Conflicts in expert evidence weigh against suitability for summary trial, particularly where the conflicts leave the Court unable to conclude on an issue in dispute.
Insurance law – Stock Throughput insurance – Coverage – Evidence – Practice – Summary judgments – Damages
Valley Select Foods Inc. v. Lloyd’s Underwriters,  B.C.J. No. 1318, 2023 BCSC 1146, British Columbia Supreme Court, July 6, 2023, A. Chan J.
The insured sought a declaration of coverage from the insurer at a summary trial. The insured operates a facility that processes and freezes blueberries. In August 2019, it suffered a $1.87 million loss when skids of blueberries became damaged during its freezing process. The cause of that damage was at issue, which led to a coverage dispute.
The insured’s facility includes equipment and machinery used to process and freeze its blueberries, including a holding freezer designed to remain at a specified temperature, and a freezing tunnel that freezes the blueberries fed through it. The insured had implemented its own processes for use of the equipment, and operators at the facility were trained to continuously monitor the equipment to ensure proper operation.
On August 1, 2019, the insured’s owner was advised that several employees had noticed skids of blueberries in the holding freezer had collapsed. A refrigeration company technician attended the facility and inspected the equipment. The technician noticed one of the refrigeration units was low on refrigerant, and subsequently discovered that some tubing had been crushed and damaged. Repairs were made and there were no further issues.
The insured’s policy with Lloyd’s provided coverage for spoilage “caused by or resulting from breakdown and/or derangement and/or stoppage of refrigerating and/or temperature controlling machinery, including improper maintenance of temperature beyond the control of the insured.” The policy excluded coverage for loss or damage within the control of the insured, namely, damage caused by the insured’s processes.
The question was whether the damaged blueberries were caused by a failure of machinery, beyond the insured’s control, or whether the damage was caused by the insured’s processes.
The insured tendered an expert report authored by an engineer which provided an opinion that there was a sudden failure of the refrigeration unit that caused the product spoilage. The insurer tendered an expert report authored by an expert in industrial refrigeration which provided an opinion that the spoilage was caused by both mechanical failure and operational issues, including excess production run times, lack of refrigeration capacity, and insufficient drying time before the freezing process.
In order for the insured to succeed, the Court needed to conclude that the loss was caused by an external event that was unintended or fortuitous. The Court found it could not make such a finding in the face of two competing expert opinions on the issue. Conflicts in expert evidence weigh against suitability for summary trial, particularly where the conflicts leave the Court unable to conclude on an issue in dispute. In this case, the insured argued that the expert opinion tendered by the insurer was based on incorrect information regarding what an appropriate production run time was. The Court found it was not in a position to decide that issue.
The insured’s summary trial application was dismissed and the matter was ordered to proceed to a conventional trial.
This case was digested by Mollie A. Clark, and first published in the LexisNexis® Harper Grey Insurance Law Netletter and the Harper Grey Insurance Law Newsletter. If you would like to discuss this case further, please contact Mollie A. Clark at firstname.lastname@example.org.
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