This case concerned coverage under a motor vehicle policy for damage to a car caused by a fire. The fire started as a result of the driver spinning the rear tires recklessly, which led to the rear axle of the car breaking. Heat then built up in the tire wells, starting a fire. The Insurance Corporation of British Columbia ("ICBC") denied coverage as the insurance policy did not cover mechanical "loss or damage" such as the breaking of an axle.
The Court of Appeal allowed the appeal on the basis that the term "loss or damage" in an exception to an exclusion had a narrower meaning than the same term in the exclusion itself. Although there was an exclusion for mechanical damage, there was an exception if the loss or damage claimed for was caused by "fire". As the insured was not claiming for the breaking of the axle (the "mechanical damage"), but rather the damage caused by the fire, there was an exception to the exclusion clause.
Swailes v. Insurance Corp. of British Columbia  B.C.J. No. 319, March 2, 2011, British Columbia Court of Appeal, L.S.G. Finch C.J.B.C., M.E. Saunders and K.E. Neilson JJ.A.