IN THE SUPREME COURT OF BRITISH COLUMBIA

Date: 20140317

Docket: S144847

Registry:
New Westminster

Between:

Gurinder Singh
Dhadwal

Plaintiff

And

Insurance
Corporation of British Columbia

Defendant

Before:
The Honourable Madam Justice Warren

Reasons for Judgment

Introduction

[1]            
This case involves a dispute between Mr. Dhadwal and ICBC regarding
the coverage under Mr. Dhadwal’s automobile insurance policy for certain
damage to a high-end Mercedes sports utility vehicle leased by Mr. Dhadwal.

[2]            
Late in the evening of June 7, 2012, the Mercedes was involved in a
single-vehicle collision. It was driven into a ditch and hit a cement culvert.
No one was injured in the collision. However, the Mercedes suffered damage
consisting of some fairly minor scrapes, dents, and cracks to the exterior, as
well as damage to several interior mechanical parts. The Mercedes was driven to
Mr. Dhadwal’s home after the collision. The next day, while Mr. Dhadwal
was driving the Mercedes to a repair shop, the engine seized.

[3]            
ICBC paid approximately $18,500 to repair the damage that occurred to
the Mercedes immediately upon impact, but has refused to pay the losses
associated with the seized engine.

[4]            
The case turns on the construction and application of certain provisions
in the insurance policy, which is known as the “Optional Policy”. The Optional
Policy provides coverage for damage “caused by … collision … with another
object … including a … culvert”. However, s. 5.9(a) of the Optional Policy
excludes coverage for damage “consisting of … mechanical fracture, failure or
breakdown” unless that damage is “coincidental with other loss or damage for
which indemnity is provided”. Even if the exclusion in s. 5.9(a) does not
apply, ICBC is not liable under the Optional Policy for damage resulting from
the failure of an owner or operator, following a collision, to protect the
vehicle “as far as reasonably possible from further loss or damage”.

[5]            
In addition to the losses associated with the seized engine, Mr. Dhadwal
also seeks coverage for losses he claims are consequences of being unable to
use the Mercedes, including the purchase, insurance, and licensing of a
replacement Volkswagen car, and the financing and insurance of the Mercedes.

Facts

The Mercedes

[6]            
Mr. Dhadwal is a car salesman with an interest in high-performance
vehicles. He has owned several such vehicles in the past. At the time of the
trial, he owned the Mercedes and a Ferrari. He takes meticulous, even
obsessive, care of his vehicles.

[7]            
Mr. Dhadwal leased the Mercedes from Mercedes-Benz Canada in
February 2012. It was special-ordered to Mr. Dhadwal’s exacting
specifications and, when new, it was worth approximately $120,000.

The Accident

[8]            
On June 7, 2012, shortly before midnight, the Mercedes was involved in a
single vehicle accident in Langley on 59th Avenue, just west of 252nd Street.

[9]            
 At the time of the accident, Mr. Dhadwal was living with his
mother, his father (Avtar Singh Dhadwal), and his brother (Tajinder Dhadwal) on
16A Avenue in South Surrey. Mr. Dhadwal, his brother, and his father all
testified at the trial. Because these witnesses all have the same surname, I
will refer to Mr. Dhadwal’s brother and father by their first names.

[10]        
Mr. Dhadwal, Tajinder, and Avtar all testified that Avtar was
driving the Mercedes at the time of the accident. Their evidence was that Mr. Dhadwal
had been picked up by his friend, Daljit Sandhar, earlier in the evening. Mr. Dhadwal
testified he spent the evening drinking whisky at Mr. Sandhar’s home. This
was corroborated by Mr. Sandhar, who testified that Mr. Dhadwal was
with him at his home on the evening of June 7, 2012, when Mr. Dhadwal
received a phone call advising him that his Mercedes had been in an accident. Mr. Sandhar
testified that Mr. Dhadwal had several calls regarding the accident that
evening.

[11]        
Mr. Dhadwal and Avtar testified that Avtar had borrowed the
Mercedes on the evening in question and driven it to his brother’s home in
Abbotsford. Avtar testified that he drove to Abbotsford by travelling east on
16th Avenue to 200th Street, then north on 200th Street to Highway 1, and then
east on Highway 1 to Abbotsford. Avtar testified that when he was driving home
later in the evening, he took a wrong turn after exiting Highway 1 at 264th
Street, and ended up on 59th Avenue in Langley. He said the collision occurred
when he swerved to avoid a dog, lost control of the Mercedes, ran into a ditch,
and hit a culvert.

[12]        
Avtar testified that the impact with the culvert was not hard. He said
he got out of the vehicle and saw very little damage. He then tried to back up
out of the ditch but could not get the Mercedes to move. He phoned Tajinder and
asked him to come to his assistance.

[13]        
Tajinder was at home in South Surrey. He testified that his father
phoned him at about midnight and told him that he had been in a minor accident
in the Mercedes. Tajinder said he drove to the scene of the accident and called
Clover Towing in Langley from his car on the way. He said he then called Mr. Dhadwal
and told him about the accident and assured him he would look after it. He said
that Mr. Dhadwal was drunk.

[14]        
Tajinder and Avtar testified that when Tajinder arrived, they both
visually inspected the Mercedes and saw very little damage. Tajinder tried to
back the Mercedes out of the ditch but it would not move enough to get it out
on to the road. He said that no warning lights were illuminated on the
dashboard while he was in the Mercedes trying to back it out of the ditch.

[15]        
The tow truck driver, Ken Yochim, testified. He said he spoke to a man
at the scene who he could not identify by name. He said this man told him that
his father had been driving the Mercedes, fell asleep, and drove into the
ditch. I find that the person he spoke to was Tajinder.

[16]        
Mr. Yochim said when he arrived at the scene the Mercedes was in
the ditch about a foot away from the culvert. He saw pieces of broken plastic
on the ground but did not see much damage to the vehicle. He characterized the
damage as “very slight” from a “low impact hit”. Mr. Yochim pulled the
Mercedes out of the ditch using a winch on his truck. He said it was an easy
recovery.

[17]        
Mr. Yochim testified that when he arrived at the scene, he noticed
tire marks in the grass in the ditch for about 200 feet in front of the
culvert. Tajinder testified that he had ripped up the grass in the ditch when
he tried to get the Mercedes out; however, he said he moved the Mercedes only
between 1 and 3 feet when doing so. Avtar testified that he did not drive along
the ditch before hitting the culvert. He said that he crossed the road and
drove just a little way into the ditch and then right into the culvert.

[18]        
Tajinder testified that he spoke to Mr. Yochim about engine fluids.
He said that he and Mr. Yochim discussed the possibility of a warning
light being illuminated and that they checked the dashboard to ensure none were
illuminated. He said Mr. Yochim used his flashlight and together they
checked the grass in the ditch but saw no signs of any engine fluids. He said Mr. Yochim
then got under the Mercedes and checked for signs of leaking fluids but
reported seeing nothing. This evidence was largely corroborated by Mr. Yochim.
Mr. Yochim said that Tajinder “mentioned something about some kind of
coolant light going off on the dash”. He was not asked in either direct or
cross-examination if he examined the dashboard to determine whether any warning
lights were in fact illuminated. However, Mr. Yochim said he used his
flashlight to check underneath the Mercedes for signs of fluids, both before
pulling the Mercedes out of the ditch and after, and saw no indication of
leaking fluids.

[19]        
Tajinder testified that he was talking to Mr. Dhadwal on the phone
as Mr. Yochim was pulling the Mercedes out of the ditch. Mr. Dhadwal
told him to have the Mercedes towed to a repair shop called Carstar or to the
Mercedes dealership. Tajinder testified that he asked Mr. Yochim to tow
the Mercedes to either Carstar or the Mercedes dealership, but Mr. Yochim
pointed out that neither business would be open and the Mercedes would be
sitting out on the street all night. Tajinder testified that Mr. Yochim
told him that the damage was minimal and it would be fine to drive the Mercedes
home, but that he could tow it to their home if they preferred. This was
corroborated by Mr. Yochim, who said he saw nothing to indicate that the
Mercedes should not be driven. He confirmed that he told Tajinder the damage
was minimal and that he could tow the Mercedes to their home or they could
drive it – it was their choice.

[20]        
Mr. Dhadwal testified that he told Tajinder to have the Mercedes
towed. He said that he knew the Mercedes had entered the ditch and that there
were sensitive components underneath the vehicle that could have been damaged.

[21]        
Tajinder acknowledged that Mr. Dhadwal instructed him to have the
Mercedes towed. He testified that he told Mr. Dhadwal that the towing
company was too busy to tow the Mercedes. He admitted at trial that Mr. Yochim
did not say he was too busy. To the contrary, Tajinder acknowledged that Mr. Yochim
gave him the option of towing the Mercedes. He explained that he told Mr. Dhadwal
the tow company was too busy in order to get Mr. Dhadwal “off [his] case”
about towing it.

[22]        
Tajinder testified that notwithstanding Mr. Dhadwal’s insistence
that the Mercedes be towed, Tajinder decided that Avtar would drive it home.
Tajinder explained that he thought he was in a better position than Mr. Dhadwal
to make the decision because he had personally assessed the damage as minimal
and that assessment had been confirmed by Mr. Yochim, whereas Mr. Dhadwal
had not seen the damage, was drunk, and is “annoying” and “obsessive” about his
cars.

Post-Accident Observations and Driving

[23]        
Avtar drove the Mercedes home, a distance of more than 30 km. He said no
warning lights were illuminated on the dashboard during the drive home.

[24]        
The next morning, Avtar and Mr. Dhadwal spent approximately 15 to
20 minutes inspecting the Mercedes. Mr. Dhadwal saw some areas of missing
paint on the driver’s side above the bumper and some damage on the bumper and
trim. He also saw that the emblem was broken, the grill was broken, and one of
the zip ties holding the license plate was broken. He opened the hood to check
for signs of leaking fluids but saw none. He did not actually check the fluid
levels using the dipstick. He backed the Mercedes up to see if there were any
fluids on the ground and saw none there either. He estimated the damage at
approximately $2,500.

[25]        
Mr. Dhadwal testified that he did not originally intend to report
the accident to ICBC because the damage appeared minimal and his father offered
to pay for the repairs. Mr. Dhadwal phoned Carstar, a repair shop he had
dealt with before, and arranged to take the Mercedes there on his way to work.
The person he spoke to at Carstar suggested that he report the accident to ICBC
in case the repairs turned out to be more expensive than Mr. Dhadwal
thought they would be. Mr. Dhadwal phoned in a claim to ICBC out of an
abundance of caution.

[26]        
Mr. Dhadwal then proceeded to drive the Mercedes to Carstar. He
testified that when he set out for Carstar, there were no warning lights
illuminated on the dashboard, but soon after leaving his home a warning light
came on indicating an inoperative running light. Mr. Dhadwal stopped, got
out of the Mercedes, and confirmed that a running light was out. He then
proceeded on his way. He had driven approximately 10 km when he accelerated to
pass some dump trucks. As he did so, he heard a warning chime and saw a light
illuminate indicating “something to do with low oil pressure”. This was
immediately followed by a warning light indicating the vehicle was shutting
off. The Mercedes did shut off and Mr. Dhadwal coasted to a parking lot.
He did not restart the engine. He phoned Carstar and arranged to have them tow
the Mercedes to their shop.

Damage to the Mercedes

[27]        
Steve Cochrane is the body shop collision manager at Carstar. He
received the Mercedes when it was towed to Carstar.

[28]        
Mr. Cochrane testified that once the Mercedes was released from the
tow truck, he tried to drive it into the shop. He said the battery was fully
charged but the Mercedes would not start. When he turned the key, there was a
warning displayed on the dash that indicated the vehicle would not start due to
low fluid levels.

[29]        
 Mr. Cochrane said that there appeared to be very
little damage when he initially looked at the Mercedes. This observation is
borne out by the photographs that were taken at Carstar before the Mercedes was
disassembled. Mr. Cochrane confirmed that the hood was fully latched and
appeared to be normally closed, although it was pushed up, creating a slight
gap between the bumper and the hood. He described the visible damage as
including cracks to the grill and the front bumper cover, scrapes on the front
bumper, a pushed-in park-assist sensor, and slight misalignment of the right
bumper to the fender.

[30]        
Mr. Cochrane testified that when he began to disassemble the
Mercedes, it became apparent that there was much more significant damage. The
radiator support, which is a large plastic assembly that holds various parts,
including the radiator, the air conditioning condenser, and engine coolers, was
split in about ten spots. The radiator itself was not damaged, but some of the
parts that contain fluids were damaged. By way of example only, the engine oil
cooler and the air conditioning condenser were bent and had to be replaced, and
an oil cooler pipe and the transmission cooler had to be replaced. Mr. Cochrane
testified that a significant volume of oil and coolant were added to the
vehicle in the course of repairing the damage, but he was unable to determine
from looking at the damaged components when the original fluids were lost.

[31]        
Mr. Cochrane testified that the extent of the damage discovered
upon disassembling the vehicle was unusual given how little damage was apparent
from his initial inspection. He said he was surprised by the extent of the
damage to the components behind the grill and bumper. He explained that this
particular vehicle has “splash shields” that obscure the view into the engine
compartment and thus concealed the damage to the engine components.

[32]        
Carstar repaired the damage to the Mercedes, other than the engine, at a
cost of approximately $19,500. The deductible was $1000 and ICBC paid the
balance.

[33]        
Once Carstar had completed its repairs, the Mercedes was towed to the
Mercedes-Benz dealership for further evaluation where it was determined that
the engine had seized.

[34]        
ICBC tendered an expert report authored by Jeff Hall, a licensed and
certified master automotive technician and certified automotive engineer,
expressing Mr. Hall’s opinion as to the cause of the engine failure. Mr. Hall
concluded as follows at p. 20 of his report:

When the Vehicle was driven after
the collision, the following scenario occurred; severe overheating resulted
from the combustion process, internal component friction occurred due to the
rapid loss of coolant and approximately 80% of the engine oil was lost from the
collision damaged components (i.e. the oil cooler, the oil cooler hoses, the
radiator hoses, the radiator outlet tank and the connection). All of the
aforementioned caused the engine to seize.

[35]        
Mercedes-Benz estimated the cost of replacing the engine at $82,133, not
including fluids and miscellany, shipping, or HST. Mr. Dhadwal has not had
the engine replaced because ICBC has refused to cover the cost.

Warning Lights

[36]        
As already noted, Tajinder testified that there were no warning lights
illuminated on the dashboard when he attempted to drive the Mercedes out of the
ditch.

[37]        
Avtar testified that there were no warning lights illuminated on the
dashboard during the time he drove the Mercedes home.

[38]        
Mr. Dhadwal testified that when he started the Mercedes the morning
after the accident, there were no warning lights displayed. He said while he
was driving the Mercedes to Carstar, a warning light came on, indicating an
inoperative running light, and then just before the Mercedes shut down, a
warning chime sounded and a light came on indicating low oil pressure. This was
immediately followed by a warning light indicating the vehicle was shutting
off.

[39]        
Mr. Cochrane testified that when the Mercedes arrived at Carstar,
he tried to start it, and when he turned the key there was a warning light
displayed on the dash that indicated the vehicle would not start due to low
fluid levels.

[40]        
Mr. Bass-Werner is an employee of Mercedes-Benz Canada Inc. He was
a shop foreman at the Mercedes-Benz dealership that dealt with the Mercedes
after it had been repaired at Carstar. Mr. Bass-Werner explained that the
Mercedes has as many as 47 on-board computers, which are referred to as
electronic control units. Each electronic control unit monitors a different
aspect of the vehicle. The electronic control unit that monitors the engine operation
is called the motor electronics or “ME”.

[41]        
Mr. Bass-Werner used a computerized diagnostic system to generate a
document recording a variety of data from the ME. He testified that the
information reflected in the document provides a very good indication of the
problem but the data is not 100% accurate.

[42]        
Mr. Bass-Werner explained that the data he retrieved indicated that
the ME had recorded a number of “events” or “faults” concerning the engine. The
specific nature of these faults was not explained. However, Mr. Bass-Werner
did explain that the first of these faults was recorded at an odometer reading
of 9,952 km, and the data indicated that, at the time of this fault, the ME
sent a request to the instrument cluster to illuminate the check-engine icon on
the dashboard. The check-engine icon is a small, stylized symbol located within
the tachometer. The ME does not itself cause the check-engine icon to
illuminate, nor does it monitor the instrument cluster. As a result, the data
retrieved by Mr. Bass-Werner does not establish that the check-engine icon
was in fact illuminated. The most he could say is that the data indicated that
a request to illuminate the check-engine icon had been sent to the instrument
cluster at 9,952 km.

[43]        
Given the reading on the odometer at the time the Mercedes was received
at Carstar, it is likely that the accident occurred at a reading close to 9,952
km.

[44]        
Mr. Bass-Werner also explained that if the same fault is not
detected in three successive runnings of the engine (or what he referred to as
three “drive cycles”), the ME sends a request to the instrument cluster to
extinguish the check-engine icon. From this, ICBC infers that the check-engine
icon was illuminated at 9,952 km, and that it remained illuminated until the
engine seized.

[45]        
Mr. Bass-Werner testified that the appearance of the check-engine
light does not mean that the engine is “collapsing”. He agreed that vehicles
with the check-engine light illuminated are driven into the Mercedes-Benz
dealership where he works on a daily basis. He confirmed that the Operator’s
Manual recommends that, in the event the check-engine icon is illuminated, the
vehicle should be brought in for servicing.

[46]        
In contrast, the portions of the Operator’s Manual related to the
coolant level warnings read in part as follows:

The coolant level is too low. Avoid making long journeys with
too little coolant in the cooling system. The engine will otherwise be damaged.

The display messages and the corresponding symbol that
indicate that the coolant level is too low must not be ignored.

Pull over and stop the vehicle safely and switch off the
engine, paying attention to road and traffic conditions.

Wait until the display message
disappears before restarting the engine. Otherwise, there is a risk of engine damage.

Summary of Mr. Dhadwal’s Claim

[47]        
As noted above, Mercedes-Benz provided a quote of $82,133 for
replacement of the engine, not including fluids and miscellany, shipping, or
HST.

[48]        
Mr. Dhadwal had the use of Carstar’s courtesy car while the
Mercedes remained with Carstar; however, he had to return the courtesy car once
the Mercedes had been towed to Mercedes-Benz. Rather than rent or lease a
vehicle comparable to the Mercedes while waiting for his claim to be resolved, Mr. Dhadwal
purchased a used Volkswagen at a total cost, including financing charges, of
$30,395.40. He financed the purchase over 84 months and has been making (and
continues to make) monthly payments of $361. He is insuring and licensing the
Volkswagen at an annual cost of $2,269.

[49]        
At the same time, Mr. Dhadwal has continued to make monthly lease
payments on the Mercedes in the amount of $2,333.76 prior to April 2013 and in
the amount of $2,396.27 thereafter. In addition, he has continued to insure the
Mercedes, initially at an annual cost of $2,660, and subsequently under a
storage policy at an annual cost of $1,446.

[50]        
Mr. Dhadwal seeks:

(a)   a declaration that ICBC is in
breach of the Optional Policy;

(b)   a declaration that ICBC is
liable to pay to Mr. Dhadwal the loss and damages sustained by him in
accordance with the provisions of the Optional Policy;

(c)    an order for the payment of
the amount found to be due to Mr. Dhadwal in respect of such loss and
damage;

(d)   interest pursuant to the Court
Order Interest Act, R.S.B.C. 1996, c. 79; and

(e)      costs.

The Insurance Policy

[51]        
The Optional Policy provides “collision coverage”, which is defined in
s. 2.3 in part as follows:

“collision coverage” means coverage for loss or damage caused
by upset of a vehicle or collision of a vehicle with another object, including,
but not limited to,

(a)  the surface of the ground, the roadway being travelled
on or an object on, in, under, over or adjacent to the roadway, including a
road sign, guard rail, pier, bridge or culvert or any body of water or waterway
under or adjacent to the pier, bridge, culvert or roadway,

[52]        
The Optional Policy includes the following exclusion clause:

5.9   Restrictions on indemnity

(a)  The Corporation is not liable
to indemnify any person under comprehensive or collision coverage for loss or
damage

i. to tires

ii. consisting of, or caused by,
mechanical fracture, failure or breakdown of any part of a motor vehicle, or

iii.      caused by

(A)   explosion within the
combustion chamber,

(B)   rust,

(C)   corrosion,

(D)   freezing, or

(E)   wear and tear,

unless the loss or damage is coincidental with other loss or
damage for which indemnity is provided under comprehensive or collision
coverage or is caused by fire, theft or malicious mischief.

[53]        
The Optional Policy also includes the following Prescribed Conditions:

Requirements if loss or damage to vehicle

5(3) If loss of or damage to a vehicle that is covered by
this contract occurs, the owner or operator of the vehicle

(a)  must, at the expense of the
insurer, protect the vehicle as far as reasonably possible from further loss or
damage, and

(b)  until the insurer has had a
reasonable opportunity to inspect the vehicle, must not, without the consent of
the insurer, remove any physical evidence of the loss or damage to the vehicle
or make any repairs to the vehicle, other than repairs that are immediately
necessary to protect the vehicle from further loss or damage.

(4)   The insurer is not liable under this contract

(a)  for loss or damage resulting
from the failure of an owner or operator to comply with subcondition (3)(a), or

(b)  to an owner if the owner or an operator, to the
prejudice of the insurer, contravenes subcondition (3)(b).

[54]        
The Optional Policy also provides for coverage for loss of use of an
insured’s vehicle. Section 5.14 reads as follows:

5.14     Loss of use coverage

(a)  Subject to subsections (b) and
(c), if a premium for loss of use coverage is indicated on the owner’s
certificate, the Corporation shall reimburse an insured for loss of use of the
motor vehicle described in the owner’s certificate that arises from loss or
damage for which coverage under this Division is provided by this policy.

(b)  Except in the case of the
theft of an entire motor vehicle, subsection (a) applies only if the
Corporation has paid for a claim for loss or damage for which coverage under
this Division is provided by the owner’s certificate with respect to the motor
vehicle.

(c)  Reimbursement under subsection
(a) shall,

(i)   subject to subsection (d),
cover the expense incurred by the insured in hiring taxis, using public
transportation or renting a substitute motor vehicle of a make and model
specified by the Corporation that, for the purpose of providing the insured
with alternate transportation, is a similar size to the described motor
vehicle,

(ii)  not exceed the limit per day
and total limit purchased by the insured and set out in the owner’s
certificate, and

(iii) terminate on the earlier of

(A) the date on which repairs to
the described motor vehicle arising from the loss or damage are substantially
completed, and

(B) the date on which the
Corporation settles or offers to settle the claim for the loss or damage to the
described motor vehicle,

and is available only after the
total limits of loss of use coverage to which the insured may be entitled under
section 6.2 or 7.2 have been exhausted.

(d)  Where an insured rents a
substitute motor vehicle, the Corporation shall not reimburse the insured for

(i)   more than the amount an
established rental service would charge the insured for renting a similar motor
vehicle for the same period, or

(ii)  the cost of fuel, maintenance
or insurance for the substitute motor vehicle,

(e)  Subject to subsection (c),
reimbursement provided by loss of use coverage is primary coverage and any
reimbursement to which the insured may be entitled under section 5.13 is excess
to the coverage provided under this section.

(f)   A deductible amount is not applicable to a claim under
this section.

Issues

[55]        
The following issues arise:

1.       Is the loss claimed by Mr. Dhadwal
for the cost of replacing the engine a loss to which his collision coverage
applies?

2.       If so, is the damage to
the engine nevertheless excluded by s. 5.9(a) of the Optional Policy? This
question raises two sub-issues:

(a)      Is the damage to the
engine properly characterized as damage “consisting of … mechanical fracture,
failure or breakdown”?

(b)      If so, is the damage
“coincidental with other loss or damage for which indemnity is provided under
collision coverage”?

3.       If the damage to the
engine is not excluded by s. 5.9(a) of the Optional Policy, did the engine
damage result from Mr. Dhadwal’s failure, following the accident, to
protect the Mercedes “as far as reasonably possible from further loss or
damage”, such that his coverage is forfeited under the Prescribed Conditions?

4.       Are the losses that are
consequences of Mr. Dhadwal being unable to use the Mercedes recoverable?

Credibility

[56]        
ICBC challenges the credibility of Mr. Dhadwal, Tajinder, and
Avtar, and submits that the actual circumstances of the collision are not
capable of accurate determination because of problematic aspects of the
evidence of these three witnesses. ICBC submits that, as a result, the Court is
unable to make findings about the nature and circumstances of the accident and
should not accept the evidence of Mr. Dhadwal, Avtar, and Tajinder about
the absence of warning lights on the dashboard. However, ICBC also maintains
that coverage for the engine damage was originally denied on Mr. Dhadwal’s
version of events. Thus, even if Mr. Dhadwal’s version is accepted, ICBC’s
position is still that there is no coverage for the losses claimed in this
action.

[57]        
It is my view that the aspects of the evidence challenged by ICBC are
relevant only to the third issue, the resolution of which depends on the
reasonableness of Mr. Dhadwal’s conduct following the accident. On this
point, ICBC submits that the alleged problematic aspects of the evidence of Mr. Dhadwal,
Tajinder, and Avtar leave the Court unable to assess the reasonableness of Mr. Dhadwal’s
post-accident conduct. As such, I will address credibility when analysing the
third issue.

[58]        
The other issues can be resolved on the following findings that arise
from the uncontroverted evidence:

·      
Damage to the body of the Mercedes, and certain mechanical parts,
occurred late on the evening of June 7, 2012, when the Mercedes was driven into
a ditch and collided with a culvert.

·      
The damage that occurred on the evening of June 7, 2012, has been
repaired at ICBC’s expense, costing approximately $18,500.

·      
Mr. Dhadwal’s loss, and the indemnity claimed, would have
been limited to that $18,500 if the Mercedes had been towed from the scene of
the collision to a repair shop for repair.

·      
The damage to the Mercedes for which coverage is sought in this
action is damage to its engine, a mechanical component of the vehicle.

·      
The engine damage occurred the day after the collision, after the
Mercedes had been driven approximately 40 km.

·       The
cause of the engine damage was as stated by Mr. Hall at p. 20 of his
report:

When the Vehicle was driven after
the collision, the following scenario occurred; severe overheating resulted
from the combustion process, internal component friction occurred due to the
rapid loss of coolant and approximately 80% of the engine oil was lost from the
collision damaged components (i.e. the oil cooler, the oil cooler hoses, the
radiator hoses, the radiator outlet tank and the connection). All of the
aforementioned caused the engine to seize.

Analysis

Issue 1:   Coverage

[59]        
Mr. Dhadwal bears the burden of establishing that he suffered a
loss to which the collision coverage in the Optional Policy applies.

[60]        
The material portions of the definition of “collision coverage” in
s. 2.3 of the Optional Policy read as follows: “coverage for loss or
damage caused by … collision of a vehicle with another object … including a
culvert”.

[61]        
It is not disputed that the Mercedes was involved in a collision with a
culvert and that loss or damage resulted. In fact, ICBC does not dispute that Mr. Dhadwal’s
collision coverage was triggered. As already noted, ICBC paid $18,500 to repair
the damage that arose immediately upon impact with the culvert.

[62]        
In ICBC’s submission, the Hall Report establishes that the engine
seizure was caused by the driving subsequent to the collision and that, at
best, the collision was a contributing cause of the engine damage. In my view,
the Hall Report clearly establishes that the engine seizure was the result of
two concurrent sources of causation: the collision and the subsequent driving. Mr. Hall
explained at p. 20 that coolant and engine oil were lost from the “collision
damaged” components and, as a result, severe overheating and internal
component friction occurred “when the [Mercedes] was driven after the
collision” (emphasis added). His conclusion at p. 20 is that “[a]ll of
the aforementioned” caused the engine to seize. I accept Mr. Hall’s
opinion as to the cause of the engine seizure.

[63]        
In my view, it is clear from the Hall Report that neither of the two
sources of causation, the collision and the subsequent driving, would alone
have resulted in the engine failure. It was the combination that caused the
damage. Neither was dominant, since the engine damage would not have occurred
but for both causes.

[64]        
Where there are concurrent causes of a loss for which an insurance claim
is advanced, there is no presumption that the coverage is ousted if one of the
concurrent causes is an excluded peril. An insurer may oust coverage where one
of the concurrent causes is covered and another excluded, but only by express
language in the policy to that effect. Whether an exclusion clause applies in a
particular case of concurrent causes is a matter of interpretation: Derksen
v. 539938 Ontario Ltd., 2001 SCC 72, at paras. 48-49; Chandra v.
Canadian Northern Shield Insurance Co., 2006 BCSC 715, at paras. 27,
50.

[65]        
For the foregoing reasons, I find that all the damage to the Mercedes,
including the engine damage, is damage “caused by … collision of a vehicle with
another object … including a … culvert” and, as such, falls within the
definition of “collision coverage” in the Optional Policy. Whether the coverage
for the engine damage is nevertheless ousted depends upon the construction and
application of the exclusion in s. 5.9(a) of the Optional Policy and
Prescribed Conditions 5(3) and (4).

Issue 2:   Application of the Exclusion in s. 5.9(a)

[66]        
The material portion of s. 5.9(a) of the Optional Policy reads as
follows:

(a)   The Corporation is not liable to indemnify any person
under comprehensive or collision coverage for loss or damage

ii.  consisting of, or caused by,
mechanical fracture, failure or breakdown of any part of a motor vehicle,

unless the loss or damage is
coincidental with other loss or damage for which indemnity is provided under
comprehensive or collision coverage or is caused by fire, theft or malicious
mischief.

[67]        
As already noted, s. 5.9(a)(ii) raises two issues:  is the damage
to the Mercedes’ engine properly characterized as damage “consisting of
mechanical fracture, failure or breakdown” and, if so, is it “coincidental with
other loss or damage for which indemnity is provided under … collision
coverage”? ICBC bears the burden with respect to the first issue and Mr. Dhadwal
bears the burden with respect to the second: Swailes v. Insurance
Corporation of British Columbia, 2011 BCCA 95, at para. 12; rev’g on
other grounds 2009 BCSC 1324; Dawson Truck Repairs Ltd. v. Insurance
Corporation of British Columbia, 2008 BCCA 209, at para. 13.

Damage “consisting of … mechanical fracture,
failure or breakdown”

[68]        
The exclusion expressly recognizes that mechanical failure can be a
cause or an effect in that it refers to two different categories of loss or
damage, namely, loss or damage “consisting of” mechanical fracture, failure, or
breakdown, and loss or damage “caused by” mechanical fracture, failure, or breakdown.
Where the mechanical failure is asserted to be an effect, or, in other words,
the loss itself, causation is irrelevant and the focus is on determining the
nature of the damage: Insurance Corporation of British Columbia v. Pfleger,
2006 BCSC 1328; Dawson Truck Repairs.

[69]        
In Pfleger, the insured’s friend was found to have negligently
driven the insured’s truck after seeing a “water in fuel” warning light come
on. The engine was damaged by the contamination of its fuel by water. The
Provincial Court trial judge found that the exclusion for mechanical failure or
breakdown did not apply because the damage was caused by the friend’s
negligence. This Court allowed the appeal. Halfyard J. held that the trial
judge erred in focusing on causation because the damage in issue “consisted of”
mechanical failure. At paras. 12-13, Halfyard J. said:

The issues on appeal are:

(a)  Whether the trial judge erred
in failing to consider whether the damage "consisted of … mechanical
fracture, failure or breakdown of any part of [the] motor vehicle"; and

(b)  If so, whether the damage to
the truck engine in this case did "consist of … mechanical fracture,
failure or breakdown of any part of [the] motor vehicle".

The answer to the first question
depends on whether “consists of” has a separate and distinct meaning from
“caused by”. In my opinion, the appellant must succeed on this issue, because
the dictionary definitions for “consist” include the meanings “to be composed,
made up, or formed: followed by ‘of”. In my view, the words “consisting of”
convey an entirely different meaning than the words “caused by”, as they appear
in the exclusion clause. I agree with the argument of appellant’s counsel, that
“consists of” refers to the actual composition of the loss or damage, as
opposed to what caused the damage.

[70]        
Halfyard J. then, at para. 15, considered dictionary definitions of
the word “mechanical”, including “having to do with machinery or tools” and
“produced or operated by machinery or a mechanism”. He concluded that there was
a failure of the engine and “the engine is obviously a mechanical part of a
motor vehicle”.

[71]        
Similarly, in Dawson Truck Repairs, the insured’s employee was
found to have negligently repaired a customer’s truck, resulting in an
explosion of the engine, which in turn damaged the cab of the truck. The trial
judge concluded that the damage to the engine was not caused by mechanical
fracture, failure, or breakdown, but rather that the true or “proximate” cause
of the engine damage was the negligence of the insured’s employee, with the
result that the exclusion did not apply. This was overturned on appeal.
Chiasson J.A., for the Court of Appeal, agreed that the initiating cause of the
damage was the negligent repair. However, he found that the trial judge erred
in not considering whether the damage consisted of mechanical fracture,
failure, or breakdown. Chiasson J.A. concluded as follows at para. 22:

Insofar as the focus is on
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.

[72]        
In determining whether the damage consisted of mechanical fracture,
failure, or breakdown, Chiasson J.A. referred to evidence that described the
incident as resulting from various engine parts moving too fast, leading to
friction and then the explosion, which in turn caused pieces of the exploding
parts to damage other parts of the truck. From this evidence, he concluded that
it was “clear the damage to the engine consisted of mechanical fracture,
failure or breakdown of a part of the vehicle and was excluded” (para. 26).

[73]        
In the instant case, Mr. Dhadwal did not seriously argue that the
engine damage was not damage consisting of mechanical fracture, failure, or
breakdown. The parties agreed, in an agreed statement of facts, that “[t]he
damage to the Plaintiff’s vehicle for which coverage is sought in this action
is damage to its engine, a mechanical component of the vehicle”.

[74]        
As stated in the Hall Report, the Mercedes’ engine seized as a result of
severe overheating from the combustion process and internal component friction
due to the loss of coolant and engine oil from the collision damaged
components. As with the engine damage at issue in Pfleger and Dawson
Truck Repairs, it is clear that the damage to the Mercedes’ engine consists
of mechanical fracture, failure, or breakdown.

Damage “coincidental with other loss or damage
for which indemnity is provided under … collision coverage”

[75]        
The material part of s. 5.9(a) provides that the exclusion for
damage consisting of mechanical failure does not apply if the damage is
“coincidental with other loss or damage for which indemnity is provided under
collision coverage”. Counsel referred to this as the “exception to the
exclusion”.

[76]        
ICBC submitted that Mr. Dhadwal failed to meet the burden of
establishing that the exception to the exclusion applied, as Mr. Dhadwal
proved only that the Mercedes was in a collision one day and its engine seized
the next day. In ICBC’s submission, there was no evidence “explaining in
mechanical terms a connection between the accident and the subsequent
breakdown”.

[77]        
I disagree. The Hall Report clearly establishes the connection. As noted
above, Mr. Hall’s conclusion is that coolant and engine oil were lost from
the components that were damaged in the collision and, when the Mercedes
was driven after the collision, this led to internal component friction, severe
overheating, and ultimately the seizure of the engine. In Mr. Hall’s
words, “[a]ll of the aforementioned caused the engine to seize”.

[78]        
As already explained, neither the collision nor the subsequent driving
was the dominant cause of the engine seizure. The engine would not have seized
without both events. The Hall Report establishes that a chain of causation is
present in this case: the collision set off a series of events, including the
damage to the fluid-related components for which indemnity has been provided,
which ultimately resulted in the damage to the engine.

[79]        
ICBC also submitted that the word “coincidental” contains a temporal
requirement that cannot be met in this case because the engine seizure occurred
the day after the collision and only after the vehicle had been driven. In
effect, ICBC’s position is that mechanical failure cannot be found to be
“coincidental with” other loss or damage for which indemnity is provided unless
it occurs simultaneously with that other loss or damage.

[80]        
ICBC referred to a number of cases that have considered the exception in
what is now s. 5.9(a) of the Optional Policy. However, none of those cases
is determinative of the issue here and, in particular, none of those cases
stands for the proposition that mechanical failure cannot be found to be
coincidental with other loss or damage for which indemnity is provided unless
it occurs simultaneously with that other loss or damage.

[81]        
The exception in what is now s. 5.9(a) was considered in Young
v. Insurance Corporation of British Columbia, 2004 BCPC 460, and in Chapin
v. Insurance Corporation of British Columbia, [1985] B.C.J. No. 1400
(Co. Ct.). The facts in those cases were quite similar to those in the present
case. In both Young and Chapin, an insured drove his vehicle
after an accident in which the vehicle suffered body damage. In both cases,
fluid-related components were punctured during the accident and, when the
vehicle was driven after the accident, fluid leaks resulted in the seizure of
the engine. In both cases, ICBC covered the damage caused immediately upon
impact but denied coverage for the damage to the engine. In both cases, the
Courts held that the engine damage was coincidental with the covered damage
and, as such, the exception to the exclusion applied. In both cases, that
finding appears to have been based, at least in part, on the conclusion that
the insured did not act unreasonably in driving the vehicle after the
collision: see Young, at paras. 25-28; Chapin, at paras. 16-19.

[82]        
ICBC submitted that to the extent Young and Chapin turned
on a lack of fault on the part of the insured, those cases were decided
incorrectly. In ICBC’s submission, the words “coincidental with” focus on the
nature of the loss or damage and its relationship to a covered peril. I agree
that a lack of fault on the part of the insured is not determinative of whether
the damage claimed is “coincidental with” other covered damage. To the extent Young
and Chapin hold otherwise, I disagree with those parts of the decisions.

[83]        
The exception to the exclusion was also considered in Pfleger; Dawson
Truck Repairs; and Swailes. However, as explained below, none
of those cases is determinative of the issue here.

[84]        
When considering the application of the exception to the exclusion,
Halfyard J., in Pfleger, wrote at para. 18:

The dictionary definitions of
“coincidence” include the following: “occurrence or existence at the same time;
simultaneous occurrence or existence”; “a notable occurrence of events or
circumstances having no apparent connection”; “an accidental and remarkable
occurrence of events, ideas etc. at the same time in a way that sometimes suggests
a causal relationship”.

[85]        
However, Halfyard J.’s conclusion that the exception to the exclusion
did not apply in that case was not based on the meaning of the words
“coincidental with”. In Pfleger, the damaged engine was the only damage.
As already noted, that damage was excluded from coverage on the basis that it
“consisted of” mechanical breakdown. Counsel for the insured in Pfleger argued
that the engine damage was “coincidental with” the negligence of the insured’s
friend who had driven the vehicle after seeing the water in fuel warning light
come on. Halfyard J. rejected that submission, noting at para. 19 that the
friend’s negligence was not “other loss or damage”. There was simply no “other
loss or damage for which indemnity [was] provided” and, on that basis, it was
held that the exception to the exclusion did not apply.

[86]        
Similarly, in Dawson Truck Repairs, the Court of Appeal
concluded that the exception to the exclusion did not apply because there was
no other damage for which indemnity was provided. The argument had been that
the engine damage was coincidental with the damage that occurred to the cab of
the truck as a result of the engine explosion. The Court of Appeal concluded at
para. 30 that the cab damage was caused by the engine explosion and, as
such, was itself excluded as being damage “caused by” mechanical fracture,
failure, or breakdown. Chiasson J.A. held at para. 30 that “the exception
to the exclusion under s. 132(1) [now s. 5.9] would have been engaged
only if the cab damage neither consisted of nor was caused by mechanical
fracture, failure or breakdown of any part of the truck”. As in Pfleger,
there was simply no “other loss or damage for which indemnity [was] provided”
and, on that basis, it was held that the exception did not apply.

[87]        
In Swailes, the loss for which the claim was
advanced was the total loss of a vehicle by fire. The trial judge found the
fire was caused by mechanical breakdown of the rear axle “U” joint and, as a
result, the exclusion applied. He noted the two branches to the exception;
namely, where the loss is coincidental with other indemnified loss, and where
the loss is caused by fire, theft, or malicious mischief. He first considered
the second branch of the exception, and concluded at para. 45 that this
branch only applies if the loss or damage claimed neither consisted of, nor was
caused by, mechanical breakdown. He held that because the fire was caused by
mechanical breakdown, the exception for loss caused by fire did not apply.

[88]        
The trial judge in Swailes then considered the first branch of
the exception. At para. 50, he quoted the passage from Pfleger
referred to above that set out dictionary definitions of “coincidence”. He
observed that the mechanical failure and the fire did not occur simultaneously,
but he did not find that simultaneity was essential to establishing that a loss
caused by mechanical failure was coincidental with other indemnified loss.
Rather, he emphasized that the mechanical failure in that case caused the loss
claimed, stating at para. 52 that the mechanical breakdown “was not
coincidental with the fire loss; the breakdown caused the fire”
(emphasis in original). This aspect of his reasoning was consistent with
Chiasson J.A.’s conclusion in Dawson Truck Repairs that the first branch
of the exception would only be engaged where there was other loss or damage
that neither consisted of, nor was caused by, mechanical breakdown.

[89]        
The Court of Appeal allowed the appeal in Swailes on the basis
that the second branch of the exception (“loss … caused by fire…”) applied.
Neilson J.A., for the Court, held that if the loss or damage was caused by
mechanical breakdown, the exclusion would apply unless that loss or damage was
caused by fire. It was therefore not necessary for the Court of Appeal to
consider the first branch of the exception.

[90]        
In the present case, unlike in Swailes, the mechanical breakdown
did not cause the loss claimed; rather, the mechanical breakdown is the loss
claimed. In the present case, unlike in Pfleger and Dawson Truck
Repairs, there is “other loss or damage for which indemnity is provided”.
Thus, this case raises squarely the question of whether the mechanical
breakdown was “coincidental with” the other damage which ICBC has already
covered.

[91]        
In Progressive Homes Ltd. v. Lombard General Insurance Co. of Canada,
2010 SCC 33, at paras. 22-24, the Supreme Court of Canada restated the
following principles of interpretation to be applied to insurance policies:

·      
When the language of the policy is unambiguous, the Court should
give effect to clear language, reading the contract as a whole;

·      
When the language of the insurance policy is ambiguous, the Court
should rely on general rules of contract construction. For example, the Court should
prefer interpretations that are consistent with the reasonable expectations of
the parties and avoid interpretations that would give rise to an unrealistic
result or that would not have been in the contemplation of the parties at the
time the policy was concluded; and

·      
When these rules of construction fail to resolve an ambiguity, the
Court should construe the policy in favour of the insured, with coverage
provisions being interpreted broadly and exclusion clauses narrowly.

[92]        
In Co-operators Life Insurance Co. v. Gibbens, 2009 SCC 59, at para. 21,
the Supreme Court of Canada reiterated that ordinary words, such as the word
“accident”, should be construed in an insurance policy “as they would be
understood by the average person applying for insurance”. In my view, the word
“coincidental” should be interpreted in the same manner.

[93]        
For ease of reference, the dictionary definitions referred to in Pfleger
(at para. 18) and Swailes (at para. 50 of the trial reasons)
are as follows:

The dictionary definitions of
“coincidence” include the following: “occurrence or existence at the same time;
simultaneous occurrence or existence”; “a notable occurrence of events or
circumstances having no apparent connection”; “an accidental and remarkable
occurrence of events, ideas etc. at the same time in a way that sometimes
suggests a causal relationship”.

The dictionaries from which these definitions were taken
were not identified in those decisions.

[94]        
The Shorter Oxford English Dictionary (6th ed.) defines
“coincidence” as including:

1. occupation of the same
portion of space; 2. correspondences in substance, nature, character,
value, etc.; (an instance of) exact agreement 3. simultaneous occurrence
or existence; an instance of this 4. a notable concurrence of events or
circumstances without apparent causal connection.

[95]        
The Concise Oxford English Dictionary (12th ed.) defines
“coincidence” as including:

1. a remarkable concurrence
of events or circumstances without apparent causal connection; 2.
correspondence in nature or in time of occurrence.

[96]        
On the basis of these dictionary definitions, I make some observations.
First, several of the dictionary definitions cited above refer to a
“coincidence” as events “without apparent causal connection” or “having no
apparent connection”. Such events must be “notable” or “remarkable” to be
considered coincidental. Implicit in this meaning of “coincidental” is that the
events in question do not, in fact, have a causal connection between them.

[97]        
To take a very simplistic example, if two people arrive at their mutual
workplace one day and both are wearing the same shirt, we would say that is a
“coincidence”. But if we know that one of those people called the other and
told him to wear that shirt, we no longer think it is a “coincidence” because
the two similar events were, in fact, causally related. The events are only
considered to be “coincidental” as long as we assume there is no causal
relationship between them.

[98]        
In my view, this meaning of “coincidence” cannot be implied by the use
of the words “coincidental with” in s. 5.9(a) of the Optional Policy. An
average person applying for insurance would not understand the word
“coincidental” in s. 5.9(a) to mean that a mechanical fracture, failure,
or breakdown, otherwise excluded by the policy, would be covered only where
that event is not, in fact, causally related to other loss or damage for which
indemnity is provided. Such a construction would be absurd.

[99]        
The second meaning of “coincidence” that emerges from the dictionary
definitions is a sharing of some feature or a “correspondence” of some kind,
which might include location or “space”, “substance, nature, character, value,
etc.”, or “time”. On this meaning of “coincidence”, according to the definitions
cited above, no evaluation is necessary of whether or not a causal relationship
exists between two things, although the presence of a causal connection would
not preclude the characterization of those things as coincidental.

[100]     It is
apparent from these definitions that two forms of damage do not have to occur
simultaneously for them to be considered coincidental. While the definitions do
refer to a possible temporal component, “time” is not an essential or required
component as the shared feature could also include location, substance, nature,
character or value. Further, even where the shared feature is “time”, the Concise
Oxford English Dictionary suggests that all that would be required to
constitute “coincidence” would be a “correspondence” of time. To “correspond”,
according to the same dictionary, means to have a “close similarity; match or
agree almost exactly”, which clearly indicates an exact match is not necessary.

[101]     For the
foregoing reasons, it is my view that the average person applying for insurance
would understand the word “coincidental”, when read in the context of s. 5.9(a),
to mean “corresponding or having a close similarity in some manner, such as in
space, substance, nature, character, value, or time”.

[102]     Construing
the words “coincidental with” in s. 5.9(a) in this way is consistent with
the principle that an insurer who wishes to oust coverage in cases where
covered perils operate concurrently with excluded perils must ensure that the
exclusion clause is drafted in a manner that does so expressly: Derksen;
Ford Motor Co. of Canada v. Prudential Assurance Co., [1959] S.C.R.
539; Pavlovic v. Economical Mutual Insurance Co. (1994), 99
B.C.L.R. (2d) 298 (C.A.). The question of whether a particular exclusion
clause actually ousts coverage in such a case is a matter of interpretation.
Such interpretation must accord with the general principles of interpretation
of insurance policies, which include the principle that coverage provisions
should be construed broadly and exclusion clauses narrowly: Derksen, at
paras. 48-49.

[103]     Section
5.9(a) of the Optional Policy does not expressly provide that coverage for an
insured risk (in this case, damage caused by collision) will be inoperative if
an excluded risk is also engaged. To the contrary, and particularly if the
exclusion aspects of the clause are read narrowly and the exception aspects (in
this case, the words “coincidental with”) broadly, the language indicates an
intention to preserve the collision coverage in certain cases where the
exclusion would otherwise apply. Where damage that is caused by a covered peril
nevertheless falls within the exclusion language in s.5.9(a) the coverage will
be preserved so long as that damage corresponds in some way with or is closely
similar to other covered damage.

[104]     It is my
view that the mechanical breakdown in this case, i.e. the engine damage, was
coincidental with the damage that occurred on June 7, 2012, because the two
losses corresponded in substance, nature, character, and time. Specifically,
the two losses arose from the same incident (i.e. the collision) and were part
of the same chain of causation. The collision resulted in immediate body damage
and damage to internal components of the Mercedes (specifically, the oil
cooler, the oil cooler hoses, the radiator hoses, the radiator outlet tank, and
the connection), which in turn caused coolant and engine oil to be lost, and,
in combination with the driving after the accident, resulted in the seizure of
the engine. In these circumstances I find that the two losses were closely
similar, or in other words corresponded in, substance, nature, character, and
time.

[105]     I conclude
that the exception to the exclusion in s. 5.9(a) applies to the engine
damage incurred in this case, as the engine damage was “coincidental with” the
damage that occurred immediately upon impact, and the latter was damage for
which indemnity was provided under the collision coverage of the Optional
Policy.

Issue 3:  Application of Prescribed Conditions 5(3) and (4)

[106]     ICBC
concedes that it bears the burden of establishing that coverage is forfeited
under Prescribed Conditions 5(3) and (4), which, as noted above, provide that
ICBC is not liable for loss or damage resulting from the failure of an owner or
operator to “protect the vehicle as far as reasonably possible from further loss
or damage”.

[107]     ICBC
submits that by driving the vehicle after the collision, instead of having it
towed to a repair shop, Mr. Dhadwal and his family members failed to
protect the Mercedes as far as reasonably possible from further loss or damage,
and that their failure to do so resulted in the engine damage.

[108]     It is
clear that the engine damage would not have occurred if the Mercedes had been
towed to a repair shop rather than driven after the collision. The question is
whether Avtar’s conduct in driving the Mercedes home after the accident and/or Mr. Dhadwal’s
conduct in driving the Mercedes to the repair shop the next morning is properly
characterized as a failure to protect the vehicle as far as reasonably possible
from further loss or damage.

[109]    
No authority was provided by ICBC with respect to the standard imposed
on an owner or operator by Prescribed Conditions 5(3) and (4). In my view, a
plain reading of the provision, and, in particular, the words “as far as
reasonably possible”, indicates a negligence standard:  following a collision
in which damage to a vehicle has occurred, did the owner or operator do
something a reasonably prudent person would not have done, or fail to do
something a reasonably prudent person would have done, and did that conduct result
in further loss or damage to the vehicle? This is consistent with the standard
imposed by Sheppard Co. Ct. J. in Chapin at para. 18:

In my view, before Regulation
9.49(b) [now Prescribed Conditions 5(3) and (4)] can be invoked by the
defendant, there must be some reason for the plaintiff to be aware that a step
must be taken (or an action such as driving refrained from) in order to protect
the car from further damage.

[110]     As already
noted, ICBC challenges the credibility of Mr. Dhadwal, Avtar, and
Tajinder. ICBC submits that because of the problematic aspects of the evidence
of these three witnesses, the Court is unable to assess the reasonableness of
their post-accident conduct. ICBC also submits that the evidence at least
establishes that the collision resulted in significant body damage, Mr. Dhadwal’s
family members were aware of a possible problem with the coolant, and the
Mercedes’ check-engine light was illuminated. In these circumstances, ICBC
submits the only logical choice was to have the Mercedes towed from the scene
of the accident, and the failure to do so amounts to a failure to protect the
Mercedes as far as reasonably possible from further loss or damage.

[111]     The
problematic aspects of the evidence alleged by ICBC include that Avtar had his
own vehicle (implying there was no need for him to borrow the Mercedes). ICBC
submits that the accident occurred in a location that was not on the natural
route between Abbotsford, where Avtar’s brother lives, and South Surrey, where
Avtar lives. ICBC submits that the natural route would have been along 16th
Avenue, parallel with the American border, whereas the accident occurred some
43 blocks north of 16th Avenue, and closer to Mr. Sandhar’s home than to
Avtar’s home. ICBC also notes that Mr. Yochim testified that Tajinder said
his father had fallen asleep at the wheel, while Avtar said he swerved to avoid
a dog.

[112]     ICBC has
not said so expressly, but appears to imply that Mr. Dhadwal, not Avtar,
was in fact driving the Mercedes at the time of the accident, possibly in an
intoxicated state, and that after the accident Mr. Dhadwal colluded with
Avtar and Tajinder to make it appear that Avtar had been driving.

[113]     While
there were some inconsistencies in the evidence regarding the circumstances of
the collision, and while Avtar was not able to provide a clear explanation for
the route he took to and from Abbotsford, these are not an adequate basis upon
which I can conclude that Avtar was not driving the Mercedes at the time of the
accident. Mr. Dhadwal, Avtar, and Tajinder all testified that Avtar was
driving. Mr. Yochim testified that he spoke to Tajinder at the scene and
that Avtar was present. Mr. Sandhar testified that Mr. Dhadwal was
with him at his home when Mr. Dhadwal received the phone call telling him
his father had been in the accident. Mr. Sandhar was not cross-examined.

[114]     ICBC also
emphasizes Mr. Yochim’s evidence about seeing tracks in the ditch starting
from about 200 feet before the culvert. The presence of 200 feet of tracks in
the ditch is inconsistent with Avtar’s evidence that he entered the ditch close
to the culvert and Tajinder’s evidence that the Mercedes did not move more than
a few feet after the collision. On the basis of Mr. Yochim’s evidence,
ICBC appears to imply that the Mercedes was driven at length along the ditch
before hitting the culvert, which would have increased the likelihood of damage
to the sensitive components underneath. Again, however, the presence of the
tracks observed by Mr. Yochim, considered in the context of all the
evidence of Mr. Dhadwal, Avtar, Tajinder, and Mr. Sandhar, is
insufficient in my view to permit an inference to be drawn that the Mercedes
was driven along the ditch for 200 feet before hitting the culvert. It is
possible that the tracks observed by Mr. Yochim were not caused by the
Mercedes at all.

[115]     ICBC also
submits that the evidence of Mr. Dhadwal and his family members appeared
to be contrived to emphasize that there was only minor damage to the Mercedes,
when, in fact, there was quite substantial damage as evidenced by the long list
of repairs performed at Carstar. ICBC submits that the actual damage implies a
forceful impact, inconsistent with Avtar’s evidence that the impact was slight.
However, ICBC did not lead any evidence about the force of the impact necessary
to cause the damage that occurred to the internal components. All the witnesses
who saw the Mercedes after the collision, including Mr. Yochim and Mr. Cochrane,
who were called by ICBC, agreed that the visible body damage was extremely
minor and consistent with a low-impact collision. This is borne out by the
photographs that were taken before any disassembly of the engine compartment
components. It is reasonable to assume that there would have been more
extensive body damage if the impact had been forceful.

[116]     Mr. Dhadwal
testified that when he inspected the Mercedes the morning after the accident,
the damage appeared minimal. He testified that he opened the hood and saw
nothing to indicate there was extensive damage to the engine components. ICBC
submits that a check under the hood should have revealed more damage, but Mr. Cochrane’s
evidence was that the internal damage (or certainly most of it) was not visible
until after Carstar commenced its disassembly of the components.

[117]     ICBC
emphasizes that Mr. Dhadwal and Tajinder were concerned about the
possibility of fluid loss. This was not disputed. Tajinder testified he raised
the prospect of a problem with the fluids with Mr. Yochim, but was
satisfied by his and Mr. Yochim’s inspection that there were no leaking
fluids. This was corroborated by Mr. Yochim, who confirmed he checked for
signs of leaking fluids and found none. He also said he saw no reason why the
Mercedes should not be driven after the accident. Mr. Dhadwal testified
that he was concerned about fluid loss when he inspected the Mercedes the next
morning, but he too saw no signs of leaking fluids.

[118]     Tajinder,
Avtar, and Mr. Dhadwal all denied the presence of any fluid warning light,
until, according to Mr. Dhadwal’s evidence, moments prior to the engine
shutting down the day after the accident. ICBC suggests this evidence should
not be believed, but there is no evidence to the contrary. In fact, Mr. Yochim’s
evidence that there was no indication of any leaking fluids at the accident
scene suggests that the fluid warning was not illuminated. Further, as already
noted, both Tajinder and Mr. Dhadwal acknowledged they were concerned
about the possibility of fluid loss. There was nothing preventing Tajinder from
having the Mercedes towed from the scene of the accident and nothing preventing
Mr. Dhadwal from having the Mercedes towed from his home the next day. In
my view, given their admitted concern about the possibility of fluid loss, and Mr. Dhadwal’s
obsession with his cars, Tajinder would have had the Mercedes towed from the
accident scene and Mr. Dhadwal would have had it towed from home the next
morning had the fluid warning light been illuminated. In all the circumstances,
it is more likely than not that the fluid warning was not illuminated until
just moments before the engine shut down.

[119]     Tajinder,
Avtar, and Mr. Dhadwal also all denied that the check-engine light had
been illuminated. ICBC submits that the denial on this point is inconsistent
with the evidence of Mr. Bass-Werner. However, Mr. Bass-Werner
testified only that the data he retrieved establish that a request was sent to
the instrument cluster to illuminate the check-engine light. He admitted that
he could not say whether the check-engine light was in fact illuminated. In any
event, Mr. Bass-Werner testified that the illumination of the check-engine
light does not mean that the engine is about to collapse. He confirmed that the
Operator’s Manual recommends that in the event the check-engine light is
illuminated, the vehicle should be brought in for servicing. The illumination
of the check-engine light does not mean that the vehicle should be immediately
stopped and towed in for servicing.

[120]     Mr. Dhadwal
testified that given the fact the accident had occurred, and the front end of
the vehicle had been damaged, he would not have driven the Mercedes had the
check-engine light been illuminated. Given his obsession with his vehicles, I
accept this evidence and find that it supports the conclusion that the check-engine
light was not illuminated. In all the circumstances, it is more likely than not
that the check-engine light was not displayed.

[121]     ICBC
emphasizes that Tajinder and Avtar initially told Mr. Dhadwal that the tow
truck driver was too busy to tow the Mercedes from the scene of the accident.
This was denied by Mr. Yochim who testified that he made it clear to
Tajinder that he could tow the Mercedes. I accept Mr. Yochim’s evidence. I
also accept Tajinder’s explanation that he told Mr. Dhadwal the tow truck
driver was too busy to tow the vehicle because he, Tajinder, had decided,
contrary to Mr. Dhadwal’s express instructions, that it was not necessary
to tow the vehicle, and Tajinder used the false story about the tow truck
driver being too busy to discourage Mr. Dhadwal from continuing to insist
upon it. In my view, this does not detract from the credibility of Tajinder’s
evidence at trial.

[122]     ICBC
attempts to undermine Avtar’s credibility on the basis of an affidavit he swore
prior to trial. Mr. Dhadwal assisted Avtar, who does not read English, in
the preparation of the affidavit in which Avtar states that the tow truck
driver was “busy” on the night of the accident. ICBC suggests Avtar either
swore to content of the affidavit that he knew was untrue or did not take
sufficient care to ensure the content was fully and correctly relayed to him
before he swore to it.

[123]    
In my view, this submission is unfounded and does not serve to undermine
Avtar’s credibility. In his affidavit, Avtar states:

6.   After pulling the vehicle from the ditch the tow truck
driver got underneath the vehicle with a flashlight and checked the outside of
it. The tow truck driver told me that the damage was not significant and it was
safe to drive the vehicle home.

7.   I tried to insist that the
vehicle be towed because I was shaken by the accident and nervous but was told
they were busy and that it was fine to be driven.

[124]     These
statements are consistent with Avtar’s testimony at trial. Avtar testified that
when the tow truck driver first arrived, he said that the company was “busy”
that night. Mr. Yochim testified that he had taken some time getting to
the scene of the collision that evening because he had wanted the police to
arrive before him. It is entirely possible he did say he was busy. Avtar also
testified that the tow truck driver did not say that he was “too busy” to tow
the Mercedes, and that “he would have towed it if we asked”. The central point
is not whether Mr. Yochim said he was busy but whether he said it was safe
to drive the Mercedes. All the evidence (including Avtar’s affidavit) was
consistent on that point.

[125]     As noted
above, ICBC bears the burden of establishing that coverage is forfeited under
Prescribed Conditions 5(3) and (4). Notwithstanding the problems with some of
the evidence of Mr. Dhadwal’s witnesses, such as Tajinder telling Mr. Yochim
his father fell asleep at the wheel and Avtar saying he swerved to avoid a dog,
Avtar being unable to explain his choice of route the evening of the accident,
and the unexplained tracks in the ditch observed by Mr. Yochim, ICBC has
not met the burden of establishing that Mr. Dhadwal (or his family
members) failed to protect the Mercedes as far as reasonably possible from
further damage.

[126]     Driving a
vehicle that has sustained apparently minor damage in a collision to the
owner’s home, and then to a repair shop, rather than having it towed, is a
common and everyday occurrence. The evidence satisfies me that the observable
body damage to the Mercedes was minimal and consistent with a low-impact collision,
and that there were no signs of leaking fluids prior to the engine shutting
down. I am also satisfied that it is more likely than not that no warning
lights were illuminated to indicate low fluids or that the engine should be
checked.

[127]     There is no
evidence upon which I could conclude that Mr. Dhadwal or his family
members did something a reasonably prudent person would not have done, or
failed to do something a reasonably prudent person would have done. In
particular, there is no evidence from which I could conclude that Mr. Dhadwal
or his family members should have known, at any time prior to the moment before
the engine shut down, that the fluids had been lost from the collision damaged
components.

Issue 4:  Consequential Losses

[128]     Mr. Dhadwal
bears the burden of establishing his right to recover the losses he claims as
consequences of being unable to use the Mercedes.

[129]     Mr. Dhadwal
argues that he was and is entitled to reimbursement for the cost of a
replacement vehicle under s. 5.14 of the Optional Policy. He submits that
the full costs of a temporary replacement vehicle include reimbursement for his
purchase of a used Volkswagen car, as well as the insuring and licensing of it.
Mr. Dhadwal also seeks reimbursement for the monthly lease and insurance payments
he has continued to make in respect of the Mercedes, without the benefit of its
enjoyment or use, on the basis that these are damages that result from ICBC’s
breach of the Optional Policy.

[130]     ICBC
argues that these additional damages sought by Mr. Dhadwal are beyond the
contractual terms of the Optional Policy and that they could not have been
reasonably contemplated by the parties as occurring in the event of a breach.

[131]    
The Supreme Court of Canada has articulated the principles underlying
the assessment for damages for breach of contract, including insurance
contracts, in Fidler v. Sun Life Assurance Co. of Canada, 2006 SCC 30, at
para. 27, as follows:

Damages for breach of contract
should, as far as money can do it, place the plaintiff in the same position as
if the contract had been performed. However, at least since the 1854 decision
of the Court of Exchequer Chamber in Hadley v. Baxendale (1854), 9 Ex.
341, 156 E.R. 145, at p. 151, it has been the law that these damages must
be "such as may fairly and reasonably be considered either arising naturally
… from such breach of contract itself, or such as may reasonably be supposed
to have been in the contemplation of both parties".

[132]     The
decision in Bassett v. The Maritime Life Assurance Co., 2001 BCSC 988,
dealt with a claim for consequential losses under a policy for disability
insurance. The plaintiff in that case claimed, in addition to the amount for disability
benefits, the consequential losses resulting from his withdrawal of
tax-protected funds from his RRSP. He said that the withdrawal had been made in
order for him to survive financially in the absence of disability payments.

[133]    
Although the Court held that the plaintiff in Bassett was
entitled to a portion of the disability benefits claimed, the claim for
consequential losses was denied. Blair J. set out the rationale for his
analysis, along with the conclusion, as follows (paras. 51-52):

In Gannon Associates Ltd. (c.o.b. Barnacle Pete’s) v.
Advocate General Insurance Co. of Canada, (1984), 32 Man.R. (2d) 1 (Man.
Q.B.), the plaintiff insured sought repair and replacement costs beyond the
terms of the insurance policy on the basis that the defendant insurer’s
unjustified denial of the claim together with the plaintiff’s lack of funds
resulted in delays and increased replacement costs. Simonsen J. denied the
claim, stating at para. 48:

The indemnity provided under an
insurance policy imposes an obligation to pay an identifiable and ascertainable
loss upon the happening of a particular event. The policy contains no
obligation to make payment beyond the loss as described in the policy. Even
though repudiation has occurred, the policy terms are not altered; it becomes
the Court’s task to assess the loss and enforce payment as if the policy were
in effect. If an insured could recover additional losses over and above the
coverage stipulated in the policy arising out of his impecuniosity, it ought to
be a term in the contract. If an additional allowance were made beyond the
contractual terms, it would be equally logical to compensate for loss of
business or other economic losses. I am not able to find that such an addition
(sic) loss should be allowed. In effect it would amend the terms of the
insurance contract.

I conclude that Simonsen J. has
set out the proper approach which I should apply in the present case. There is
nothing in the insurance contract between the plaintiff and Maritime which
provides for payment in excess of the disability payments. I therefore deny the
plaintiff’s claim for consequential economic loss.

[134]     The
Optional Policy, applicable to the case at bar, clearly provides, in s. 5.14(c)(i),
for “the expense incurred by the insured in hiring taxis, using public
transportation or renting a substitute motor vehicle”, subject to several
limitations and exceptions. The express wording of this clause clearly suggests
an intention that the cost of purchasing a replacement vehicle is not covered.

[135]     The Optional
Policy makes no provision for reimbursement for monthly lease and insurance
payments for the damaged Mercedes. However, the Optional Policy contains no
obligation to cover losses other than those expressly provided for.

[136]     I find the
remarks of Simonsen J. in Gannon (as cited at paras. 51-52 of Bassett)
to be compelling on this issue and I adopt them here. Although I have concluded
in this case that ICBC was not justified in denying Mr. Dhadwal’s claim
for the cost of repair to the engine, and the denial may have resulted in
additional expenses incurred by Mr. Dhadwal, the Optional Policy contains
no obligation to make payment beyond the loss as described in the policy. If Mr. Dhadwal
could recover additional losses over and above the coverage stipulated in the
policy arising out of his loss of use of the vehicle, it ought to be a term in
the contract. To allow for additional damages beyond the terms of the contract
would, in effect, be to amend the terms of the Optional Policy.

Conclusion

[137]     For the
foregoing reasons, the Court orders and declares that:

(a)      The defendant, ICBC, is in
breach of the Optional Policy;

(b)      The defendant, ICBC, is
liable to pay to the plaintiff, Mr. Dhadwal, damages in the amount
required to replace the engine of the Mercedes, in accordance with the
provisions of the Optional Policy; and

(c)      The defendant, ICBC, is
further liable to pay to the plaintiff, Mr. Dhadwal, interest on this
amount pursuant to the Court Order Interest Act.

[138]     Unless
there are matters of which I am unaware,
the plaintiff Mr. Dhadwal shall have his costs in accordance with Appendix B of the Supreme Court
Civil Rules.

“Warren
J.”