IN THE PROVINCIAL COURT OF BRITISH COLUMBIA

[1]           The complainant operates a garage in which he conducts, among other things, automotive repairs.  During the course of repairs to two vehicles extensive damage was done to electronic components within the vehicles.  The question in this case is whether that damage is covered under a policy of insurance between the claimant and the defendant.  For the reasons that follow, it is my view that the loss is excluded from coverage by the policy of insurance and the claim must be dismissed.

[2]           Kal Tire Ltd. hereinafter “Kal Tire”, operates a series of automotive service centers in British Columbia that conduct repairs and maintenance on customer’s automobiles.  In order to conduct this business Kal Tire is required to hold a policy of insurance called a Garage Policy issued by the defendant Insurance Corporation of British Columbia, hereafter “ICBC”. ICBC, sold Kal Tire that insurance policy for which Kal Tire paid a premium of $510,769.00.  The policy provides that ICBC shall indemnify Kal Tire, "for liability for direct loss or damage other than loss or damage to which collision coverage applies to a customer's vehicle while in the care, custody or control of the insured.”  It is agreed between the parties that the damage in question is clearly covered under the policy of insurance, unless it is specifically excluded by another term policy.

[3]           The restriction on liability on which the defendant relies is found in section 5.9 of the garage policy which provides:

[4]           At its simplest, it is the position of ICBC that the damage in question is excluded by the language of section 5.9 (a)(ii) because it consists of mechanical failure or breakdown.  On the other hand, the claimant says the damage in question is not a mechanical fracture, failure or breakdown and therefore is not captured by the exclusion.

[5]           On January 3, 2014, a mechanic employed by Kal Tire incorrectly installed a battery to a Mercedes-Benz automobile.  The effect of that incorrect installation was that the Mercedes’ expensive electronic control unit and other electronic parts were destroyed.  None of the electronic components destroyed as a result of the negligence of the Kal Tire employee have any moving parts.  They are essentially computers of various sizes that are specifically designed to carry out certain functions within the automobile, functions that were formerly carried out by different mechanical apparatuses.  The evidence establishes that without these computer parts the automobile is completely inoperable.  It cannot be started, driven, or operated in any material way.

[6]           The total cost of repairs to the Mercedes was $3,618.11. 

[7]           On November 12, 2013 a customer of Kal Tire brought his Volkswagen Jetta in for repair, complaining that it would not hold a charge and was losing power.  An employee of Kal Tire attempted to jumpstart the Jetta, but reversed the polarity on the jumper cables attaching the live positive jumper cable to the negative battery terminal and connecting the live negative jumper cable to the positive battery terminal.  As a result of this negligence on the part of the employee of Kal Tire many of the electronic components within the Jetta were destroyed.  None of the electronic components that were destroyed by the actions of the employee had any moving parts and again were essentially computers specifically designed to operate the motor vehicle.  Without those electronic components the motor vehicle was inoperable, it could not be started, nor driven.

[8]           The cost to repair the electronics in question exceeded the actual value of the motor vehicle and Kal Tire claims damages for the value of the Jetta in the amount of $5200.00 less the cost of salvage of $150.00 for a total claim of $5050.00.

[9]           The claimant says that the exclusion must be read narrowly and that all of the electronic components destroyed as a result of the negligent repairs conducted by the employees of Kal Tire were caused to parts of the vehicle that were essentially computers and therefore did not constitute a mechanical fracture or failure.  Given that the damages were not mechanical fracture or failure, they would not fall within the exclusion found in paragraph 5.9 of the garage policy.

[10]        The defendant says that the policy of insurance in question was never intended to constitute an insurance policy which represented a warrantee for the repair work conducted by the policyholder.  It further says that the only meaningful interpretation of the policy is that the computer is an essential part of the mechanical functioning of the motor vehicle, that damage to the computer is damage that is a mechanical failure and therefore falls within the exclusionary definition of machinery.

[11]        It is common ground that the nature of the damage sustained by the claimant in both losses is the type of damage that is covered under the insurance policy unless that damage is specifically excluded by the terms of the policy.  This blanket garage policy covers all damages that might be sustained to a customer's car while in the care control of the operator of that garage.  It is clear as well, however, that the policy excludes certain types of damage which exclusions are found in paragraph 5.9 of the policy.

[12]        There is no question that ICBC has the burden of establishing whether or not this damage falls within the exclusionary language of the policy.  ”The onus of proving the loss was not covered because of the exclusion rested with the Insurer”. Swailes vs. Insurance Corporation of British Columbia 2011 BCCA 95 @ para. 12, the Court must now decide whether or not the damages alleged by the claimant fall within the exclusionary language of the policy of insurance.

[13]        In determining whether or not the exclusionary language in question covers the damages at issue requires the Court to consider the exclusionary cause in the context of the insurance policy as a whole.  The Supreme Court of Canada has provided guidance on how contracts of insurance are to be interpreted generally.  In the Progressive Homes Ltd. vs. Lombard General Insurance Company of Canada  Mr. Justice Rothstein for the court writes:

[14]        ICBC argues that the damages are excluded because the policy was never intended to be a warranty policy for the insured’s repair work.  While that position is accurate, it is not helpful because the policy of insurance is clearly intended to cover all damage which occurs while the vehicle is in the care and control of the insured. The policy booklet is incorporated into the policy by reference to Rider APV4F which provides that the insurer shall be responsible for liability for “direct loss or damage …to a customer’s vehicle while in the care custody or control of the insured…”  In this case the damage arose as a result of the negligence of the Claimant and while the vehicle was still in the care or control of the insured.  As such, the damage in question is covered by the policy both because it is not specifically excluded and such an interpretation is consistent with the reasonable expectations of the parties.

[15]        Is apparent in the Dawson Truck Repairs Ltd. decision that ICBC took the position that damage caused by the negligent repairs of the garage keeper were covered certainly for so long as the customer’s vehicle continued to be in the care or control of the insured.  Such an interpretation is entirely consistent with the language of the policy and, given that the insured has taken the position in the past accepting that such liability is covered by the policy, it can fairly be said that the interpretation which includes liability for this damage is one that is consistent with’ reasonable expectations of the parties’. See: Progressive Homes at paragraph 13 above.

[16]        The next question to be resolved is whether or not the damage in question is damage that is excluded by the exclusionary language of the policy.  Following the principles articulated in Progressive Homes Ltd. in my view the damage in question fall squarely within the exclusionary language of the policy. 

[17]        The term “mechanical” has been judicially considered in Insurance Corporation of British Columbia v. Pfleger [2006] B.C.J. No. 2027.  In that decision Mr. Justice Halfyard accepted the dictionary definition of mechanical as, ʺ ‘having to do with machinery or tools’ and ‘produced or operated by machinery or a mechanism’”.  Phleger @ para 15 I accept the evidence that the computer or electronic components in question have no moving parts.  I leave for another day the existential question of whether these parts standing alone would constitute machines, however in this case there is no question that the damaged  parts, since they were actually installed in the operating machine, form part of the machine because they are essential to its core functioning in operation.  As such they both "have to do with machinery" and are "operated by machinery or a mechanism".  As such their failure is a mechanical failure as described by the paragraph 5.9 (a) (ii) of the policy.  This is a reasonable interpretation of the contract and consistent with the reasonable expectations of the parties.

[18]        By analogy, a piston rod which connects the piston to the crankshaft in some kinds or automobile engines, standing alone would not be considered a machine.  That same piston rod, however, is essential to the functioning of the engine and, as such, once it has been incorporated into the engine becomes part of the machine.  Any other conclusion leads to the absurd result that if any part of the machine cannot function on its own as a separate machine, that it would not be captured by the exclusionary language.  Such an interpretation would render the exclusionary clause completely meaningless.

[19]        The electronic parts in question are clearly part of the machine.  As such their failure constitutes a, "mechanical fracture, failure or breakdown".  The exclusionary language of the policy squarely applies.