Canadian Underwriter

How hitting a skateboarder with a dealership’s courtesy car led to a priority dispute

July 25, 2019   by David Gambrill

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A vehicle owner asks someone who is not on his insurance policy to take his car to the dealership for a repair. When that driver subsequently gets into an accident with the dealership’s courtesy car, is the car owner’s insurance company on the hook for the liability lawsuit?

No, a Calgary court recently found.

On June 4, 2016, Gurpreet Sran drove a vehicle owned by Harjit Gill to the Northwest Acura dealership in Calgary with Gill’s permission. Sran was not a named insured under Gill’s policy, nor was she considered a spouse of Gill, since she did not reside with him.

Gill requested that she take his vehicle to the dealership for servicing and had told her that the dealership would provide her with a courtesy vehicle. The dealership did provide her with a courtesy vehicle after she signed a “Loaner Vehicle Agreement.”

Sran was driving the courtesy vehicle provided by the dealership when she collided with a skateboarder. The skateboarder sued Sran, which resulted in a priority dispute between insurers.

Gill’s vehicle was insured by Security National Insurance Company. The courtesy vehicle was owned by Honda Canada Finance Inc. and leased to Honda Canada. Honda Canada then loaned the vehicle to Northwest Acura pursuant to the Acura Courtesy Car Program Agreement. The courtesy vehicle was insured by Tokio Marine & Nichido Insurance Company Limited.

Tokio Marine contended that Gill’s insurer, Security National, should be required to defend Sran in the skateboarder’s action.

The insurer of the courtesy car noted that Gill’s insurance policy contains the standard SPF No. 6 provision, which provides coverage to “a person who with his consent personally drives the automobile.” There is also a provision providing coverage for a “temporary substituted vehicle.”

Tokio Marine argued that since Gill gave Sran permission to drive his vehicle to the dealership, that same consent transferred to the courtesy vehicle provided by the dealership. In other words, the courtesy vehicle became a “temporary substituted vehicle” under his insurance policy.

A case master disagreed with Tokio Marine’s position, and the Court of Queen’s Bench of Alberta upheld the case master’s ruling.

Coverage for a “temporary substituted vehicle” would apply if Gill drove the courtesy car, the Alberta Court of the Queen’s Bench found, but it did not apply in Sran’s situation.

As the court put it: “I have no doubt that the understanding between Mr. Gill and Ms. Sran was that she would drop off his vehicle at the dealership and that the dealership would provide her with a courtesy car to use while Mr. Gill’s vehicle was being serviced. However, I cannot make the leap that this understanding between these two parties applies to the other parties involved [e.g. the dealership].”

The court also did not accept Tokio Marine’s contention that a “priority flip” applied under the terms of the Miscellaneous Insurance Provisions Regulation. Basically, it would mean Gill’s insurer would take priority if the dealership were to be considered a “rentor” or “lessor” of the courtesy car under the definitions of province’s Highway Traffic Act.

However, the dealership was not the “rentor” or “lessor” of the courtesy car, the court found.

First, the “rental” part of the Loaner Vehicle Agreement was left blank, so Sran would not have known she was entering into a rental agreement, the court said.

Second, a car dealership does not rent or lease cars “in the ordinary course of its business,” as defined in the province’s Highway Safety Act.

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