Duty to defend - Lessors and lessees - Statutory provisions

Intact Insurance Co. of Canada v. American Home Assurance Co. of Canada

Application by the defendant's personal motor vehicle insurer for a determination that the defendant's employer's insurer was required to respond to the action against the defendant under s. 277 of the Insurance Act. The defendant was the lessee of the motor vehicle, so the defendant's personal motor vehicle insurer was responsible to respond. The fact that the defendant's employer reimbursed the rental expense did not make the employer the de facto lessee.

[2013] O.J. No. 1864

2013 ONSC 2372

Ontario Superior Court of Justice

P.M. Perell J.

April 24, 2013

The defendant was involved in a motor vehicle accident while driving a rental vehicle for work. The defendant rented the vehicle using a personal credit card provided by his employer for which he was reimbursed the rental expense. Under the employer's corporate policy, the defendant could use the credit card for business and personal expenses and he was entitled to be reimbursed for his business expenses.

The defendant's personal motor vehicle insurer brought an application to determine whether the defendant's personal motor vehicle insurer or the defendant's employer's insurer was responsible to respond first pursuant to s. 277 of the Insurance Act, R.S.O. 1990, c. I.8. The specific issue to be determined was whether the defendant or his employer was the "lessee" of the rental vehicle. The defendant's personal motor vehicle insurer argued that the defendant's employer was the de facto lessee because it controlled the type of vehicle being rented, the way in which the vehicle was rented, the place the vehicle was rented, and what the defendant could and could not charge pertaining to the rental vehicle. The defendant's employer argued that the definition of "lessee" was clear and specific and there was no reason to delve into the issue of who the de facto lessee was.

The court agreed with the defendant's employer and saw no reason to give s. 277 of the Insurance Act a reading that would introduce the concept of de facto lessee. The court noted that the issue of who the lessee was could be tested and determined by asking the following question: Who can the lessor sue to enforce the rental car contract? The answer to this question was the defendant. The defendant signed the car rental contract and there was no privity of contract between the rental company and the defendant's employer. Accordingly, the application was dismissed and the defendant's personal motor vehicle insurer was the first insurer to respond pursuant to s. 277 of the Insurance Act.