consulting business and he had managed a medical surgical business operation. He presented as an intelligent and sophisticated individual. His failure to dispute the words of the Crown at the sentencing hearing “are unexplainable. He testified he did not hear those words. Yet, he was present and he was specifically asked if he had anything he wanted to say prior to sentence being pronounced. He declined to say anything in response.” 

The court held that:

The failure to call Mrs. Mitchelson suggests her evidence would not have been favourable to Mr. Mitchelson’s case. His denial of involvement in the face of positive identifications, and a guilty plea based on the fact of an accident, calls out for evidence establishing his lack of involvement. Mrs. Mitchelson was this evidence. 

In all of the circumstances, the court was satisfied, on a balance of probabilities, that it was more likely than not that Mitchelson was the operator of the Baja boat that collided with the Banford boat.

Damages were awarded to Connie Banford for her injuries.