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Compulsory Insurance for Vessels carrying Passengers

The Government of Canada has published amendments to the Marine Liability Act  which will bring into force a system of compulsory insurance for all vessels in Canada that carry passengers.

The MLA contains a comprehensive liability regime for losses arising from the carriage of passengers: Part IV of the Act incorporates into Canadian law the provisions of the Athens Convention,[N1] which limits recovery for injury or death to 175,000 SDRs per passenger. There was no obligation on vessel owners or operators to maintain liability insurance sufficient to cover this exposure, however.

The proposed regulations would require commercial and public purpose ships engaged in the domestic carriage of passengers to maintain liability insurance in an amount of $250,000 multiplied by the passenger capacity of the ship. They would require that a Certificate of Insurance be kept on board the vessel where feasible or be produced within 24 hours after a designated officer boards the ship.

The proposed regulations will impact most notable on small business operators, who may be required to obtain substantial additional coverage for their operations. However, it should be noted that the new limit of $250,000 is not even enough to cover Athens Convention limited liability at current exchange rates, much less the actual potential exposure for personal injury or death if these were unlimited by Convention.

Accordingly, if small operators are under-insured for the convention limits, they were drastically underinsured relative to their potential exposure. The correction, though perhaps painful for these operators, is therefore clearly justified from a public policy perspective.

[N1] Athens Convention relating to the Carriage of Passengers and their Luggage by Sea, 1974, concluded at London on March 29, 1990

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