Damage to a car resulting from negligent repair may not be covered under an automobile policy

In determining whether a loss is caused by mechanical fracture, failure or break down of any part of a motor vehicle pursuant to s. 132(1) of the regulations under Insurance (Motor Vehicle) Act, R.S.B.C. 1996, c. 231, only the nature of the damage is relevant to the inquiry.  The cause of the damage is relevant in determining whether the damage caused by mechanical fracture, failure or break down of a part is coincidental with other loss or damage for which indemnity is provided.  Here is a link to a discussion on the significance between the cause of a loss and the nature of loss.  This case was also discussed by the Canadian Underwriters in the Canada's Insurance and Risk Magazine.

Dawson Truck Repairs Ltd. v. Insurance Corp. of British Columbia [2008] B.C.J. No. 884 British Columbia Court of Appeal P.D. Lowry, E.C. Chiasson and D.F. Tysoe, JJ.A. May 15, 2008

The appellant, ICBC, insured the respondent under a "Garage all-risk policy".  It included coverage for loss and damage to customers' vehicles.  The engine of a truck which the insured had repaired  exploded and caused extensive damage to the truck.  The insured rebuilt the engine for the owner and claimed indemnity from ICBC.  The insurer paid only a portion of the claim because it contended that the remainder of the damage consisted of or was caused by "mechanical fracture, failure or breakdown of [a] part" of the truck and was excluded by s. 132 of the then applicable regulations under the Insurance (Motor Vehicle) Act, R.S.B.C. 1996, c. 231.  The regulation at issue read:

"The Corporation is not liable to indemnify any person under comprehensive or collision coverage for loss or damage . . . consisting of or caused by, mechanical fracture, failure or break down of any part of a motor vehicle . . . unless the loss or damage is coincidental with other loss or damage for which indemnity is provided . . . "

The trial judge held that the exclusion in s. 132(1) did not apply.  He concluded that the engine had oversped because oil had contaminated the air system of the truck's turbo charger, which occurred because an employee of the insured failed to properly inspect and clean the air system.  The judge held that the  damage to the truck was caused by the employee's negligence and not as a result of mechanical fracture, failure, or breakdown of any part of a motor vehicle. 

The Court of Appeal held that insofar as determining whether the loss or damage consists of mechanical fracture, failure or breakdown, causation is not relevant.  The focus is on the nature of the damage.  It is in determining whether the exception under s. 132(1) applies that causation is relevant. 

The Court of Appeal asked itself whether the negligence of the employee or the flying parts of the engine were the legal cause of the damage in the context of the exception in s. 132(1).  The Court of Appeal held that the truck damage was legally caused by the engine damage and therefore the exception does not apply.  The Court held that the engine damage was not "coincidental with other loss or damage for which indemnity is provided".  In the context of this case the exception to the exclusion under s. 132(1) would have been engaged only if the truck damage neither consisted of nor was caused by mechanical fracture, failure or breakdown of any part of the truck.

This case was originally summarized by celder@harpergrey.com and originally edited by dpilley@harpergrey.com

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