The company running the Sea to Sky Gondola in Squamish, B.C., has filed a lawsuit against its former insurance broker claiming agents’ negligence meant the business wasn’t as covered as it should have been for the income lost during a six-month shutdown after a vandal — or vandals — cut the steel gondola cable in 2019.
The gondola company claimed Marsh and McLennan Holdings failed to draft an insurance policy with fulsome business interruption coverage that year.
The alleged negligence meant the business was only covered for 70 per cent of its losses from the closure, with the remaining cost left to be covered out of pocket.
“[The company] has been, and only will be, partially indemnified,” read the lawsuit filed in B.C. Supreme Court on Dec. 7, 2020.
The 39-car gondola takes passengers up from its base near the Sea to Sky Highway to a viewpoint on a towering cliff nearly a kilometre above Howe Sound. The thick steel cable was severed in the middle of the night on Aug. 10, 2019, sending the cars crashing onto the mountainside.
Owners said at the time that the vandalism would cost the gondola company between $5 million and $10 million, including replacement cabins, a new cable and lost business.
In September 2020, the attraction closed again after someone cut the cable for a second time. RCMP said no one has been charged in connection with either incident.
Company wanted to be over-insured, lawsuit claims
In its lawsuit, Sea to Sky Gondola said it had a “low tolerance for risk” and, if anything, wanted the business to be over-insured.
Instead, it claims the Marsh and McLellan brokers drafted business interruption coverage in 2019 based on years-old financial information that didn’t reflect how profitable the business had become.
Business interruption insurance is meant to cover loss of income a business suffers after physical loss, fire or natural disaster, for example, covering profits that would have been earned based on previous financial information.
Neither the brokerage nor agents named in the lawsuit have filed responses to the notice of claim.
The lawsuit also accuses the same brokers of negligence when it came time to renew the insurance in January 2020, as the gondola prepared to reopen.
The claim said the brokers allegedly told the business they weren’t going to renew the coverage before it expired that month, allegedly forcing the gondola to get two-short term insurance extensions for a few days at a time until they found a solution.
“The second policy extension expired without the policy being further renewed or extended,” the gondola’s claim read. “As a result, [Sea to Sky Gondola] was required to extend the policy on unfavourable terms while it procured a new property insurance policy for the Sea to Sky Gondola for the balance of the 2020 year.”
The company ultimately found a new insurance provider. It was insured when the cable was cut the second time last fall.
The lawsuit said insurance brokers should have known the 2019 coverage was put together with “outdated financial information and outdated estimates and projections,” and that the brokers had a duty to make sure the insurance was adequately renewed for 2020.
The business is claiming unspecified damages for alleged negligence, breach of contract, breach of fiduciary duty and negligent misrepresentation.