When someone is injured following a motor vehicle accident, they may be entitled to damages as a result of the injuries they suffer. While it can sometimes be easy to determine who is responsible to pay these damages, there are other instances where identifying the liable party can be trickier. Take for example a decision recently released by the Court of Appeal for Ontario which dealt with an employer, an employee, and a rental truck company.

The accident

The injured party (“the driver”) was injured when their car was rear-ended by a rental truck driven by an employee (“the employee”) working for a furniture company (“the employer”). The accident occurred on October 29, 2010. The driver sued the employer, the employee, and the truck rental company (“the company”). The insurance companies for the employer and the company could not agree on which policy should cover the insurance obligations. The employee had no insurance of his own.

The driver’s employment contract stipulated that he must have his own insurance. He failed to acquire that insurance, but claimed he did not understand the terms of the contract when signing. The employee also listed himself as the renter of the vehicle, and did not include the employer on the rental documentation.

Legislation

The province’s Insurance Act lays out the order in which policies should respond. The order goes as follows:

1. any policy under which the “lessee of the automobile is entitled to indemnity” (emphasis added);
2. any policy under which the “driver of the automobile is entitled to indemnity” (emphasis added); and
3. any policy under which the “owner of the automobile is entitled to indemnity” (emphasis added).

The original trial

The application judge who issued the original ruling found that while the driver was the lessee, since he did not have insurance, it would be the company’s insurer who would serves as the first loss insurer. The company’s insurance provider appealed.

Issues at appeal

The main issue at appeal was the company’s insurer’s argument that he application judge erred by failing to consider all the relevant facts in determining who the lessee was (the driver as opposed to the employer). Failing that, the company’s insurer argued that the employee was an employee, not a contractor, of the employer, and that the employer’s insurance should be the first loss insurer.

The court agreed that the application judge failed to consider all of the relevant factors when identifying the employee as the lessee. The application judge relied primarily on the rental agreement, which the employee filled out, leaving no mention of the employer. By failing to consider more than the form, the application judge did not consider the employee’s role as an agent of the employer. The court highlighted that the employee rented the vehicle at the bequest of the employer, using their credit card to pay for it. Furthermore, he was instructed to use the vehicle only for work purposes. He also told the rental company he was picking it up for the employer.

As a result, the employer’s insurance provider was determined to be the first loss insurer.

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