If a decision we’ve discussed in a blog post is appealed, we like to report back on the new decision if it provides additional clarity or changes the ruling favours. We have the opportunity to do just that this week.
In January 2021, we wrote about an insurance coverage dispute heard by the Court of Queen’s Bench of Alberta. The Court of Appeal of Alberta recently issued a decision on an appeal from that decision that is worthy of further review.
Car accident occurs after “borrowed” car is not returned
While most people purchase automobile insurance to cover themselves or people they may injure when driving, automobile insurance policies can also provide similar coverage to people who drive a car with the owner’s consent. If a car is borrowed but later considered stolen, and the person who borrowed it is in an accident, what happens? Where does the line between “borrowed” and “stolen” lie?
The facts leading up to the accident involved a man (“RR”) who visited the home of his friend and his friend’s wife (“KP”). KP was not at home during RR’s visit, during which her husband allowed RR to borrow her car. RR had told KP’s husband he would return the car to them later that day.
Unfortunately, RR failed to return the car as promised. Over two days, KP tried to reach RR by phone and text message, but she could not. After growing more concerned, KP contacted the police to report the car as stolen. When the police questioned RR about the car’s whereabouts, he told them he no longer had possession of it but would be able to get it. The police, along with KP, decided to give RR until 5:00 am the following day to make good on his promise to return the vehicle. KP missed his 5:00 am deadline to return the car and, later that following day, was involved in an accident while fleeing police in KP’s car. He was ultimately charged with six offences.
The decision we originally wrote about asked whether RR had KP’s consent to operate her vehicle at the time of the accident. KP’s insurance coverage would kick in if he did have her consent. If not, the liability of the accident could not fall to KP or, more importantly, her insurer.
The court wrote that Alberta’s Traffic Safety Act allows the owner of a vehicle to be vicariously liable for damages caused by someone who “was in possession of the motor vehicle with the consent, expressed or implied, of the owner of the motor vehicle….”
The court found that RR only had KP’s consent to possess the car until 5:00 am the day of the accident. When the deadline to return the car came and went, the “consent switch” was turned “off.” This meant that KP’s insurer was not liable for damages.
Driver of car during accident appeals on the grounds that he did have consent to be driving
On appeal, RR took the position that the court’s original decision should be struck down because he had consent to be in possession of KP’s car at the time of the collision.
RR’s appeal focused on one key paragraph in the chamber judge’s decision, which related to RR’s claim that consent cannot be revoked ahead of time, meaning that the deadline to return the car by 5:00 am created a condition which should not have been imposed on him. The paragraph reads,
“There is a notable difference between creating a condition to consent by imposing a time or location restriction and revoking consent after a period of time has passed.”
The court noted that the law around vicarious liability has evolved over time, stating that previous iterations of the Traffic Safety Act required consent for the driving of the vehicle as well as the possession of it. In contrast, today, only consent for possession is required. Two decisions referred to as Mugford and Garrioch, which the Alberta Court heard of Appeal in 2004 and 2017, respectively, are considered the leading cases in consent related to vicarious liability. The court wrote that those decisions confirm the law does not recognize conditional consent. Instead, by granting possession, the owner of a vehicle must accept the risk of what the driver might do once they are behind the wheel. This allows for an important policy to be in place: every vehicle being operated in the province must be insured. By revoking consent ahead of time, the insurer is imposing a condition that is beyond their control and could leave the vehicle uninsured if kept beyond that deadline. The court wrote that the only exception to this concept is that the owner of a car can give a driver consent on the condition that the consent is not then passed on to a third party.
The court listed five conditions (not an inclusive list) that would be ineffective in law and that many people may imply without realizing they can’t rely on those conditions. They are:
(a) You have my permission to take my car to go to the store, but you have to come right back.
(b) You have my permission to have my car until 5 p.m., but I need it back by then because I have to drive to work this evening.
(c) You have my permission to take my car, provided you do not drive on any gravel roads.
(d) You have my permission to take my car, provided you do not exceed the speed limit.
(e) You have my permission to take my car, provided you do not leave the city limits.
By following this reasoning, the court wrote that KP’s limit on consent was ineffective and that she remained liable even after the fixed period had expired. The court added that there is no difference in this approach to consent if it is given before the vehicle is lent or while it is in possession of the borrower.
As a result, the court ruled that RR’s keeping the car did not result in KP escaping vicarious liability, and the prior judgment was set aside.
Contact Calgary Insurance Lawyers For Insurance Claims and Litigation
The Insurance Law Team at HMC Lawyers has decades of collective experience in all matters related to insurance law, including those about Insurance Coverage Disputes. We understand the importance of risk management, especially when it comes to questions of insurance coverage and strive to provide our clients with certainty by helping them identify and avoid potential problems wherever possible. To discuss an insurance coverage matter or related dispute, call 1-800-480-3534 or contact us online.