The Court of Quebec recently ruled on this issue in Long BÉ Express Limited v. Service Routier ML Inc. and Intact Insurance Company. In the context of a "Wellington" Motion, Service Routier requested that its insurer take up its defence and assume its costs in the lawsuit brought by Long‑BÉ Express Limited.
Service Routier offered a heavy-duty mechanical service, and Long-BÉ entrusted it with the installation of a used 2012 engine, replacing the much older original 2001 engine. The vehicle was entrusted on August 15, 2019, but Long-BÉ was unable to collect it until December of the same year, after three and a half months, which it considered unreasonable, having been deprived of the use of its truck. It therefore claimed loss of revenues from Service Routier. It was in this context that the court analyzed the insurance coverage, and more specifically the definition of "material damage". Material damage" was defined in the insurance contract as:
"13.1 Any deterioration or destruction of tangible property, including the resulting deprivation of enjoyment. The latter is deemed to occur at the same time as the deterioration or destruction that caused it; or
13.2 Loss of use of tangible property which has not been damaged. This is deemed to have occurred at the time of the loss which caused it."
(our translation)
As for the word "loss", it was defined as "any accident, as well as continuous or repeated exposure to risks of essentially the same nature."
Having reviewed the usual rules relating to the duty to defend, namely that it is distinct from the duty to indemnify and is much broader in scope than the latter, the insured must benefit from any doubt that may exist early in the litigation.
However, although in principle loss of enjoyment is covered, the court concludes that there must be "material damage" resulting from a "loss". Thus, although the definition of "material damage" as cited above includes deprivation of enjoyment of tangible property that has not been damaged, the court concludes that the loss must nevertheless require the occurrence of an accident or continuous or repeated exposure to risks of essentially the same nature. Unfortunately for the insured, the plaintiff did not allege any such accident or loss in its pleadings. It was simply a deprivation of enjoyment relating to the performance of the contract between the parties, since the claim qualified the delay in carrying out the repair work as unreasonable. Thus, the court concluded that "the allegation of a breach of a contractual obligation is not in itself an accident or loss".
Furthermore, this breach of contract results from incompetence to perform the contract; consequently, the failure to meet the performance deadline cannot be classified as an accident or a claim, so the "Wellington" Motion was dismissed.
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