Executive Summary: Key Legal and Evidentiary Issues

• Coverage under an extended warranty administered by Cornerstone turned on whether a radiator failure fell within a contractual exclusion for damage resulting from corrosion.
   
• Only exclusion i) of Chapter 5 was found potentially applicable, since the other rust-related clauses appeared to target repairs to the rust itself.
   
• Treating the contract as an additional warranty contract under the Consumer Protection Act meant any doubt had to be resolved in the consumer's favour.
   
• The burden of proving that the exclusion applied rested on Cornerstone as the party invoking it.
   
• Conflicting evidence came from a third-party inspection report attributing the leak to a rusted radiator core and a mechanic's letter finding no abnormal rust.
   
• With both opinions given equivalent value, Cornerstone failed to discharge its burden on a balance of probabilities.
   

Facts of the case

Réjean Tremblay bought a Newmar Ventana recreational vehicle on August 31, 2016, for $309,000. Through the seller, he also purchased an additional warranty for $5,500 plus taxes, administered by Cornerstone United Ltd. Two earlier claims he submitted, for a malfunctioning radio and air conditioning system, had been accepted.

After returning from Florida in April 2023, Tremblay noticed a coolant leak. He obtained a July appointment at the selling dealership, VR St-Cyr, whose invoice noted coolant leaking on the right side of the radiator. That invoice recorded a replacement cost of $6,622.61, with a note that the radiator was rotten at the tank clips.

Before the replacement, Normand Lamontagne, president of Services M.D. Inc., inspected the vehicle on June 14, 2023, and found no abnormal rust. He later examined the removed radiator at Tremblay's request and again found no abnormal rust, impact or abusive use. Lamontagne concluded that rust played no part in the leak, noting that the radiator is aluminum and its tanks are plastic.

At Cornerstone's request, a third party examined the vehicle on July 24, 2023, and reported that a rusted right-side radiator core caused the leak. Photographs attached to that report showed what appeared to be rust. Cornerstone took the position that the repair was not covered because the failure resulted from rust or corrosion.

Policy and legislative provisions at issue

Cornerstone pointed to several references to rust and corrosion in Chapter 5 of the contract, which sets out the exclusions, including subparagraphs a), c), i) and o). Judge Céline Gervais considered that only subparagraph i) could apply. That exclusion covers internal or external damage directly resulting from freezing, overheating, corrosion, electrolysis, salt or any other environmental conditions, or from improper storage or shutdown. Following Kiley c. Cornerstone United, 2019 QCCQ 7161, the court treated the contract as an additional warranty contract within the meaning of the Consumer Protection Act (CQLR, c. P-40.1).

Reasoning and analysis

Under the wording of exclusion i), Cornerstone had to prove that corrosion caused the failure. Relying on Houle c. Cornerstone United Ltd., 2019 QCCQ 5165, the court noted that a contract governed by the Consumer Protection Act must be interpreted in the consumer's favour in case of doubt. Citing Déry c. Cornerstone United Ltd., 2019 QCCQ 6032, it placed the burden of proving the exclusion on the party invoking it.

The evidence consisted of two opposing opinions: Cornerstone's report attributing the leak to rust, and the Services M.D. letter concluding otherwise. Judge Gervais found both of equivalent value, so the outcome depended on the rules of evidence. A party bearing the burden must establish its position on a balance of probabilities, and Cornerstone could not do so against an equally valid contrary opinion.

Ruling and overall outcome

The court granted Tremblay's claim and ordered Cornerstone to pay him $6,754.78. That sum covers the $6,622.61 radiator replacement, which includes $288 in GST and $574.56 in QST. It also covers the $132.17 Services M.D. examination fee, which includes $5.75 in GST and $11.47 in QST. Interest at the legal rate and the additional indemnity under article 1619 of the Civil Code of Québec apply from November 1, 2023, the date of service. Cornerstone must also pay $207 in legal costs, covering the cost of the court stamp on the claim.