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Stephen R. Moore

Blaney McMurtry LLP






Where Do You Look for Insurance?


Some Background

The Legislative Changes

What Vehicles are Subject to the Legislation


Coverage for the Lessee’s Liability


Car Rental Companies

Car Leasing Companies








Prior to March 1, 2006, the rules for vicarious liability for automobile accidents in Ontario were relatively straight forward. As the result of legislative changes that took effect on March 1, 2006 (Bill 18) and changes to standard policy wordings that have taken effect between March 1, 2006 and December 31, 2008, the rules are now very complex, highly confusing and, in some cases, ineffective.

This paper will begin with a discussion of the rules as they existed prior to March 1,

2006. I will then run through the import of the legislative changes. The changes made by the Superintendent of Insurance to a number of policies and endorsements are best understood within the context of the three major areas that they effect, namely, automobile rentals, vehicle leasing and the liability insured under non-owned automobile policies. Each of these topics will be discussed separately after a general overview of the policy changes has been provided. I will also spend a little time commenting on several issues that a careful practitioner should consider when handling a serious personal injury claim. At the end of this paper are a number of problems and answers which may assist in understanding the new regime.

This paper attempts to focus on the issues arising under Bill 18 from both a plaintiff and defence perspective. The casual reader may be inclined to skip those portions of the paper that appear to be of limited relevance based on whether they do plaintiff or defence work. I would admonish you not to do so. I believe that that both the defence and plaintiffs’ bars need to be more familiar with the insurance coverages that may be obliged to respond to serious personal injury claims. This new scheme increases the risk that a lawyer, who does not understand the intricacies of automobile insurance, will fail to involve all of the appropriate parties and insurers in a serious personal injury claim.

This slightly modified version of this paper was first presented at the Osgoode Hall Professional Development CLE Program entitled Managing and Litigating Motor Vehicle Accident Claims Those who fail to understand this new regime will not be able to properly represent their clients. The errors they make could expose them to serious professional liability claims.

VICARIOUS LIABILITY PRIOR TO MARCH 1, 2006 At common law the owner of an automobile was not liable for the negligent operation of an automobile by someone the owner had entrusted the vehicle to. Decades ago this rule was legislatively changed through an amendment to the Highway Traffic Act. That rule was carried forward in what is now section 192 of the HTA. That provision made both the driver and the owner liable to any person who suffered loss or damage due to the driver’s negligent operation of the vehicle.2 The owner’s liability did not depend on any negligence of the owner. The liability was simply imposed on the owner by statute. This liability is commonly referred to the “vicarious” liability of the owner.

Section 192 also provided that if a lessee consented to the operation or possession of the motor vehicle by some other person, then that other person would be deemed to be in possession of the vehicle with the consent of the owner.3 Up until March 1, 2006, no vicarious liability was imposed on either the lessee or renter of a motor vehicle. If an individual lent a leased vehicle to their spouse, the lessee was not vicariously liable for the negligent operation of the leased vehicle. The spouse would be liable both at common law and under section 192 of the HTA and the leasing company would be vicariously liable for the spouse’s negligence under section 192 of the HTA. To succeed against the lessee, however, the plaintiff would need to demonstrate negligence;

for example, by proving that the lessee lent the car to the spouse when he or she knew that the spouse was intoxicated.

As the lessee or renter of a vehicle had no vicarious liability the standard motor vehicle accident report in this province has no place to gather information regarding who rented or leased a vehicle involved in a collision. This presents problems for both the plaintiff The owner’s liability depended on the owner have granted the driver permission to possess the motor vehicle.

This liability applies to motor vehicles and street cars.

and defence bars given that vicarious liability has been imposed on lessees in respect of accidents occurring on or after March 1, 2006.

Prior to March 1, 2006 both the plaintiff and defence bars rarely had any reason to care who rented or leased a vehicle involved in a collision. Generally, one sued persons who were known or suspected to have been negligent such as the drivers of the involved vehicles, a road authority or a drinking establishment. Additionally, one sued those who were known to be vicariously liable for the actions of the negligent entities. In most cases, this was limited to the owners of the involved motor vehicles and employers.

Until recently, those involved in personal injury litigation tended to limit their enquiries to the question of who was legally responsible for the plaintiff’s damages. Plaintiff’s counsel, in particular, often failed to appreciate that it is critical to not only identify who caused the accident but who insured the entities who caused the accident.

Often, it is not obvious who those insurers are. Sometimes the liable parties are insured under policies owned by persons who may not even be responsible for the collision. It is often difficult to obtain information about or from the entities which may own policies that insure the liable parties.

The defence bar is usually familiar with the types of insurance available to the various defendants to a personal injury lawsuit and defence lawyers have an innate understanding of who usually insures what. In my opinion, many members of the plaintiffs’ bar and, in particular, junior members of that bar see very few insurance policies and really have no idea how the various parties to the lawsuit are insured or potentially might be insured.

The following comment is directed primarily to the plaintiff’s bar. When you are trying to figure out who to sue you have only done half the job. Once you identify the potential defendants, you then need to identify the various insurance policies which might insure them. This admonition applies to lawsuits arising out of accidents both before and after March 1, 2006.

Where Do You Look for Insurance?

In this section I will briefly set out the likely sources of insurance for the owners, lessees and drivers of motor vehicles. When you are dealing with a serious claim you need to carefully explore all potential sources of insurance. You will need to use your imagination to track down all of the potential sources of insurance coverage.

Let’s start with a simple example involving an accident where a car owned by A is lent to B. If a plaintiff simply sued A and B, in most cases A’s insurer would defend the action.

If the amount claimed exceeded A’s primary limits, then A’s insurer should be asking both A and B if they have any other insurance which can respond to the claim. By the time that matter proceeded to discoveries all of the potential insurance should have been identified. This is how it is supposed to work but, in my experience, all of the potential insurance is rarely identified before discoveries. The plaintiff may not recover his or her full proven damages unless all of the insurance is found. Therefore, it is imperative that plaintiff’s counsel identity all of the policies which may insure those who are responsible for the plaintiff’s injuries.

Let us start with the owner A. Hopefully, the car is insured and the insurer is the one identified on the police report. A may have taken out excess insurance. If A is an individual this was probably accomplished using an umbrella policy which sits on top of the individual’s auto and homeowner’s policies. A may not even remember that he had an umbrella at the time of the collision. I would suggest asking who the broker or agent is at discovery. Defence counsel should be asked to make specific written enquiries of the broker regarding insurance and, in particular, umbrella coverages. Although rare, I have seen situations where a vehicle is insured under two different primary policies.

Always ask if A or A’s spouse own other vehicles and request that the relevant policies be produced.

If A is a corporation it may also have excess coverage. This coverage may be found in some unusual places. For example, if A is part of a conglomerate of companies, one of the related or parent companies may have excess or umbrella coverage that insures the entire group of companies. If A is doing work for another company, it is possible that A is insured under the other company’s policy. It is important to review all contracts between A and the other company to determine if they obliged the other company to provide insurance for A. Specific enquiries regarding potential insurance coverages should be directed to the company’s insurance broker and risk manager.

That takes us to B. If B or B’s spouse owns a car, then there is a very good chance that B is insured under the policy on that car while operating A’s car. There may be excess or umbrella coverage available as well. If B was in the course of his or her employment, then the employer’s S.P.F. 6 coverage (standard non-owned automobile policy) may be obliged to respond to the claim.

Let us assume that B does not own a car but has been provided with a company car by his or her employer. It is quite possible that B has insurance coverage under his employer’s insurance on the company car while driving A’s car.

Enquiries must be made at discoveries, or sooner, regarding how the vehicle was being used at the time of the collision. If the vehicle was being used for any work or business related purpose, then it is possible that the employer of A or B may be insured for its vicarious liability at common law under an S.P.F. 6. That policy may also insure the operator of the involved vehicle.

One thing I should point out about S.P.F. 6 policies is that they often provide broader coverage to the named insured than they do to the person who owned and operated the involved vehicle. For example, let’s assume that Company C employed A. A owns the car involved in the collision. At the time of the collision A was making a sales call. The SPF 6 would provide no coverage to A, but would provide coverage to Company C. To access Company C’s policy it would be necessary to sue Company C alleging that it was vicariously liable for A’s negligence. Simply suing A would not provide access to Company C’s S.P.F. 6. Just to demonstrate how counter-intuitive this area is, if A had rented a car to make the sales call, then it A would probably be insured under the S.P.F. 6 and you would not actually need to sue Company C to access its S.P.F. 6 coverage.

Let us assume for the moment that A is driving a car which he or she rented or leased. It is possible that the leasing or rental company’s insurance will be obliged to respond to claims against A. As we will discover shortly, after March 1, 2006 in many cases the rental or leasing company’s exposure is capped at $1 million. However, the insurer of the rental or leasing company may also insure the driver for an amount in excess of the rental or leasing company’s liability. If that insurer insures A, then depending what endorsements are on its policies, it may provide coverage to A considerably in excess of the exposure of its named insured, the car rental or leasing company.

Hopefully, this small section will impress on those who handle large personal injury claims that they need to understand automobile insurance intimately if they hope to be able to find all of the insurance policies that may be obliged to respond to a claim. You should never forget that the insurance possessed by an entity with limited exposure may provide significant coverage to another entity with unlimited exposure.

In closing, I should point out that the foregoing are just examples of potential sources of insurance. It is by no means an exhaustive list.


Some Background On a warm summer night in 1997 a woman in her early twenties and her friend accepted a ride from two young men they had been drinking with in a bar. Unfortunately, the young man who drove was drunk. He lost control of his leased car while attempting to negotiate a curve on a dark country road. His car careened off the road and rolled over as it passed through the ditch beside the road. The young woman, who was probably not wearing a seatbelt, was ejected from the car and sustained devastating injuries.

The young woman sued the young man driving the car and the leasing company. The young man carried $1 million of third party liability coverage, as required by his lease.

His insurer paid out that $1 million early on in the litigation. Our firm was retained to represent the leasing company shortly before trial and we settled the claim in the Fall of 2004 for just under $10 million plus costs.4 This settlement received significant exposure in the press. It was reported that it was the largest motor vehicle settlement ever paid in Canada.

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