--From:        Robert B. Kennedy

               Vancouver, British Columbia

 

Re:      Marine Liability Act,  S.C. 2001, c.6

This memorandum will summarize developments to this date regarding the Marine Liability Act and its effect on water-based adventure tourism activities in Canada.

The Marine Liability Act (“MLA”) is federal legislation.  It received Royal Assent in May 2001, and came into force on August 10, 2001.  The intent of the MLA is to consolidate existing marine liability regimes dealing with carriage of goods, carriage of passengers, limitation of liability, pollution claims, etc., into one law.  The federal government’s authority to enact legislation in this field derives from its jurisdiction over navigation and shipping under the Canadian constitution.  Although the principal aim of the legislation is to regulate shipping, the broad scope of the legislation incidentally encompasses activities not normally associated with shipping and navigation, such as white water river rafting, guided sport fishing from boats, and other activities where passengers are transported over water in a vessel for commercial purposes.

A copy of the MLA and related conventions may be found on the Government of Canada website: http://laws.justice.gc.ca/en/M-0.7/text.html.

Although this legislation has been in effect since last summer, it has only very recently come to the attention of the adventure tourism sector.  Unfortunately, there has been considerable misunderstanding as to the effect of this legislation on water-based adventure tourism activities, and in particular, insurance requirements that may be established under the legislation.

The implementation and administration of the MLA is the responsibility of Transport Canada, and this ministry has retained a consultant, The Mariport Group Ltd., to present recommendations for the implementation of a compulsory liability scheme under the legislation. Significant progress in clarifying the impact of the legislation was made at a recent meeting in Ottawa attended by representatives of Transport Canada, the Mariport Group Ltd., the Canadian Tourism Commission, and counsel retained by the Canadian Tourism Commission (“CTC”). As this legislation is new and as of yet untested in the courts, there are areas of uncertainty and ambiguity in terms of the impact of the legislation.  The application of the legislation in a number of areas however, appears reasonably clear. 

Please note: The information contained in this memorandum should not be construed as legal advice and operators should not make decisions based on this information without consulting their legal counsel or professional insurance advisor.

The MLA is divided into eight parts and incorporates by reference international conventions and protocols, including the Athens Convention which relates to the carriage of passengers by sea.  The legislation needs to be read in conjunction with the related conventions.  The Athens Convention is appended as Schedule 2 to the legislation and is found in the Government of Canada website.  Parts 1 to 4 of the MLA have direct relevance to adventure tourism activities and should be studied carefully.

 

 

1.         What activities are affected by the MLA?

The MLA is a comprehensive code of maritime liability law and will impact the determination of liability claims arising in a marine context.  This includes the transport of passengers in a vessel over navigable water.  Navigable water is interpreted very broadly in the law and will include oceans, rivers, lakes, and possibly even creeks and streams.  Certain provisions of the legislation relate only to “passengers” carried pursuant to a contract of carriage and not to persons on board a vessel for other than a “commercial or public purpose.”  Maritime activities such as commercial white water river rafting or commercial sports fishing from a boat, where the passengers are under the supervision of an on-board guide, will most likely be encompassed by this legislation.  The impact of the legislation on other activities such as the rental of kayaks or canoes is less clear.

 

2.         Does the MLA impose minimum requirements for liability insurance?

Unfortunately, there has been considerable misunderstanding on many fronts in respect of this issue over the past few weeks.  Part 4 of the MLA, Liability For Carriage of Passengers By Water, includes under Section 39 the following provision:

s. 39    Regulations and Orders

The Governor in Council may make regulations requiring insurance or other financial security to be maintained to cover liability to passengers under this Part.

This provision was included in the legislation in response to public concern that the interests of passengers on vessels be addressed through requiring operators to demonstrate financial security or maintain certain levels of liability insurance.  As of this date, no such regulations have been passed, and there are currently no requirements under the MLA for operators to carry liability insurance in any amount.  Prudent business practice requires that any commercial enterprise protect itself and its employees from exposure to legal liability through liability insurance in an amount and under such terms as may be recommended by a competent and qualified insurance broker.  There are provisions in the MLA affecting Canadian maritime law which may alter the liability exposure of an operator.  The MLA however, does not at this time, mandate minimum levels of compulsory insurance. 

The Mariport Group has been retained to advise Transport Canada regarding the insurance regulatory regime contemplated by Section 39 of the MLA.  Mariport is currently receiving submissions from interested groups in respect of its recommendations to Transport Canada regarding Section 39 of the MLA.  Mariport may be contacted at 1-800-319-9997 or through its website: http://www.mariport.com. Mariport will be amending its website as of April 29, 2002 to include the following statement in respect of Section 39: 

Until such time as these regulations are in place, operators may carry any level of insurance that they believe meets their risk profile.  However, in the event of an incident, they may be liable up to the limits established in the MLA.

Although there are currently no regulations passed pursuant to the MLA requiring operators to maintain minimal levels of insurance, such regulations will likely be enacted by Transport Canada in the near future.  Representatives of the adventure tourism industry who wish to have input in this process should contact Mariport.

 

3.         Are releases of liability still effective under the MLA, and should adventure tourism operators continue to maintain a release of liability program?

Comprehensive releases of liability have been a fixture in adventure tourism operations in most provinces in Canada for many years.  The   exception is Quebec, where contractual exclusion of liability has traditionally not been accepted as a defence to personal injury and fatal injury claims.  In the past, many adventure tourism operators have been unable to obtain insurance without demonstrating a comprehensive release of liability program. Releases of liability have been upheld by courts in all common law provinces and have served as an effective risk management tool for many years.

Contractual exclusion of liability as a defence to personal and fatal injury claims has enjoyed less popularity on the international scene and in fact, is precluded by law in some European countries.  International shipping law has heavily influenced Canadian maritime law, now codified (or set out by statute) under the MLA.  Under the MLA, the Athens Convention relating to the carriage of passengers by sea has been adopted as the law of Canada.  Article 18 of the Athens Convention reads as follows:

Invalidity of contractual provisions

Any contractual provision concluded before the occurrence of the incident which has caused the death of or personal injury to a passenger or the loss of or damage to his luggage, purporting to relieve the carrier of his liability towards the passenger or to prescribe a lower limit of liability than that fixed in this Convention except as provided in paragraph 4 of Article 8, and any such provision purporting to shift the burden of proof which rests on the carrier, or having the effect of restricting the option specified in paragraph 1 of Article 17, shall be null and void, but the nullity of that provision shall not render void the contract of carriage which shall remain subject to the provisions of this Convention.

By virtue of Article 18 of the Athens Convention, it will no longer be possible under Canadian maritime law to rely upon contractual exclusion of liability as set forth in a release of liability or waiver as a defence to a personal injury or fatal injury claim advanced against an operator arising in a maritime context.  For example, consider a case of a passenger on a white water raft trip, who loses balance during the descent of a stretch of rapids, falls from the raft, becomes entrapped, and drowns.  Should a fatal injury claim be advanced by the next of kin of the deceased passenger, defence counsel appointed on behalf of the operator would traditionally defend on the basis that:

(a)               there is no negligence on the part of the operator; and

(b)               in any event, the claim is covered by the release of liability signed by the passenger and therefore, should be dismissed.

As a result of the adoption of the Athens Convention into Canadian domestic law, the release of liability defence is no longer available in respect of claims arising in a maritime context, such as in this example.

Not all claims arising out of water-based adventure tourism activity however, will occur in a “maritime context.”  Some activities such as swimming or hiking, although incidental to the main activity, may be construed as not being essentially “maritime” in context (as not involving the transport of passengers in a vessel over water), and thus may be subject to defences raised under a release of liability.  Accordingly, there may still be a role for contracting out of liability in an adventure tourism operator’s risk management program, despite the fact that the MLA precludes reliance on a release in respect of a true maritime incident.

Furthermore, regardless of Article 18 of the Athens Convention, it will still be an important element of each operator’s risk management program to advise prospective guests of the inherent risks which may be encountered in the activity.  This is best accomplished through a comprehensive assumption of risk statement which in most cases will incorporate release of liability language.

As a result of the impact of the MLA on exclusion of liability, some insurance brokers are undertaking revisions to release of liability and assumption of risk documentation for their clients.  It is recommended that operators consult with their legal counsel and insurance broker on this issue.

 

4.         Has the law relating to negligence or standard of care of an adventure tourism      operator been altered by the MLA?

The liability of an operator for injury or death to a passenger under Canadian maritime law as codified by the MLA remains a negligence or fault-based system.  In order to succeed against the operator, the Plaintiff, i.e. the injured passenger or next of kin in a fatal injury situation, must still prove fault or neglect on the part of the operator.  To this extent the law has not changed.  The operator is still permitted to defend the allegation of negligence on all grounds available to the operator prior to the introduction of the MLA.

 

Except for specific circumstances, the MLA follows the normal rule of law under which the burden of proving fault or neglect on the part of the operator lies with the claimant.  In specific enumerated circumstances, namely shipwreck, collision, stranding, explosion, fire, or defect in the vessel, Article 3, section 3 of the Athens Convention imposes a presumption of fault or negligence on the part of the operator, unless the contrary can be proven.  The enumerated categories clearly arise from a shipping context, and it is unknown at this time whether Canadian Courts will interpret the inherent risks of adventure tourism activities (capsizing of rafts, falling from boats, collision with logs, boulders, and other objects on a river, to refer to but a few examples) as falling within any of these enumerated categories.  This provision illustrates the difficulty of attempting to apply Canadian shipping law to largely unrelated matters, such as adventure sport activities.

 

5.         Does the MLA limit an operator’s liability to passengers?

Although the Athens Convention, which has been adopted as domestic law in Canada by the MLA, renders contractual exclusion of liability provisions with respect to marine claims null and void, the legislation does provide a significant benefit to operators by substantially limiting the operators exposure to liability arising out of fatal injury and personal injury claims advanced on behalf of passengers or their next of kin.  Under Article 7 of the Athens Convention, the liability of a carrier for the death of or personal injury to an individual passenger shall in no case exceed 175,000 “units of account” per trip.  The Convention equates a “unit of account” with a Special Drawing Right (“SDR”), as defined by the International Monetary Fund (“IMF”).  A SDR is an international reserve asset, a difficult concept which need not be understood in order to understand the limit of liability provisions to the MLA.  The IMF sets the conversion rate for SDRs.  Currently the SDR is valued at approximately CDN $2.00.  The per passenger, per incident limit of liability to an operator under Article 7 of the Convention is therefore approximately CDN $350,000.00.  The significance of this provision is to be measured against assessments of damages in catastrophic personal injury and fatal injury claims which can approach several million dollars.

Further, in the case of a multi-passenger incident giving rise to personal injury or fatal injury claims, the MLA also provides for an aggregate limit of liability or exposure cap of the greater of 2,000,000 units of account (approximately CDN $4,000,000.00) or 175,000 units of account  multiplied by the number of passengers on board the vessel.

Under Article 13 of the Convention, the per passenger limit and the aggregate limit may not apply if it can be proved that the accident giving rise to the claim resulted from:

                        “an act or omission of the carrier done with the intent to cause such                                      damage, or recklessly and with knowledge that such damage would                            probably result.”

This would be a difficult test for a claimant to meet in order to attack the limit of liability provisions to the MLA.

 

6.         Conclusion

The MLA is new legislation; familiarity with it will take considerable effort on the part of the adventure tourism industry and its liability insurers.  Although the loss of the release defence for maritime claims will be a source of concern for many, it must be remembered that even a well-written and well-administered release of liability could be attacked on various grounds.  The release defence is inapplicable to persons under the age of majority and would likely not be enforced by the Courts in the face of evidence similar to that referred to in Article 13, referenced above.  On balance, an adventure tourism operator’s liability position may be considerably enhanced through the introduction of the MLA; however, this is a matter for the individual consideration of each operator and the operator’s legal and insurance advisors. 

It is strongly recommended that the sector of the adventure tourism industry which is affected by the MLA give careful and immediate consideration to presenting submissions to The Mariport Group on the Section 39 regulatory insurance regime.  The Mariport Group anticipates providing Transport Canada with an interim report on this issue as early as June 2002.

It is also very important to bear in mind that the limit of liability provisions for passenger claims under the MLA are subject to revision and may be increased by Transport Canada.  A strong, national voice from the adventure tourism industry in respect of any such proposed changes is essential.

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I would like to thank Barry Oland, a senior member of the British Columbia marine bar, for reviewing these comments prior to submission to the CTC.