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Kruger Products Limited v. First Choice Logistics Inc. Page 24 I am satisfied that the landlord-tenant and construction project cases that have found a bar to subrogation can be distinguished from cases involving bailor and bailee. A warehouser does not have a generalized property interest in the goods which it stores. On the other hand, tenants have an insurable interest in the continuing existence and availability for use of demised premises. Similarly, the insurable interest of all trades and subtrades in a construction project is obvious and was recognized in Commonwealth Construction Co. v. Imperial Oil Ltd., [1976] 1 S.C.R. 317. [At para. 205; emphasis added.] [49] On a policy level, the trial judge was also of the view that barring the subrogated action would impair the duty of care owned by FCL to Scott, contrary to s. 2(4)(b) of the Warehouse Receipt Act. He noted that there were no Canadian cases on point, but that in two American decisions, Brown v. Sloan’s Moving & Storage Co., 296 SW2d 20 (S.C. Mo., 1956) and Kimberley-<strong>Clark</strong> Corporation v. Lake Erie Warehouse, Division of Lake Erie Rolling Mill Inc. 375 NYS2d 918, 49 A 2d 492 (S.C., App. Div.), the courts had declined to give effect to clauses requiring a bailor to obtain its own insurance, on the basis that the bailee should not be exempted from its contractual or statutory duties of care. As well, the trial judge said, disallowing the subrogated claim in this instance would “make meaningless” the indemnification provisions at para. 12 of the WMA, under which each of Scott and FCL had covenanted to hold the other harmless from all losses and claims arising, inter alia, from property damage ‘related to’ the negligence of the other. Given the policy implications of barring a party from enforcing its rights to indemnity, he suggested that very clear and specific language would be required for that purpose. 2013 BCCA 3 (CanLII) [50] In the result, he held that there was no bar to the subrogated claim against FCL. The claim was allowed as against both defendants, with damages to be assessed at a later date. On Appeal [51] In this court, the defendants submit that the trial judge erred in declining to apply the “covenant to insure” principle established by the trilogy and in particular, in distinguishing bailment situations from the landlord-tenant and complex construction
Kruger Products Limited v. First Choice Logistics Inc. Page 25 situations discussed in the authorities. In the defendants’ submission, the trial judge’s concern regarding the “impairment” of the warehouser’s standard of care is based on a misapprehension of both the immunity defence and the intent of the Warehouse Receipt Act. It is said that Scott’s covenant to insure and to name FCL as an insured in respect of the primary coverage for liability and property damage must be construed “in effect as an assumption by that party [here, Scott] of the risk of loss or damage caused by the peril to be insured against”. (Madison, at 85.) The defendants say that para. 17A of the WMA was, like the subject clause in Ross Southward, intended to benefit FCL, and that FCL did have an insurable interest in the contents of the warehouse, contrary to the trial judge’s holding. I will attempt to deal with each of these arguments below. 2013 BCCA 3 (CanLII) Does a Warehouser have an Insurable Interest in the Stored Goods? [52] It seems to me that this question was answered by the Supreme Court of Canada in Commonwealth. As seen above, de Grandpré J. for the Court observed that in the field of bailment “in the widest sense”, persons other than the owner have been held to have insurable interests in the subject property “because of their special relationship with the property entailing [the] possibility of liability.” (At 322- 23.) His Lordship cited various English and Canadian cases but found it necessary to refer only to Smith v. Stevenson [1942] 1 D.L.R. 681 (Ont. C.A.). I repeat here for convenience the observations of de Grandpré J.: ... Although these judgments were pronounced on policies issued to the bailee and not to the owner and all other interested parties, as in the case at bar, I do not see that circumstance making any difference when it comes to determining the existence or non-existence of an insurable interest in a person who is not the owner of a property. In all these cases, there existed an underlying contract whereby the owner of the goods had given possession thereof to the party claiming full insurable interest in them based on a special relationship therewith. ... By recognizing in all tradesmen an insurable interest based on that very real possibility [of damage by one tradesman to the property of another], which itself has its source in the contractual arrangements opening the doors of the job site to the tradesmen, the courts would apply to the construction field the principle expressed so long ago in the area of bailment. [At 323-24; emphasis added.]
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