In December of 2005, the Ontario Government introduced legislation that extended vicarious liability for the negligent operation of motor vehicles to lessees of such vehicles, while limiting the potential liability of lessors.

Recent Amendments to the Ontario Highway Traffic Act and Insurance Act

Bill 18, An Act to Implement 2005 Budget Measures and to Amend Various Acts, was first introduced in November of 2005 and quickly proceeded through the House, receiving Royal Assent and being proclaimed into force on December 15, 2005. This legislation imposed significant amendments to several Ontario Acts, including the Highway Traffic Act, and the Insurance Act.

In particular, Part XI of the Highway Traffic Act was amended by adding section 191.9, which provides a statutory definition for "lessee", and by substituting a new section 192. Section 192 now addresses the potential liability of drivers, owners and lessees of motor vehicles or street cars.

Essentially, section 192 provides that the driver, owner or lessee of a motor vehicle is liable for the loss or damage sustained by any person by reason of the negligent operation of the vehicle. With respect to the owner or lessee of a vehicle, the legislation further stipulates that this liability is subject to one exception, namely, where the motor vehicle was in the possession of some person other than the owner or lessee without the owner or lessee's consent. The driver, owner, and lessee of a motor vehicle who are found liable under this provision are jointly and severally liable.

The newly-enacted section 192 expands the scope of those who are statutorily exposed to vicarious liability for the negligent operation of a motor vehicle by adding lessees as potentially liable parties.

Bill 18 also limited the potential vicarious liability of lessors by amending the Ontario Insurance Act by adding section 267.12. This section provides that, in an action in Ontario for loss or damage from bodily injury or death arising from the use or operation of a motor vehicle that is leased, the maximum amount for which lessors of motor vehicles are liable per incident in their capacity as lessors is the greatest of:

  • $1,000,000.00;
  • the amount of third party liability insurance required by law to be carried in respect of the motor vehicle; and
  • the amount determined in the manner prescribed by the regulations, if regulations are made prescribing the manner for determining an amount for the purpose of this clause.

Significantly, any amount found to be owing under these provisions is to be reduced by (a) any payments recovered for loss or damage from bodily injury or death under a motor vehicle liability policy issued to persons other than the lessor; (b) that in respect of the use or operation of the leased motor vehicle; and (c) that are in respect of the same incident. Accordingly, a motor vehicle lessor may have no liability under section 267.12 if a third party motor vehicle liability policy provides coverage in excess of the amount found to be owing by the lessor under the above provisions.

The enactment of this statutory limit to the potential vicarious liability of vehicle lessors brings Ontario more in line with the United States, which has already made the shift away from legislation exposing lessors to unlimited vicarious liability for damages arising from an accident. For example, in the United States, the Safe, Accountable, Flexible, Efficient Transportation Equity Act: A Legacy for Users Act, eliminated at the national level all vicarious liability statutes imposing liability on motor vehicle leasing companies.

Finlayson v. GMAC Leaseco Ltd.

In Finlayson v. GMAC Leaseco Ltd., Quinn, J., of the Superior Court of Justice found on a Rule 21.01(a) motion that the lessor/owner of a motor vehicle was vicariously liable for damages arising out of the negligence of the lessee in operating the motor vehicle. Moreover, Quinn, J., held that the lessor was not entitled to contract out of the vicarious liability provisions set out under section 192 of the Highway Traffic Act by way of a term in the lease. Although this case was determined under the previous legislation, its reasoning will apply to the current legislation.

The facts of the case were largely undisputed. The plaintiffs sustained injuries in a single vehicle accident when the vehicle in which they were front-seat occupants hit a guardrail and rolled over in March of 2000. The vehicle, which was owned by the defendant GMAC Leaseco Ltd. ("GMAC"), and leased to co-lessees Simon and Jefferies, was driven by Simon at the time of the accident. Under section 18 of the lease, dated August 29, 1997, the vehicle was not to be operated by "excluded, restricted or unlicensed drivers". The vehicle was insured under a policy of insurance issued by the Economical Mutual Insurance Company. When Simon's driver's licence was suspended in 1999, he signed an Excluded Driver Endorsement, which is approved for use in accordance with section 249 of the Ontario Insurance Act.

The primary issue in the action involving GMAC was the question of its vicarious liability as owner of the vehicle for Simon's negligent operation of the vehicle pursuant to section 192 of the Highway Traffic Act . GMAC argued that, because Simon was operating the vehicle in contravention of section 18 of the lease, section 192(1) of the Highway Traffic Act, which dealt with the liability of "owners" (including lessors) of motor vehicles, did not apply. If successful, this argument would mean that lessors could, by way of the terms of a lease agreement, contract out of the vicarious liability provisions found in section 192(1) of the Highway Traffic Act in some circumstances.

Quinn, J., rejected GMAC's argument. Quoting from a 1933 decision of the Ontario Court of Appeal, Quinn, J., noted that the vicarious liability provisions of the Highway Traffic Act are intended "to protect the public by imposing upon the owner of a motor vehicle the responsibility of careful management thereof and of assuming the risk of those to whom he entrusted possession that they would observe the law…". Accordingly, Quinn, J., concluded that although a lease may restrict the use or operation of a vehicle, the statutory liability imposed by section 192(1) cannot, as a matter of law and public policy, be nullified by a lease agreement.


While Ontario has not gone as far as the United States in eliminating the statutory imposition of vicarious liability on motor vehicle lessors, the amendments to the Highway Traffic Act and the Ontario Insurance Act significantly limit such exposure. Nonetheless, as the Finlayson decision indicates, courts are unlikely to be sympathetic to leasing companies that attempt to avoid vicarious liability through carefully drafted lease agreements.