C. Hook purchased a six-metre houseboat. He insured the boat against all risks in the amount of $50,000 under his home ownership policy. A special condition was attached to the policy respecting the boat:
SPECIAL CONDITION: Navigation limits: warranted that the named houseboat will be used only in the navigable waters of the provinces of Ontario and Quebec including the Great Lakes.
During summer holidays, Hook takes his family on a boat excursion through the river and lock system to the St. Lawrence River and the Thousand Islands. Their trip took them to a few ports of call in upstate New York. When the summer is over Hook prepares the boat for winter storage. In the process of removing the boat from the water a cable breaks and the boat is dropped six metres to the ground. The boat is severely damaged. The adjuster's report notes the earlier summer excursion into U.S. waters.
a. What arguments would be made by the insurance company regarding this claim and how may they be substantiated?
b. The insurance company derives liability on the policy citing the above condition. You are retained by Mr. Hook to outline his arguments to the court.
c. What right(s) does the insurance company have should it pay the claim?
a. The insurance company's arguments will be based on the special condition and on breach of contract.
- the condition was an explicit term of the contract and was brought to Hook's attention
- the condition must be upheld in order to obtain indemnification from (or performance by) the insurer as it is material to the risk
- if the condition is breached the insurer may deny liability
b. Hook's arguments will be based on the relevance of the condition to the loss
- although the condition was breached the breach resulted in no loss
- the loss which eventually occurred was independent of the condition and would have occurred whether the condition were breached or not
- thus, the condition is immaterial to the loss and similarly a breach of the condition is immaterial to the loss in this instance and should not defeat the insurer's liability
c. The insurance company may rely on its rights of salvage and subrogation if it pays the claim.
- it may sell the damaged boat to reduce the loss it suffered by paying Hook's claim
- the insurer would be entitled under the doctrine of subrogation to bring legal action against any party who would be liable to Hook for the damage i.e. the cable manufacturer or the marina and its employees if they were assisting at the time

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The Answer of C. Hook purchased a six-metre houseboat. He insured the boat against all risks in the amount of $50,000 under his home ownership policy. A special condition was attached to the policy respecting the boat:
SPECIAL CONDITION: Navigation limits: warranted that the named houseboat will be used only in the navigable waters of the provinces of Ontario and Quebec including the Great Lakes.
During summer holidays, Hook takes his family on a boat excursion through the river and lock system to the St. Lawrence River and the Thousand Islands. Their trip took them to a few ports of call in upstate New York. When the summer is over Hook prepares the boat for winter storage. In the process of removing the boat from the water a cable breaks and the boat is dropped six metres to the ground. The boat is severely damaged. The adjuster's report notes the earlier summer excursion into U.S. waters.
a. What arguments would be made by the insurance company regarding this claim and how may they be substantiated?
b. The insurance company derives liability on the policy citing the above condition. You are retained by Mr. Hook to outline his arguments to the court.
c. What right(s) does the insurance company have should it pay the claim?
a. The insurance company's arguments will be based on the special condition and on breach of contract.
- the condition was an explicit term of the contract and was brought to Hook's attention
- the condition must be upheld in order to obtain indemnification from (or performance by) the insurer as it is material to the risk
- if the condition is breached the insurer may deny liability
b. Hook's arguments will be based on the relevance of the condition to the loss
- although the condition was breached the breach resulted in no loss
- the loss which eventually occurred was independent of the condition and would have occurred whether the condition were breached or not
- thus, the condition is immaterial to the loss and similarly a breach of the condition is immaterial to the loss in this instance and should not defeat the insurer's liability
c. The insurance company may rely on its rights of salvage and subrogation if it pays the claim.
- it may sell the damaged boat to reduce the loss it suffered by paying Hook's claim
- the insurer would be entitled under the doctrine of subrogation to bring legal action against any party who would be liable to Hook for the damage i.e. the cable manufacturer or the marina and its employees if they were assisting at the time

C Hook Purchased a Six-Metre Houseboat