After 19 months of use on the insured's farm, a telehandler caught fire. Having compensated its policyholder, the insurer successfully pursued a claim against the equipment seller. However, the court reduced the amount the defendant must pay.
The case was heard on September 14 and 15, 2026, in Quebec City, before Justice Elif Oral of the Superior Court of Quebec. Promutuel Assurance du St-Laurent aux Appalaches is the plaintiff in the dispute, having been subrogated to the rights of its insured, Ferme J.R. Beaudoin, located in Sainte-Hénédine, in the Chaudière-Appalaches region.
On June 26, 2022, a Merlo multifunction telescopic forklift caught fire while transporting silage boxes from a field to the farm. The equipment and its contents were a total loss. Promutuel paid the farm nearly $158,000 in compensation.
The insurer sought to recover that amount from Manulift E.M.I., a company that sells and rents industrial equipment. The insurer alleged a manufacturing defect or flaw. The defendant countered that the fire resulted from the farm's improper use of the equipment during the 19 months it had owned it.
In its decision rendered in French on September 30, 2026, the court found the defendant liable for the loss but reduced the amount payable to $109,012.73.
The legal presumption
The court noted that the insurer had triggered the rebuttable presumption set out in section 1729 of the Civil Code of Québec. The defendant did not dispute that it was bound by the legal warranty applicable to professional sellers. The equipment's spontaneous combustion, when it had a 10-year service life and 2,000 hours of use, constituted premature deterioration.
In this regard, the engineer retained as an expert by Promutuel testified that it is not unusual for agricultural machinery of this type to remain in service for up to 40,000 hours when properly maintained. The farm owner confirmed that, when purchasing the equipment, he intended to use it over the long term, not for just 19 months.
After reviewing the testimony and expert evidence, the court concluded that the probable cause of the fire remained unknown and could not be attributed to poor maintenance by the farm. Liability was established, and Manulift was held responsible for the fire.
Cause of the loss
The seller sought to convince the court that the farm had failed to maintain the equipment properly. The judge devoted approximately 15 pages to examining the testimony and expert evidence, ultimately rejecting the defendant's argument aimed at rebutting the legal presumption.
The farm employee operating the equipment on the day of the loss described the incident during an examination for discovery. The fire started at the rear of the engine compartment. He attempted to extinguish the flames but was unsuccessful. Firefighters arrived approximately 15 minutes later and took 20 minutes to bring the fire under control. By then, the flames had spread to the cab and the silage box attached to the equipment.
Promutuel's expert explained that the equipment had an unusual configuration, with the engine mounted on the side rather than at the front. This feature is specific to multifunction machines manufactured by Merlo. The defendant's expert confirmed that this configuration results in a very compact engine compartment, with its components positioned extremely close together.
Two competing theories were presented regarding the probable cause of the fire, although the experts agreed that it was likely caused by a flammable liquid igniting upon contact with a hot engine surface. An electrical failure was ruled out.
The dispute concerned the cause and nature of the leak, the court wrote. Promutuel's expert believed that an engine oil leak had come into contact with the extremely hot surface of the turbocharger, causing the oil to ignite rapidly.
According to Manulift's expert, the high temperature on June 26, 2022, the presence of organic debris in the engine compartment and the towing of the silage box may have contributed to the spread of the fire, without being its probable cause.
The court noted shortcomings in the various theories, preventing it from assigning greater weight to either one in determining the probable cause of the fire.
Manulift therefore failed to rebut the legal presumption arising from the warranty of quality. The seller's expert relied on a fire report prepared by firefighters, who did not testify at trial. Information in the report was contradicted by other evidence.
The equipment had undergone repairs by a field service mechanic in February 2022, after the engine compartment fan broke apart, requiring several components to be replaced. The mechanic recommended that the machine's owner have it inspected at Manulift's workshop, but the recommendation was declined.
The defendant failed to demonstrate how such an inspection by the seller would have prevented the loss. The sequence of events proposed by Manulift's expert consisted of conjecture based on unproven facts. Neither improper use nor inadequate maintenance of the equipment was established.
The court also rejected Promutuel's expert's theory. His report and testimony were inconsistent with the account given by the person operating the machine at the time of the loss. The operator had noticed no decline in engine performance before seeing the flames. If the turbocharger had been the source of the fire, as the expert claimed, the machine would not have had sufficient power to tow the silage box.
Use of the equipment
After being purchased in November 2020, the equipment was never repaired or inspected at the seller's workshop. Repairs were carried out either by the field service mechanic or by the machine's operator himself, after ordering the necessary parts. The operator had the skills required to keep the equipment in proper working condition.
Manulift's recommendations regarding workshop inspections were not followed, and the equipment was often dirty, sometimes very dirty. The field service mechanic had recommended that the operator clean the equipment, but this was not done adequately.
Despite these findings, the court concluded that there was no connection between the farm's use of the equipment and its malfunction. At most, the evidence established that maintenance was suboptimal compared with the manufacturer's recommendations.
Value of the equipment
The court then considered the parties' arguments regarding the compensation paid and the actual value of the loss. The court rejected the testimony of the appraiser retained by Promutuel. According to the judge, the method used to establish the equipment's market value did not meet accepted professional standards, and his testimony was unreliable.
Moreover, the appraiser valued the equipment at $160,333.33, although it had been sold to the farm operator for $140,020. The court rejected this 14.5% increase in market value for a machine that had been used for 19 months. The insurer's request to recover from Manulift an amount greater than the sale price received 19 months earlier "defies common sense."
The court accepted Manulift's method of establishing market value. According to the witness, the defendant's national director of credit and insurance, agricultural equipment depreciates by 10% annually, or 0.83% per month, when used properly.
The 19 months of use represented depreciation of 15.83%, applied to the original purchase price, resulting in a value of $117,850.17 on the date of the loss.
The evidence showed that the equipment had not been maintained optimally. To prevent the insurer from being unjustly enriched, the court applied an additional 5% depreciation, reducing the market value by $7,000. The market value on the date of the loss was therefore $110,853.83.
The insurer had reduced its claim by 1.33% under the "proportional rule." In the absence of details regarding that calculation, the court maintained the reduction. The resulting market value was $109,412.73. The court deducted a further $400, representing the difference between the farm's cost of renting replacement equipment ($1,600) and the proceeds from selling the damaged machine's remains ($2,000).
Court costs were awarded against Manulift, except for expert fees, which each party must bear separately.
