Reasons of the court
Justice Iacobucci, writing for a unanimous court, held in favour of Can-Dive on the basis it was able to rely on the subrogation clause. The case turned on the existence of any exceptions to privity. Iacobucci first affirmed the existence of an agency exception to privity, and then expanded on the "principled exception to the privity of contract doctrine" established in London Drugs Ltd v Kuehne & Nagel International Ltd .
He noted that in cases where the agency exception did not apply, as in this case, courts "may nonetheless undertake the appropriate analysis, bounded by both common sense and commercial reality, in order to determine whether the doctrine of privity with respect to third-party beneficiaries should be relaxed". This principled approached, he believed, was preferable to having "yet another ad hoc exception".
A two-stage test was devised to determine if the exception could be applied: "(a) Did the parties to the contract intend to extend the benefit in question to the third party seeking to rely on the contractual provision? and (b) Are the activities performed by the third party seeking to rely on the contractual provision the very activities contemplated as coming within the scope of the contract in general, or the provision in particular, again as determined by reference to the intentions of the parties?" (see decision at para 31)
Iacobucci acknowledged this exception was a departure from the doctrine of privity. However, it was only "incremental" in nature and did not abdicate any existing principles. Since the exception was dependent on the intention within the contract, it would not frustrate the expectations of the parties to the contract.
On the facts, Iacobucci found the policy was clearly intending to extend a benefit to Can-Dive satisfying the first stage. It was noted that parties to a contract cannot unilaterally revoke the rights of a third party once they have received an actual benefit. On the second stage, the requirements were easily satisfied since Can-Dive was acting in accordance with the charter agreement.
The doctrine of privity of contract is a common law principle which provides that a contract cannot confer rights or impose obligations upon any person who is not a party to the contract.
In insurance, the insurance policy is a contract between the insurer and the insured, known as the policyholder, which determines the claims which the insurer is legally required to pay. In exchange for an initial payment, known as the premium, the insurer promises to pay for loss caused by perils covered under the policy language.
Contra proferentem, also known as "interpretation against the draftsman", is a doctrine of contractual interpretation providing that, where a promise, agreement or term is ambiguous, the preferred meaning should be the one that works against the interests of the party who provided the wording. The doctrine is often applied to situations involving standardized contracts or where the parties are of unequal bargaining power, but is applicable to other cases. The doctrine is not, however, directly applicable to situations where the language at issue is mandated by law, as is often the case with insurance contracts and bills of lading.
Liability insurance is a part of the general insurance system of risk financing to protect the purchaser from the risks of liabilities imposed by lawsuits and similar claims. It protects the insured in the event he or she is sued for claims that come within the coverage of the insurance policy. Originally, individual companies that faced a common peril formed a group and created a self-help fund out of which to pay compensation should any member incur loss. The modern system relies on dedicated carriers, usually for-profit, to offer protection against specified perils in consideration of a premium.
A third-party beneficiary, in the law of contracts, is a person who may have the right to sue on a contract, despite not having originally been an active party to the contract. This right, known as a ius quaesitum tertio, arises when the third party is the intended beneficiary of the contract, as opposed to a mere incidental beneficiary. It vests when the third party relies on or assents to the relationship, and gives the third party the right to sue either the promisor or the promisee of the contract, depending on the circumstances under which the relationship was created.
Marine insurance covers the loss or damage of ships, cargo, terminals, and any transport by which the property is transferred, acquired, or held between the points of origin and the final destination. Cargo insurance is the sub-branch of marine insurance, though Marine insurance also includes Onshore and Offshore exposed property,, Hull, Marine Casualty, and Marine Liability. When goods are transported by mail or courier, shipping insurance is used instead.
Uberrima fides is a Latin phrase meaning "utmost good faith". It is the name of a legal doctrine which governs insurance contracts. This means that all parties to an insurance contract must deal in good faith, making a full declaration of all material facts in the insurance proposal. This contrasts with the legal doctrine caveat emptor.
A Himalaya clause is a contractual provision expressed to be for the benefit of a third party who is not a party to the contract. Although theoretically applicable to any form of contract, most of the jurisprudence relating to Himalaya clauses relate to maritime matters, and exclusion clauses in bills of lading for the benefit of employees, crew, and agents, stevedores in particular.
Insurance bad faith is a legal term of art unique to the law of the United States that describes a tort claim that an insured person may have against an insurance company for its bad acts. Under United States law, insurance companies owe a duty of good faith and fair dealing to the persons they insure. This duty is often referred to as the "implied covenant of good faith and fair dealing" which automatically exists by operation of law in every insurance contract.
Finite risk insurance is the term applied within the insurance industry to describe an alternative risk transfer product that is typically a multi-year insurance contract where the insurer bears limited underwriting, credit, investment and timing risk. The assessment of risk is often conservative. The insurer and the insured share in the net profit of the transaction, including loss experience and investment income. The premium is generally well in excess of the present value of a conservative estimate of loss experience. The policy generally contains retrospective rating provisions such as
Insurance law is the practice of law surrounding insurance, including insurance policies and claims. It can be broadly broken into three categories - regulation of the business of insurance; regulation of the content of insurance policies, especially with regard to consumer policies; and regulation of claim
handling.
The Marine Insurance Act 1906 is a UK Act of Parliament regulating marine insurance. The Act applies both to "ship & cargo" marine insurance, and to P&I cover.
Privity is a doctrine in English contract law that covers the relationship between parties to a contract and other parties or agents. At its most basic level, the rule is that a contract can neither give rights to, nor impose obligations on, anyone who is not a party to the original agreement, i.e. a "third party". Historically, third parties could enforce the terms of a contract, as evidenced in Provender v Wood, but the law changed in a series of cases in the 19th and early 20th centuries, the most well known of which are Tweddle v Atkinson in 1861 and Dunlop Pneumatic Tyre v Selfridge and Co Ltd in 1915.
The Contracts Act 1999 is an Act of the Parliament of the United Kingdom that significantly reformed the common law doctrine of privity and "thereby [removed] one of the most universally disliked and criticised blots on the legal landscape". The second rule of the Doctrine of Privity, that a third party could not enforce a contract for which he had not provided consideration, had been widely criticised by lawyers, academics and members of the judiciary. Proposals for reform via an act of Parliament were first made in 1937 by the Law Revision Committee in their Sixth Interim Report. No further action was taken by the government until the 1990s, when the Law Commission proposed a new draft bill in 1991, and presented their final report in 1996. The bill was introduced to the House of Lords in December 1998, and moved to the House of Commons on 14 June 1999. It received the Royal Assent on 11 November 1999, coming into force immediately as the Contracts Act 1999.
Lister v Romford Ice and Cold Storage Co Ltd [1956] UKHL 6 is an important English tort law, contract law and labour law, which concerns vicarious liability and an ostensible duty of an employee to compensate the employer for torts he commits in the course of employment.
A reservation of rights, in American legal practice, is a statement that one is intentionally retaining his full legal rights to warn others of those rights. The notice avoids later claims that one waived legal rights that were held under a contract, copyright law, or any other applicable law.
ERISA Reimbursement is the terminology utilized to describe an ERISA Plan's effort to require that it be paid back for medical bills expended on behalf of a Participant or Beneficiary of the ERISA Plan. The concept of “reimbursement” can be traced to the traditional doctrine of “Subrogation,” but it exists today without the traditional safeguards established in the development of the law concerning subrogation. When an insurer pays a claim to an insured, the insurer generally has the right to “step in the shoes” of the insured for the purpose of recapturing that money by pursuing a claim against the tortfeasor who may be liable for the loss. An ERISA plan's “right of reimbursement” is essentially a subrogation claim. Although there are subtle legal distinctions between “subrogation” and “reimbursement,” these devices are essentially the same.
Insurance in South Africa describes a mechanism in that country for the reduction or minimisation of loss, owing to the constant exposure of people and assets to risks. The kinds of loss which arise if such risks eventuate may be either patrimonial or non-patrimonial.
