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Does Ontario’s Insurance Act thwart Bill 18 intentions?


June 8, 2007   by Canadian Underwriter


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A conflict between the new regulations contained in Ontarios Bill 18, which deals with vicarious liability for vehicle leasing and rental companies, and s. 239 of the Insurance Act may be inadvertently thwarting the intent of Bill 18, according to Stephen R. Moore, a partner with Blaney McMurtry LLP.
Moore was reached by e-mail after he spoke to delegates at the Insurance Law Update presentation on June 6.
Moore noted that prior to Mar. 1, 2006, a leasing or a car rental company was vicariously responsible for the driver of a vehicle (assuming the driver was not the same person who had rented or leased the vehicle). The person renting or leasing a vehicle was responsible for his or her own negligence.
However, after Mar. 1, 2006, liability for property damage and personal injury following an accident involving a rented or leased car now first falls on the person renting or leasing a vehicle (in the event he or she is found negligent). Second, it falls on a driver who is not the same person who rented or leased the car. And thirdly, liability falls on the owner of the car (i.e. the rental or leasing company).
The intent of Bill 18 in Ontario, which changed the rules for vicarious liability in rental and leasing situations, is to give both car rental and leasing companies the ability to reduce their and their insurers liability to zero for vicarious liability (not negligence) claims, Moore noted in an e-mail.
In terms of bodily injury claims only, the liability of the leasing or car rental company is capped at Cdn$1 million. This liability is reduced by any insurance available under motor vehicle liability policies issued to persons other than the leasing or car rental companies, Moore said.
So, for example, if someone was injured in a car accident, and the driver of the rented vehicle had $1 million in insurance coverage, the owner of the vehicle i.e. the car rental or leasing agency would pay nothing, since the first $1 million in liability would be covered by the drivers policy.
However, the goal to reduce the owners vicarious liability has not worked out as intended, Moore observed in his e-mail.
He noted that in s. 239 of the Insurance Act, the standard owners policy also insures all occupants of the insured vehicleincluding the driver. He said that unless policies and endorsements changed i.e. so that coverage for drivers is excluded from the standard policies of vehicle leasing and car rental companies the changes introduced in Bill 18 would not be carried out with the same effect as intended.